3. Malayan Insurance Co., Inc. vs. PAP Co., Ltd.

(2013)

Facts: Malayan Insurance Company (MICO) issued a Fire Insurance Policy to PAP Co. for the
latter’s machineries and equipment located at Sanyo Bldg., PEZA, Rosario, Cavite. The
insurance was worth P15,000,000.00 and effective for 1 year. It was procured by PAP Co. for
RCBC, the mortgagee of the insured machineries and equipment. Prior to the expiration of the
insurance coverage, PAP Co. renewed the policy on an “as is” basis; this was for May 13, 1997
to May 13, 1998.

During the subsistence of the renewal policy, the insured machineries and equipment were totally
lost by fire. PAP Co. filed a fire insurance claim with MICO in the amount insured. MICO
however denied the claim because accordingly, at the time of the loss, the insured machineries
and equipment were transferred by PAP Co. from Sanyo Bldg. to Pace Factory, also in PEZA,
Rosario, Cavite. According to MICO, there was an increase of risk as a result of the unilateral
transfer of the insured properties. It averred that the Sanyo Bldg. was occupied as a factory of
automotive/computer parts by the assured and factory of zinc & aluminum die cast and plastic
gear for copy machine by Sanyo Precision Phils., Inc. with a rate of 0.449% while Pace Factory
was occupied as factory that repacked silicone sealant to plastic cylinders with a rate of 0.657%
under. PAP Co. however argued that MICO cannot avoid liability since it was informed of the
transfer by RCBC, the mortgage and the party duty-bound to relay such information.

The RTC ordered MICO to pay PAP Co. an indemnity for the loss. The CA affirmed the RTC’s
decision. Hence, this appeal.

Issue: Whether MICO is liable under the insurance contract?

Ruling: No. Under the policy and when it was renewed, it forbade the removal of the insured
properties unless sanctioned/consented by MICO. PAP Co. failed to notify and to obtain consent
of MICO regarding the removal. The transfer also increased the risk. With the transfer of
location of the subject properties, without notice to and consent of MICO, PAP Co. committed
concealment, misrepresentation, and breach of a material warranty. Under the Insurance Code,
MICO can rescind the insurance contract.

Wherefore, the decision of the CA is hereby reversed and set aside. Petitioner MICO is hereby
declared not liable for the loss of the insured machineries and equipment suffered by PAP Co.