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, respondent Facts: Tantuco Enterprises is engaged in coconut oil milling and refining industry. First they only had one oil mill. They later had a second new oil mill. Both were separately covered by two fire insurance policies by American Home Assurance. The first was covered for three million for one year and the second for 6 million for same term. A fire broke out and gutted the new oil mill. After Tantuco filed its claim for the proceeds they have been rejected by AHA Company stating that there was no policy issued covering the burnt oil mill. A complaint was filed for specific performance by Tantuco. In a further attempt to avoid liability, petitioner claims that respondent forfeited the renewal policy for its failure to pay the full amount of the premium. Petitioner also contends that respondent violated the express terms of the Fire Extinguishing Appliances Warranty. The said warranty provides: WARRANTED that during the currency of this Policy, Fire Extinguishing Appliances as mentioned below shall be maintained in efficient working order on the premises to which insurance applies: - PORTABLE EXTINGUISHERS - INTERNAL HYDRANTS - EXTERNAL HYDRANTS - FIRE PUMP - 24-HOUR SECURITY SERVICES BREACH of this warranty shall render this policy null and void and the Company shall no longer be liable for any loss which may occur. Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein. The breach occurred when the respondent failed to install internal fire hydrants inside the burned building as warranted. Issues: WON AHAs contention was correct. WON there was a breach of warranty. Held (1) No. The amount of the premium stated on the face of the policy was P89,770.20. From the admission of respondents own witness, Mr. Borja, which the petitioner cited, the former only paid it P75,147.00, leaving a difference of P14,623.20. The deficiency, petitioner argues, suffices to invalidate the policy, in accordance with Section 77 of the Insurance Code. The Court of Appeals refused to consider this contention of the petitioner. It held that this issue was raised for the first time on appeal, hence, beyond its jurisdiction to resolve, pursuant to Rule 46, Section 18 of the Rules of Court. Petitioner, however, contests this finding of the appellate court. It insists that the issue was raised in paragraph 24 of its Answer, viz.: 24. Plaintiff has not complied with the condition of the policy and renewal certificate that the renewal premium should be paid on or before renewal date. Petitioner adds that the issue was the subject of the cross-examination of Mr. Borja, who acknowledged that the paid amount was lacking by P14,623.20 by reason of a discount or rebate, which rebate under Sec. 361 of the Insurance Code is illegal.

1) 2)

The argument fails to impress. It is true that the asseverations petitioner made in paragraph 24 of its Answer ostensibly spoke of the policys condition for payment of the renewal premium on time and respondents non -compliance with it. Yet, it did not contain any specific and definite allegation that respondent did not pay the premium, or that it did not pay the full amount, or that it did not pay the amount on time. Likewise, when the issues to be resolved in the trial court were formulated at the pre-trial proceedings, the question of the supposed inadequate payment was never raised. Most significant to point, petitioner fatally neglected to present, during the whole course of the trial, any witness to testify that respondent indeed failed to pay the full amount of the premium. The thrust of the cross-examination of Mr. Borja, on the other hand, was not for the purpose of proving this fact. Though it briefly touched on the alleged deficiency, such was made in the course of discussing a discount or rebate, which the agent apparently gave the respondent. Certainly, the whole tenor of Mr. Borjas testimony, both during direct and cross examinations, implicitly assumed a valid and subsisting insurance policy. It must be remembered that he was called to the stand basically to demonstrate that an existing policy issued by the petitioner covers the burned building. (2) No. We agree with the appellate courts conclusion that the aforementioned warranty did not require respondent to provide for all the fire extinguishing appliances enumerated therein. Additionally, we find that neither did it require that the appliances are restricted to those mentioned in the warranty. In other words, what the warranty mandates is that respondent should maintain in efficient working condition within the premises of the insured property, fire fighting equipments such as, but not limited to, those identified in the list, which will serve as the oil mills first line of defens e in case any part of it bursts into flame. To be sure, respondent was able to comply with the warranty. Within the vicinity of the new oil mill can be found the following devices: numerous portable fire extinguishers, two fire hoses fire hydrant and an emergency fire engine. All of these equipments were in efficient working order when the fire occurred. It ought to be remembered that not only are warranties strictly construed against the insurer, but they should, likewise, by themselves be reasonably interpreted. That reasonableness is to be ascertained in light of the factual conditions prevailing in each case. Here, we find that there is no more need for an internal hydrant considering that inside the burned building were: (1) numerous portable fire extinguishers, (2) an emergency fire engine, and (3) a fire hose which has a connection to one of the external hydrants.

ANG GIOK CHIP, doing business under the name and style of Hua Bee Kong Si, plaintiff-appellee, vs. SPRINGFIELD FIRE & MARINE INSURANCE COMPANY, defendant-appellant. Facts: Ang Giok Chip used to be an owner of a warehouse. The contents of the warehouse were insured by three companies for 60k. One of them was Springfield Fire and Marine Insurance Company. The warehouse was then destroyed by a fire. Petitioner then filed a case against Springfield to recover from the loss. One of the defenses of Springfield was with regards to Warranty F which fixed the amount of hazardous goods that can be stored in building. It is noteworthy to include that the court believed that it would be a reasonable deduction to conclude that more than 3 per cent of the total value of the merchandise contained in the warehouse constituted hazardous goods. The policy states: WARRANTY F 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; . . . . 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 Held :

No. "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." As the Philippine law was taken verbatim from the law of California, in accordance with well settled canons of statutory construction, the court should follow in fundamental points, at least, the construction placed by California courts on a California law. This being true, we turn to two of such well recognized doctrines. In the first place, 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. (I Couch, Cyclopedia of Insurance Law, sec. 159.) 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. (4 Couch, Cyclopedia of Insurance Law, sec. 862.) The law says that every express warranty must be "contained in the policy itself." The word "contained," according to the dictionaries, means "included," inclosed," "embraced," "comprehended," etc. When, therefore, the courts speak of a rider attached to the policy, and thus "embodied" therein, or of a warranty "incorporated" in the policy, it is believed that the phrase "contained in the policy itself" must necessarily include such rider and warranty. As to the alternative relating to "another instrument," "instrument" as here used could not mean a mere slip of paper like a rider, but something akin to the policy itself, which in section 48 of the Insurance Act is defined as "The written instrument, in which a contract of insurance is set forth." In California, every paper writing is not necessarily an "instrument" within the statutory meaning of the term. The word "instrument has a well defined definition in California, and as used in the Codes invariably means some written paper or instrument signed and delivered by one person to another, transferring the title to, or giving a lien, on property, or giving a right to debt or duty. In other words, the rider, warranty F, is contained in the policy itself, because by the contract of insurance agreed to by the parties it is made to form a part of the same, but is not another instrument signed by the insured and referred to in the policy as forming a part of it.

ARMANDO GEAGONIA, petitioner, vs. COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION, respondents. Facts: Petitioner is the owner of Norman's Mart. He obtained from the private respondent fire insurance policy No. F-14622 for P100, 000.00, covering the following: "Stock-in-trade consisting principally of dry goods such as RTW's for men and women wear and other usual to assured's business." The policy contained the following condition (the other insurance clause):3. The insured shall give notice to the Company of any insurance or insurances already affected, 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 in 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 the loss or damage is not more than P200,000.00. The petitioner declared in the policy under the subheading entitled CO-INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for P50, 000.00. A fire of accidental origin broke out, petitioner's insured stock-in-trade were completely destroyed prompting him to file with the private respondent a claim under the policy. Private respondent denied the claim because it found that at the time of the loss the petitioner's stocks-in-trade were likewise covered by fire insurance policies No. GA-28146 and No. GA-28144, for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (hereinafter PFIC).These policies indicate that the insured was "Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage clause.The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy. Issue:

Whether the petitioner for not disclosing the two insurance policies issued by the PFIC when he obtained the fire insurance policy from the private respondent violated Condition 3 (Other Insurance Clause) of the policy. Held: No The Court is of the opinion that in Condition 3 (Other insurance Clause) of the subject policy (a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. The first conclusion is supported by the portion of the condition referring to other insurance "covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured," and the portion regarding the insured's declaration on the subheading CO-INSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00. A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and interest. As earlier stated, the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate. Since the two policies of the PFIC do not cover the same interest as that covered by the policy of the private respondent, no double insurance exists. The non-disclosure then of the former policies was not fatal to the petitioner's right to recover on the private respondent's policy. The fire insurance policies issued by the PFIC name the petitioner as the assured and contain a mortgage clause which reads: Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their interest may appear subject to the terms of this policy. This is clearly a simple loss payable clause, not a standard mortgage clause. Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured.

Makati Tuscany Condominium Assoc v CA, American Home Assurance FACTS American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium Corporation Insurance Policy on the latter's building and premises, for a period beginning one year. The premium was paid on installments and all of which were accepted by private respondent. Private respondent issued to petitioner another Insurance Policy, which replaced and renewed the previous policy, for a term of one year. The premium was again paid on installments. All payments were likewise accepted by private respondent. The policy was again renewed and private respondent issued to petitioner another Insurance Policy for a period of one year. On this renewed policy, petitioner made two installment payments, both accepted by private respondent. Thereafter, petitioner refused to pay the balance of the premium. Private respondent filed an action to recover the unpaid balance. Petitioner discontinued the payment of premiums because the policy did not contain a credit clause in its favor and the receipts for the installment payments covering the 3 policies and that the policy was never binding and valid, and no risk attached to the policy.


Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance, in view of Sec. 77. HELD: No. The subject policies are valid even if the premiums were paid on installments. The records clearly show that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. Basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums, although paid on installments, and later deny liability on the lame excuse that the premiums were not prepared in full. It appearing from the peculiar circumstances that the parties actually intended to make three (3) insurance contracts valid, effective and binding, petitioner may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy. Where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary.

UCPB GENERAL INSURANCE CO. INC., petitioner, vs. MASAGANATELAMART, INC., respondent. G.R.No. 137172. April 4, 2001 FACTS: Plaintiff (respondent) obtained from defendant (petitioner) five (5) insurance policies on its properties effective from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May 1992. On June13, 1992, plaintiff's properties were razed by fire. On July 13, 1992, plaintiff tendered, and defendant accepted, five (5) Equitable Bank Manager's Checks in the total amount of P225,753.45 as renewal premium payments for which Official Receipt Direct Premium No. 62926 was issued by defendant. On July 14, 1992, Masagana made its formal demand for indemnification for the burned insured properties. On the same day, defendant returned the five (5) manager's checks rejecting Masagana's claim on the following grounds: "a) Said policies expired last May 22, 1992 and were not renewed for another term; b) Defendant had put plaintiff and its alleged broker on notice of non-renewal earlier; and c) The properties covered by the said policies were burned in a fire that took place last June 13, 1992, or before tender of premium payment." Both the Court of Appeals and the trial court found that sufficient proof exists that Respondent, which had procured insurance coverage from Petitioner for a number of years, had been granted a 60 to 90-day credit term for the renewal of the policies. Such a practice had existed up to the time the claims were filed. In the Supreme Court decision of 15 June 1999, the Court defined the main issue to be whether the fire insurance policies issued by petitioner to the respondent covering the period from May 22, 1991 to May 22, 1992 had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date and after the occurrence of the (fire) risk insured against. The Court resolved this issue in the ne gative in view of Section 77 of the Insurance Code. Accordingly, the Court reversed and set aside the decision of the Court of Appeals. Respondent filed a Motion for Reconsideration. ISSUE: Whether Section 77 of the Insurance Code of 1978 (P.D. No. 1460) must be strictly applied to Petitioners advantage despite its practice of granting a 60- to 90-day credit term for the payment of premiums. HELD: No. Section 77 of the Insurance Code of 1978 provides: SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies. There are exceptions to Section 77. The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the grace period provision applies. The second is that covered by Section 78 of the Insurance Code, which provides: SEC. 78. Any acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until premium is actually paid. A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals, wherein the Court ruled that Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss.

Another exception was provided for in the Courts ruling in the case of Tuscany, namely , that the insurer may grant credit extension for the payment of the premium. (Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreement granting credit extension). This simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term. Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The agreement binds the parties.

Qua Chee Gan vs Law Union and Rock Insurance Co., Ltd. Qua Chee Gan owns four warehouses in Albay. He was using these warehouses to house crops like copra and hemp. All warehouses were insured by Law Union and Rock Insurance for the amount of P370,000.00. The insurance states that Qua Chee Gan should install 11 hydrants in the warehouses premises. Qua Chee Gan installed only two, but Law Union nevertheless went on with the insurance policy and collected premium from Qua Chee Gan. The insurance contract also provides that oil should not be stored within the premises of the warehouses. In 1940, three of the warehouses were destroyed by fire. The damage caused amounted to P398k. Qua Chee Gan demanded insurance pay from Law Union but the latter refused as it alleged that after investigation from their part, they found out that Qua Chee Gan caused the fire. Law Union in fact sued Qua Chee Gan for Arson. Qua Chee Gan was acquitted in the arson case. He then demanded that Law Union pay up. This time, Law Union averred that the insurance contract is void because Qua Chee Gan failed to install 11 hydrants; and that gasoline was found in one of the warehouses. ISSUE: Whether or not the insurance contract is void. HELD: No. Law Union cannot exempt itself from paying Qua Chee Gan because it is estopped from invoking the same. It is a well settled rule of law that an insurer which with knowledge of facts entitling it to treat a policy as no longer in force, receives and accepts a premium on the policy, estopped to take advantage of the forfeiture. Also, gasoline is not one of those items specifically prohibited from the premises of the warehouses. What was mentioned was the word oil which could mean anything (f rom palm oil to lubricant and not gasoline or kerosene). This ambiguity is to be interpreted against Law Union because a contract of insurance is a contract of adhesion. Further, oil is incidental to Qua Chee Gans business, it being used for motor fuel.