J. Paras
Facts:
An open fire insurance policy, was issued to Paramount Shirt Manufacturing by Oriental Assurance Corporation to indemnify P61,000.00, caused by fire to the factory’s stocks, materials and supplies.
The insured was a debtor of Pacific Banking in the amount of (P800,000.00) and the goods described in the policy were held in trust by the insured for Pacific Banking under trust receipts.
The policy was endorsed to Pacific Banking as mortgagee/ trustor of the properties insured, with the knowledge and consent of private respondent to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation".
A fire broke out on the premises destroying the goods contained in the building.
The bank sent a letter of demand to Oriental for indemnity.
The company wasn’t ready to give since it was awaiting the adjuster’s report.
The company then made an excuse that the insured had not filed any claim with it, nor submitted proof of loss which is a clear violation of Policy Condition No.11, as a result, determination of the liability of private respondent could not be made.
Pacific Banking filed in the trial court an action for a sum of money for P61,000.00 against Oriental Assurance.
At the trial, petitioner presented communications of the insurance adjuster to Asian Surety revealing undeclared co-insurances with the following: P30,000 with Wellington Insurance; P25,000 with Empire Surety and P250,000 with Asian Surety undertaken by insured Paramount on the same property covered by its policy with Oriental whereas the only co-insurances declared in the subject policy are those of P30,000.00 with Malayan P50,000.00 with South Sea and P25.000.00 with Victory.
The defense of fraud, in the form of non-declaration of co-insurances which was not pleaded in the answer, was also not pleaded in the Motion to Dismiss.
The trial court denied the respondent’s motion. Oriental filed another motion to include additional evidence of the co-insurance which could amount to fraud.
The trial court still made Oriental liable for P 61,000. The CA reversed the trial court decision. Pacific Banking filed a motion for reconsideration of the said decision of the respondent Court of Appeals, but this was denied for lack of merit.
Issues:
1. WON unrevealed co-insurances Violated policy conditions No. 3
2. WON the insured failed to file the required proof of loss prior to court action.
Held: Yes. Petition dismissed.
Ratio:
1. Policy Condition No. 3 explicitly provides:
3. The Insured shall give notice to the Company of any insurance already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefit under this policy shall be forfeited.
The insured failed to reveal before the loss three other insurances. Had the insurer known that there were many co-insurances, it could have hesitated or plainly desisted from entering into such contract. Hence, the insured was guilty of clear fraud.
Concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance Clause" are materially different from the actual number of co-insurances taken over the subject property.
As the insurance policy against fire expressly required that notice should be given by the insured of other insurance upon the same property, the total absence of such notice nullifies the policy.
Petitioner points out that Condition No. 3 in the policy in relation to the "other insurance clause" supposedly to have been violated, cannot certainly defeat the right of the petitioner to recover the insurance as mortgagee/assignee. Hence, they claimed that the purpose for which the endorsement or assignment was made was to protect the mortgagee/assignee against any untoward act or omission of the insured. It would be absurd to hold that petitioner is barred from recovering the insurance on account of the alleged violation committed by the insured.
It is obvious that petitioner has missed all together the import of subject mortgage clause which specifically provides:
“Loss, if any, under this policy, shall be payable to the PACIFIC BANKING CORPORATION Manila mortgagee/trustor as its interest may appear, it being hereby understood and agreed that this insurance as to the interest of the mortgagee/trustor only herein, shall not be invalidated by any act or neglect—except fraud or misrepresentation, or arson—of the mortgagor or owner/trustee of the property insured; provided, that in case the mortgagor or owner/ trustee neglects or refuses to pay any premium, the mortgagee/ trustor shall, on demand pay the same.”
The paragraph clearly states the exceptions to the general rule that insurance as to the interest of the mortgagee, cannot be invalidated; namely: fraud, or misrepresentation or arson. Concealment of the aforecited co-insurances can easily be fraud, or in the very least, misrepresentation.
Undoubtedly, it is but fair and just that where the insured who is primarily entitled to receive the proceeds of the policy has by its fraud and/or misrepresentation, forfeited said right.
Petitioner further stressed that fraud which was not pleaded as a defense in private respondent's answer or motion to dismiss, should be deemed to have been waived. It will be noted that the fact of fraud was tried by express or at least implied consent of the parties. Petitioner did not only object to the introduction of evidence but on the contrary, presented the very evidence that proved its existence.
2. Generally, the cause of action on the policy accrues when the loss occurs, But when the policy provides that no action shall be brought unless the claim is first presented extrajudicially in the manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects the claim for payment
In the case at bar, policy condition No. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the private respondent (a) a claim in writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all other insurances, if any.
Twenty-four days after the fire did petitioner merely wrote letters to private respondent to serve as a notice of loss. It didn’t even furnish other documents. Instead, petitioner shifted upon private respondent the burden of fishing out the necessary information to ascertain the particular account of the articles destroyed by fire as well as the amount of loss. Since the required claim by insured, together with the preliminary submittal of relevant documents had not been complied with, it follows that private respondent could not be deemed to have finally rejected petitioner's claim and therefore there was no cause of action.
It appearing that insured has violated or failed to perform the conditions under No. 3 and 11 of the contract, and such violation or want of performance has not been waived by the insurer, the insured cannot recover, much less the herein petitioner.
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