Rizal Surety v CA G.R. No. 112360. July 18, 2000

J. Purisima

Facts:

Rizal Surety issued a 1 million peso fire insurance policy with Transworld. This was increased to 1.5 million. A four span building was part of the policy. A fire broke out and gutted the building, together with a two storey building behind it were gaming machines were stored. The company filed its claims but to no avail. Hence, it brought a suit in court. It aimed to make Rizal pay for almost 3 million including legal interest and damages. Rizal claimed that the policy only covered damage on the four span building and not the two storey building. The trial court ruled in Transworld’s favor and ordered Rizal to pay actual damages only. The court of appeals increased the damages. The insurance company filed a MFR. The CA answered by modifying the imposition of interest. Not satisfied, the insurance company petitioned to the Supreme Court.

Issue:

WON Rizal Surety is liable for loss of the two-storey building considering that the fire insurance policy sued upon covered only the contents of the four-span building.

Held: Yes. Petition dismissed.

Ratio:

The policy had clauses on the building coverage that read:

"contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situated within own Compound"

"First, said properties must be contained and/or stored in the areas occupied by Transworld and second, said areas must form part of the building described in the policy xxx"

This generally means that the policy didn’t limit its coverage to what was stored in the four-span building.

As to questions of fact, both the trial court and the Court of Appeals found that the so called "annex " was not an annex building but an integral part of the four-span building described in the policy and consequently, the machines and spare parts stored were covered by the fire insurance.

A report said: "Two-storey building constructed of partly timber and partly concrete hollow blocks under g.i. roof which is adjoining and intercommunicating with the repair of the first right span of the lofty storey building and thence by property fence wall."

"Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity"

Landicho v GSIS- the 'terms in an insurance policy, which are ambiguous, equivocal, or uncertain are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured’

The issue of whether or not Transworld has an insurable interest in the fun and amusement machines and spare parts, which entitles it to be indemnified for the loss thereof, had been settled in another SC case.