DEVELOPMENT INSURANCE CORPORATION v.

IAC, and PHILIPPINE UNION REALTY DEVELOPMENT CORPORATION

Cruz, J.
G.R. No. 71360. – July 16, 1986
FACTS
● A fire occurred in the building of Philippine Union Realty Development Corporation
 Loss was valued at P508,867
 The building was insured by Development Insurance Corp. against fire for Php 2.5M. The insurance
contract contained the provision:
o Condition 17. If the property hereby insured shall, at the breaking out of any fire, be collectively of
greater value than the sum insured thereon, then the insured shall be considered as being his
own insurer for the difference, and shall bear a ratable proportion of the loss accordingly. Every
item, if more than one, of the policy shall be separately subject to this condition

 Philippine Union sued for recovery of damages from Development Insurance
● The trial court declared Development Insurance in default, after which it rendered a judgment of default
 Judgment was rendered on the strength of the evidence submitted by Philippine Union ex parte
 Philippine Union was allowed full recovery of its claimed damages
● Upon learning of the trial court’s decision, Development Insurance moved to lift the order of default
 Invoked excusable neglect for the delay in filing its answer
 However, its motion was denied, so it appealed the case to the IAC
● The IAC affirmed the trial court’s decision in toto
● Development Insurance brought the case to the SC. The petitioner asserts that:
 The insurance covered only the building and not the elevators
 The elevators were insured only after the fire occurred
o Moreover, the elevators were not damaged by the fire
 The building was valued at Php 5.8M at the time of the fire
o Higher than the value of Php 2.5M, which was supposedly the actual value of the property insured
at the time of loss since the policy states the building is insured for such value
o Thus, following Condition 17 of the policy, Philippine Union should be considered as being its own
insurer for the difference between that amount and the face value of the policy and should share
pro rata in the loss sustained
 Philippine Union is entitled to an indemnity of only P67,629.31
 The rest of the loss to be shouldered by Philippine Union alone
ISSUES/HELD/RATIO:
1. W/N Philippine Union’s loss, valued at Php 508,867, should be shouldered entirely by Development Insurance
HELD: YES, because the policy covering the building is an open policy, wherein the amount of the loss shall be
subject to appraisal at the time of loss, and the company shall be liable for the full amount so apprised.
● There is no evidence on record that the building was worth Php 5.8M at the time of the loss
 Development Insurance did not back up its self-serving estimate with any independent corroboration
● On the contrary, the building was insured at Php 2.5M, and this must be considered the actual value of the
property insured on the day the fire occurred
 Valuation is based on the agreement of the insurer and the insured
 Valuation at Php 2.5M is more believable because at the time the building burned, it was still under
construction
● The Court notes that policy covering the building, Policy RY/F-082, is an open policy
 It is subject to the express condition that:
o This is an open policy as defined in Section 57 of the Insurance Act. In the event of loss, whether
total or partial, it is understood that the amount of the loss shall be subject to appraisal and the
liability of the company, if established, shall be limited to the actual loss, subject to the applicable
terms, conditions, warranties and clauses of this Policy, and in no case shall exceed the amount of
the policy.

1
  As defined in Sec. 57 (now Sec. 60 of the Insurance Code), an open policy is one in which the value of the
thing insured is not agreed upon but is left to be ascertained in case of loss
o Thus, the actual loss, as determined, will represent the total indemnity due the insured from the
insurer except only that the total indemnity shall not exceed the face value of the policy
● In the case at bar, the actual loss of Php 508,867 has been ascertained by the trial court, as affirmed by the IAC
 The Court will respect the lower court’s factual determination
o No showing of proof that it arrived at such determination arbitrarily
 Thus, applying the open policy clause as expressly agreed upon by the parties in their contract, the Court
holds that Philippine Union is entitled to the payment of indemnity under the said contract in the total
amount of P508,867.00
2. W/N the insurance covered the elevators
HELD: YES, the circumstance that the building insured is seven stories high and had to be provided with elevators in
order to comply with the legal requirement makes the contention of petitioner ridiculous
3. W/N the elevators were damaged by the fire
HELD: YES, the arson investigators affirmed that the fire damaged or destroyed a portion of the 7th floor of the
insured building and more particularly a Hitachi elevator control panel

DISPOSITIVE PORTION
WHEREFORE, the appealed decision is affirmed in full, with costs against the petitioner