Ang Giok Chip v Springfield G.R. No. L-33637 December 31, 1931

J. Malcolm

Facts:

Ang insured his warehouse for the total value of Php 60,000. One of these, amounting to 10,000, was with Springfield Insurance Company.  His warehouse burned down, then he attempted to recover 8,000 from Springfield for the indemnity. The insurance company interposed its defense on a rider in the policy in the form of Warranty F,  fixing the amount of hazardous good that can be stored in a building to be covered by the insurance. They claimed that Ang violated the 3 percent limit by placing hazardous goods to as high as 39 percent of all the goods stored in the building. His suit to recover was granted by the trial court.  Hence, this appeal.

Issue: Whether a warranty referred to in the policy as forming part of the contract of insurance and in the form of a rider to the insurance policy, is null and void because not complying with the Philippine Insurance Act.

Held: No. The warranty is valid. Petition dismissed.

Ratio:

The Insurance Act, Section 65, taken from California law, states:

"Every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy, as making a part of it."

Warranty F, indemnifying for a value of Php 20,000 and pasted on the left margin of the policy stated:

It is hereby declared and agreed that during the currency of this policy no hazardous goods be stored in the Building to which this insurance applies or in any building communicating therewith, provided, always, however, that the Insured be permitted to stored a small quantity of the hazardous goods specified below, but not exceeding in all 3 per cent of the total value of the whole of the goods or merchandise contained in said warehouse, viz; . . . .

Also, the court stated a book that said,  "any express warranty or condition is always a part of the policy, but, like any other part of an express contract, may be written in the margin, or contained in proposals or documents expressly referred to in the policy, and so made a part of it."

“It is well settled that a rider attached to a policy is a part of the contract, to the same extent and with like effect as it actually embodied therein. In the second place, it is equally well settled that an express warranty must appear upon the face of the policy, or be clearly incorporated therein and made a part thereof by explicit reference, or by words clearly evidencing such intention.”

The court concluded that Warranty F is contained in the policy itself, because by the contract of insurance agreed to by the parties it was made to be a part. It wasn’t aseparate instrument agreed to by the parties.

The receipt of the policy by the insured without objection binds him. It was his duty to read the policy and know its terms. He also never chose to accept a different policy by considering the earlier one as a mistake. Hence, the rider is valid.