New Life v CA G.R. No. 94071 March 31, 1992

J. Regalado

Facts:

Julian Sy, owner of New Life, insured his building in 3 different insurance agencies for 350,000, 1,000,000, and 200,000. When his building and the goods inside burned down, he claimed for insurance indemnities, but these were rejected by the three companies for violation of policy conditions.

Sy filed for 3 different suits in the trial court, where he won all suits against the insurance companies. The court of appeals reversed the decision of the trial court.

Issue: Did the petitioner violate conditions 3 and 27 of the three insurance policies, thereby foreiting collection of indemnities?

Held: Yes.

Ratio:

Condition 3. The insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated therein or endorsed on this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of loss or damage not more than P200,000.00.

Sy never disclosed co-insurance in the contracts he entered into with the three corporations. The insured is specifically required to disclose the insurance that he had contracted with other companies. Sy also contended that the insurance agents knew of the co-insurance. However, the theory of imputed knowledge, that the knowledge of the agent is presumed to be known by the principal, is not enough.

When the words of the document are readily understandable by an ordinary reader, there is no need for construction anymore.

The conformity of the insured to the terms of the policy is implied with his failure to disagree with the terms of the contract.

Since Sy, was a businessman, it was incumbent upon him to read the contracts.

Pioneer Insurance and Surety Corporation vs. Yap- The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a fire would be profitable to the insured.

“Also, policy condition 15 was used. It stated: 15.. . . if any false declaration be made or used in support thereof, . . . all benefits under this Policy shall be forfeited . . .”

As for condition number 27, the stipulation read:

27. Action or suit clause. — If a claim be made and rejected and an action or suit be not commenced either in the Insurance Commission or any court of competent jurisdiction of notice of such rejection, or in case of arbitration taking place as provided herein, within twelve (12) months after due notice of the award made by the arbitrator or arbitrators or umpire, then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder.

This is regarding Sy’s claim for one of the companies. Recovery was filed in court by petitioners only on January 31, 1984, or after more than one (1) year had elapsed from petitioners' receipt of the insurers' letter of denial on November 29, 1982. This made it void.