QUA CHEE GAN v. LAW UNION AND ROCKINSURANCE CO. LTD. from asserting the breach of such conditions.
rting the breach of such conditions. The law is charitable enough to
December 26, 1984 Aquino, J.Mafoxci
FACTS:
Qua Chee Gan (insured) owned four warehouses or bodegas in Albay used for
storage of copra and hemp. The bodegas with their contents were insured with Law
Union and Rock Insurance Co. Ltd. (insurer)The bodegas were gutted with fire of
undetermined origin. The insured informed the insurer by telegram on the same
day. The next day the fire adjusters conducted extensive investigation for
the insurer. The Insurance Company resisted payment, claiming violation of
warranties and conditions, filing of fraudulent claims, and that the fire had been
deliberately caused by the insured or by other persons in connivance with him. The
insured was tried for arson, with the insurance company acting as private
prosecutor. The insured was acquitted. Thereafter the insured instituted an action
to recover the proceeds of the fire insurance policies. The insurer argued that the
policies were avoided for breach of warranty, specifically the one appearing on a
rider pasted (with other similar riders) on the face of the policies. According to the
insurer, since the bodegas insured had an external wall perimeter of 500 meters or
1,640 feet, the insured should have eleven (11) fire hydrants in the compound, but
actually had only two (2), with a further pair nearby, belonging to the municipality
of Tabaco.The CFI ruled in favor of the insured. It found that the insurance company
was aware, even before the policies were issued, that in the premises insured there
were only two fire hydrants installed by Qua Chee Gan and two others nearby,
owned by the municipality of Tabaco, contrary to the requirements of the warranty
in question
ISSUE:
Whether the insurance company can raise as defense the violation of warranties
even when such alleged violations existed at the time the contract of insurance was
entered into. –NO
HELD:
No. The insured is barred by waiver (or rather estoppel) to claim violation of the so-
called fire hydrants warranty, for the reason that knowing fully all that the number
of hydrants demanded therein never existed from the very beginning, the appellant
nevertheless issued the policies in question subject to such warranty, and received
the corresponding premiums.
RATIO:
It is usually held that where the insurer, at the time of the issuance of a policy of
insurance, has knowledge of existing facts which, if insisted on, would invalidate the
contract from its very inception, such knowledge constitutes a waiver of conditions
in the contract inconsistent with the facts, and the insurer is stopped thereafter
assume, in the absence of any showing to the contrary, that an insurance company
intends to executed a valid contract in return for the premium received; and when
the policy contains a condition which renders it voidable at its inception, and this
result is known to the insurer, it will be presumed to have intended to waive the
conditions and to execute a binding contract, rather than to have deceived the
insured into thinking he is insured when in fact he is not, and to have taken his
money without consideration. The contract of insurance is one of perfect good faith
(uferrimal fidei) not for the insured alone, but equally so for the insurer; in fact, it is
mere so for the latter, since its dominant bargaining position carries with it stricter
responsibility.
Pioneer v Yap G.R. No. L-36232 December 19, 1974
J. Fernandez
Facts:
Respondent Oliva Yap was the owner of a store in a two-storey building where she
sold shopping bags and footwear. ChuaSoon Poon, her son-in-law, was in charge of
the store.
Yap took out a Fire Insurance Policy No. 4216 from Pioneer Insurance with a value
of P25,000.00 covering her stocks, office furniture, fixtures and fittings.
Among the conditions in the policy executed by the parties are the following:
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 benefits under this Policy shall be forfeited…
Any false declaration or breach or this condition will render this policy null and void.
Another insurance policy for P20,000.00 issued by Great American covering the
same properties. The endorsement recognized co-insurance by Northwest for the
same value.
Oliva Yap took out another fire insurance policy for P20,000.00 covering the same
properties from the Federal Insurance Company, Inc., which was procured without
notice to and the written consent of Pioneer.
A fire broke out in the building, and the store was burned. Yap filed an insurance
claim, but the same was denied for a breach.
Oliva Yap filed a case for payment of the face value of her fire insurance policy. The
insurance company refused to pay because she never informed Pioneer of another
insurer. The trial court decided in favor of Yap. The CA affirmed.
Issue:
Whether or not petitioner should be absolved from liability on the Pioneeer policy
on account of any violation of the co-insurance clause
Held: No. Petition dismissed.
Ratio:
There was a violation. The insurance policy for P20,000.00 issued by the Great
American, ceased to be recognized by them as a co-insurance policy.
The endorsement shows the clear intention of the parties to recognize on the date
the endorsement was made, the existence of only one co-insurance, the Northwest
one. The finding of the Court of Appeals that the Great American Insurance
policywas substituted by the Federal Insurance policy is indeed contrary to said
stipulation.
Other insurance without the consent of Pioneer would avoid the contract. It
required no affirmative act of election on the part of the company to make
operative the clause avoiding the contract, wherever the specified conditions
should occur. Its obligations ceased, unless, being informed of the fact, it consented
to the additional insurance.
The validity of a clause in a fire insurance policy to the effect that the procurement
of additional insurance without the consent of the insurer renders the policy void is
in American jurisprudence.
Milwaukee Mechanids' Lumber Co., vs. Gibson- "The rule in this state and
practically all of the states is to the effect that a clause in a policy to the effect that
the procurement of additional insurance without the consent of the insurer renders
the policy void is a valid provision.”
In this jurisdiction, General Insurance & Surety Corporation vs. Ng Hua-
“The annotation then, must be deemed to be a warranty that the property was not
insured by any other policy. Violation thereof entitled the insurer to rescind.
Furthermore, even if the annotations were overlooked the defendant insurer would
still be free from liability because there is no question that the policy issued by
General Indemnity has not been stated in nor endorsed on Policy No. 471 of
defendant. The obvious purpose of the aforesaid requirement in the policy is to
prevent over-insurance and thus avert the perpetration of fraud where a fire would
be profitable to the insured.“
G.R. No. L-36480 May 31, 1988
ANDREWPALERMO vs. PYRAMID INSURANCE CO., INC.,
The Court of Appeals certified this case to Us for proper disposition as the only
question involved is the interpretation of the provision of the insurance contract
regarding the "authorized driver" of the insured motor vehicle.
On March 7, 1969, the insured, appellee Andrew Palermo, filed a complaint in the
Court of First Instance of Negros Occidental against Pyramid Insurance Co., Inc., for
payment of his claim under a Private Car Comprehensive Policy MV-1251 issued by
the defendant (Exh. A).
In its answer, the appellant Pyramid Insurance Co., Inc., alleged that it disallowed
the claim because at the time of the accident, the insured was driving his car with
an expired driver's license.
After the trial, the court a quo rendered judgment on October 29, 1969 ordering
the defendant "to pay the plaintiff the sum of P20,000.00, value of the insurance of
the motor vehicle in question and to pay the costs."
On November 26, 1969, the plaintiff filed a "Motion for Immediate Execution
Pending Appeal." It was opposed by the defendant, but was granted by the trial
court on December 15, 1969.
The trial court found the following facts to be undisputed:
On October 12,1968, after having purchased a brand new Nissan
Cedric de Luxe Sedan car bearing Motor No. 087797 from the Ng
Sam Bok Motors Co. in Bacolod City, plaintiff insured the same
with the defendant insurance company against any loss or
damage for P 20,000.00 and against third party liability for P
10,000.00. Plaintiff paid the defendant P 361.34 premium for one
year, March 12, 1968 to March 12, 1969, for which defendant
issued Private Car Comprehensive Policy No. MV-1251, marked
Exhibit "A."
The automobile was, however, mortgaged by the plaintiff with the
vendor, Ng Sam Bok Motors Co., to secure the payment of the
balance of the purchase price, which explains why the registration
certificate in the name of the plaintiff remains in the hands of the
mortgagee, Ng Sam Bok Motors Co.
 On April 17, 1968, while driving the automobile in question, the
plaintiff met a violent accident. The La Carlota City fire engine
crashed head on, and as a consequence, the plaintiff sustained
physical injuries, his father, Cesar Palermo, who was with am in
the car at the time was likewise seriously injured and died shortly
thereafter, and the car in question was totally wrecked.
The defendant was immediately notified of the occurrence, and
upon its orders, the damaged car was towed from the scene of
the accident to the compound of Ng Sam Bok Motors in Bacolod
City where it remains deposited up to the present time.
The insurance policy, Exhibit "A," grants an option unto the
defendant, in case of accident either to indemnify the plaintiff for
loss or damage to the car in cash or to replace the damaged car.
The defendant, however, refused to take either of the above-
mentioned alternatives for the reason as alleged, that the insured
himself had violated the terms of the policy when he drove the
car in question with an expired driver's license. (Decision, Oct. 29,
1969, p. 68, Record on Appeal.)
Appellant alleges that the trial court erred in interpreting the following provision of
the Private Car Comprehensive Policy MV-1251:
AUTHORIZED DRIVER:
Any of the following:
(a) The Insured.
(b) Any person driving on the Insured's order or with his
permission. Provided that the person driving is permitted in
accordance with the licensing or other laws or regulations to drive
the Motor Vehicle and is not disqualified from driving such motor
vehicle by order of a Court of law or by reason of any enactment
or regulation in that behalf. (Exh. "A.")
There is no merit in the appellant's allegation that the plaintiff was not authorized
to drive the insured motor vehicle because his driver's license had expired. The
driver of the insured motor vehicle at the time of the accident was, the insured
himself, hence an "authorized driver" under the policy.
While the Motor Vehicle Law prohibits a person from operating a motor vehicle on
the highway without a license or with an expired license, an infraction of the Motor
Vehicle Law on the part of the insured, is not a bar to recovery under the insurance
contract. It however renders him subject to the penal sanctions of the Motor
Vehicle Law.
The requirement that the driver be "permitted in accordance with the licensing or
other laws or regulations to drive the Motor Vehicle and is not disqualified from
driving such motor vehicle by order of a Court of Law or by reason of any
enactment or regulation in that behalf," applies only when the driver" is driving on
the insured's order or with his permission." It does not apply when the person
driving is the insured himself.
This view may be inferred from the decision of this Court in Villacorta vs. Insurance
Commission, 100 SCRA 467, where it was held that:
The main purpose of the "authorized driver" clause, as may be
seen from its text, is that a person other than the insured owner,
who drives the car on the insured's order, such as his regular
driver, or with his permission, such as a friend or member of the
family or the employees of a car service or repair shop, must be
duly licensed drivers and have no disqualification to drive a motor
vehicle.
In an American case, where the insured herself was personally operating her
automobile but without a license to operate it, her license having expired prior to
the issuance of the policy, the Supreme Court of Massachusetts was more explicit:
... Operating an automobile on a public highway without a license,
which act is a statutory crime is not precluded by public policy
from enforcing a policy indemnifying her against liability for bodily
injuries The inflicted by use of the automobile." (Drew C.
Drewfield McMahon vs. Hannah Pearlman, et al., 242 Mass. 367,
136 N.E. 154, 23 A.L.R. 1467.)
WHEREFORE, the appealed decision is affirmed with costs against the defendant-
appellant.
SO ORDERED.