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TYPES OF POLICY

Development Insurance v. Intermediate Appellate Court - Philippine Union Realty Development insured
its building against fire. One day, the building was completely destroyed by fire. The insured thus filed a claim
from the insurer. However, the latter denied the claim. The CFI, the IAC, and the SC were unanimous in
saying that the insurer must indemnify the insured for the loss it incurred. One of the questions answered by
the SC is the amount which the insured is entitled to claim. The value of the policy is Php2.5million. The
petitioner argues that since at the time of the fire the building insured was worth P5,800,000.00, the private
respondent should be considered 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. Accordingly, the private respondent is entitled to
an indemnity of only P67,629.31, the rest of the loss to be shouldered by it alone. The question posed for the
SCs resolution is how much is the insured entitled? The court ruled that the policy issued to PURD is an
open policy, which is defined as one in which the value of the thing insured is not agreed upon but is left to
be ascertained in case of loss. This means that 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. The actual loss sustained by the insured, as determined by the lower court, is equivalent
to the amount of Php508,867. Hence, applying the open policy clause as expressly agreed upon by the parties
in their contract, the private respondent is entitled to the payment of indemnity under the said contract in the
total amount of P508,867.00.

PERIOD TO BRING ACTION

Ang v. Fulton Fire Insurance P&S Department Store insured its merchandise stocks against fire. During
the coverage, the building where the merchandise were stored was destroyed by fire. P&S, thru Sally Ang,
filed a claim with Fulton. However, the claim was met with denial. Ang received the denial on 19 April 1956.
On 5 May 1958 this action for collection of sum of money was instituted. The insurer insists that it cannot be
made liable for the claims of Ang because the plaintiff is barred from filing an action pursuant to Par. 13 of
the policy which provides that if the claim is made and rejected but no action is commenced within 12
months after such rejection, all benefits under the policy would be forfeited, and that since the claim of the
plaintiffs was denied and plaintiffs received notice of denial on April 18, 1956, and they brought the action
only on May 5, 1958, all the benefits under the policy have been forfeited. Ang, on the other hand alleged that
on May 11, 1956, they instituted Civil Case No. 2949 against Fultons Agent, Paramount Insurance, in the
Court of First Instance of Manila, to assert the claim. However, this case was dismissed without prejudice on
September 3, 1957 and that deducting the period within which said action was pending, the present action
was still within the 12 month period from April 12, 1956. The court a quo ruled that the bringing of the
action in the Court of First Instance of Manila on May 11, 1956, tolled the running of the 12 month period
within which the action must be filed. The question herein is did the filing of Civil Case No. 2949 suspend
the 12 month period within which the present action must have been filed? The court ruled that the
filing of the said civil case did not suspend the 12-month period within which the action against Fulton must
have been filed. The condition contained in the insurance policy that claims must be presented within one
year after rejection is not merely a procedural requirement. The condition is an important matter, essential to
a prompt settlement of claims against insurance companies, as it demands that insurance suits be brought by
the insured while the evidence as to the origin and cause of destruction have not yet disappeared. It is in the
nature of a condition precedent to the liability of the insurer, or in other terms, a resolutory cause, the
purpose of which is to terminate all liabilities in case the action is not filed by the insured within the period
stipulated. Contractual limitations in insurance policies prevail over the statutory limitations, as well as over
the exceptions to the latter, because the rights of the parties flow from the contract of insurance. Their
contract is the law between the parties, and their agreement that an action on a claim denied by the insurer
must be brought within one year from the denial, governs, not the rules on the prescription of actions. If
there is no condition in the policy that an action should be filed by the insured against the agent for his claim,
the filing of such action has no legal effect and serves no other purpose except that of notifying the agent of
the claim. There is no law giving any effect to such action upon the principal, and courts cannot by
interpretation extend the clear scope of the agreement beyond what is agreed upon by the parties.

New Life v. Court of Appeals Julian Sy and Jose Sy Bang insured the stocks in trade of New Life against
fire. Western Guaranty, Reliance Surety & Insurance, and Equitable Insurance issued fire insurance policies
insuring the said stocks in trade. In the morning of 19 October 1982, the building where the stocks were
stored was gutted by fire thus destroying the insured merchandise. Julian Sy filed a claim with the insurers.
However, on 9 March 1983, Western Guaranty denied the claim on the ground of breach of policy
conditions. Reliance Assurance likewise denied the claim on 23 November 1982 on the same ground. On
February 13, 1983, Atty. Dator asked the insurer the specific policy conditions that were violated by the
insured. On 30 March 1983, Western Guaranty answered the inquiry saying that the insured failed to inform
the insurer that other insurance companies were insuring the insured merchandise. In view of the denials of
its claim, New Life filed separate civil actions against the 3 insurance companies. One of the issues in this case
is the liability of Reliance Assurance to indemnify New Life. The denial of the claim was received on 29
November 1982. However, the claim was filed more than one year after the receipt of the denial or on 31
January 1984. The Trial Court ruled that the belated filing of the action was excused because plaintiff found it
necessary to be informed of the specific causes or reasons for the denial of his claim. The trial court further
ruled that the prescriptive period should run on the day when the insured received the explanation of the
denial of its claim. The issue herein is did the insureds inquiry to the insurer toll the running of the
prescriptive period within which any court action must be filed? The court held in the negative. Using
its ruling in Ang v. Fulton Fire Insurance, the court, in effect, reiterated that the condition contained in the
insurance policy that claims must be presented within one year after rejection is not merely a procedural
requirement. The condition is an important matter, essential to a prompt settlement of claims against
insurance companies, as it demands that insurance suits be brought by the insured while the evidence as to
the origin and cause of destruction have not yet disappeared. It is in the nature of a condition precedent to
the liability of the insurer, or in other terms, a resolutory cause, the purpose of which is to terminate all
liabilities in case the action is not filed by the insured within the period stipulated. Furthermore, assuming
arguendo that petitioners felt the legitimate need to be clarified as to the policy condition violated, there was a
considerable lapse of time from their receipt of the insurers clarificatory letter dated March 30, 1983, up to
the time the complaint was filed in court on January 31, 1984. The one-year prescriptive period was yet to
expire on November 29, 1983, or about eight (8) months from the receipt of the clarificatory letter, but
petitioners let the period lapse without bringing their action in court. The court did not find any peculiar
circumstances sufficient to relax the enforcement of the one-year prescriptive period and we, therefore, hold
that petitioners claim was definitely filed out of time.

ACCFA v. Alpha Insurance and Surety Co., Inc. Alpha Insurance issued a bond in favor of FACOMA
to guarantee the latter from loss on account of "personal dishonesty, amounting to larceny or estafa of its
Secretary-Treasurer, Ricardo A. Ladines. Later, FACOMA assigned its rights to the ACCFA with the
approval of Alpha Insurance. During the effectivity of the bond, Ladines converted and misappropriated
around Php11,500++ of FACOMA funds. Upon discovery of the loss, ACCFA filed a claim with Alpha
Insurance. However, the latter failed to pay despite repeated demands. On 30 May 1960, ACCFA filed a
collection suit against the insurer. The latter, however, sought for the dismissal of the case, saying that the
action was filed out of time. It was alleged that ACCFA filed the court action more than one year after
plaintiff made claim for loss, contrary to the eighth condition of the bond which stated that no action, suit or
proceeding shall be had or maintained upon this Bond unless the same be commenced within one year from
the time of making claim for the loss upon which such action, suit or proceeding, is based. The court a quo
dismissed the case. The question in this case is was the present action filed out of time? The court ruled
in the negative. A fidelity bond is, in effect, in the nature of a contract of insurance against loss from
misconduct and is governed by the same principle of interpretation. Consequently, the condition of the bond
limiting the period for bringing action thereon, is subject to the provisions of Section 61-A of the Insurance
Act (No. 2427) as amended by Act 4101. The year for instituting action in court must be reckoned, therefore,
from the time of appellee's refusal to comply with its bond. In so far, therefore, as condition eight of the
bond requires action to be filed within one year from the filing of the claim for loss, such stipulation
contradicts the public policy expressed in Section 61-A of the Philippine Insurance Act. Condition eight of
the bond, theref ore, is null and void, and the appellant is not bound to comply with its provisions. Action
must be brought within the statutory period of limitation for written contracts (N.C.C., Article 1144).

Sun Insurance v. Court of Appeals Emilio Tan insured his interest in the electrical supply store of his
brother which was then housed in a building in Iloilo. During the coverage, the building where the store was
located was destroyed by fire. Tan then filed a claim with Sun Insurance. However, on 29 February 1984, the
insurer denied the claim. On 3 April 1984, sought for the insurers reconsideration of the denial of his claim.
On September 3, 1985, Tan's counsel wrote the Insurer inquiring about the status of his April 3, 1984 request
for reconsideration. Petitioner answered the letter on October 11, 1985, advising Tan's counsel that the
Insurer's denial of Tan's claim remained unchanged. On 20 November 1985, Tan sued Sun Insurance. The
insurer sought for the dismissal of the case on the ground of prescription. The question posed for the SCs
resolution is what is the effect of the insureds request for reconsideration of insurers denial of the
claim? Does it suspend the prescriptive period? A stipulation in an insurance policy that claims must be
brought within one year after rejection is not only a procedural requirement but an important matter essential
to a prompt settlement of insurance claims. The contention of the respondents that the one-year prescriptive
period does not start to run until the petition for reconsideration had been resolved by the insurer, runs
counter to the declared purpose for requiring that an action or suit be filed in the Insurance Commission or
in a court of competent jurisdiction from the denial of the claim. To uphold respondents contention would
contradict and defeat the very principle which this Court had laid down. Moreover, it can easily be used by
insured persons as a scheme or device to waste time until any evidence which may be considered against them
is destroyed. Indisputably, the above-cited pronouncements of this Court may be taken to mean that the
insureds cause of action or his right to file a claim either in the Insurance Commission or in a court of
competent jurisdiction commences from the time of the denial of his claim by the Insurer, either expressly or
impliedly. But as pointed out by the petitioner insurance company, the rejection referred to should be
construed as the rejection, in the first instance, for if what is being referred to is a reiterated rejection
conveyed in a resolution of a petition for reconsideration, such should have been expressly stipulated. While
in the Eagle Star, the Court used the phrase final rejection, the same cannot be taken to mean the rejection
of a petition for reconsideration as insisted by respondents. Such was clearly not the meaning contemplated
by this Court. The Insurance policy in said case provides that the insured should file his claim, first, with the
carrier and then.

Pacific Banking v. Court of Appeals Paramount Shirt Mfg. Co. insured its stocks, materials, and supplies
against loss with Oriental Assurance Corporation. A Fire Policy, which was an open policy, was issued by the
insurer. During the coverage, Paramount was a debtor of Pacific Banking. Said policy was thus endorsed to
Pacific Banking as mortgagee of the properties insured. The place where the insured items were stored was
then destroyed by fire. On 24 January 1964, Pacific Banking filed a claim with the insurer. However, on 28
January 1964, the insurer informed the bank that it is not yet ready to accede with its demands because it still
waiting for the report of the insurance adjuster. On 25 March 1964, the insurance adjuster informed the bank
that it had not yet file a claim, and it did not submit a proof of loss, and thus the determination of the
insurers liability cannot be had. On 24 April 1964, the bank replied asking the insurance adjuster to verify
from the records of the Bureau of Customs the entries of merchandise taken into the customs bonded
warehouse razed by fire as a reliable proof of loss. On April 28, 1964, the bank filed this action against the
insurer. The insurer sought for the dismissal of the case saying that the case was prematurely filed because
neither the bank nor the insured submitted proof of loss, which is a violation of one of the conditions in the
policy. The issue is was the petition prematurely filed? The court ruled in the affirmative. Generally, the
cause of action on the policy accrues when the loss occurs, but when the policy provides that no action shall
be brought unless the claim is first presented extrajudicially in the manner provided in the policy, the cause of
action will accrue from the time the insurer finally rejects the claim for payment. In this case, the policy
specifically provides that the insured shall on the happening of any loss or damage give notice to the company
and shall within fifteen (15) days after such loss or damage deliver to the private respondent (a) a claim in
writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage
and (b) particulars of all other insurances, if any. Likewise, insured was required "at his own expense to
produce, procure and give to the company all such further particulars, plans, specifications, books, vouchers,
invoices, duplicates or copies thereof, documents, proofs and information with respect to the claim". The
evidence adduced shows that twenty-four (24) days after the fire, petitioner merely wrote letters to private
respondent to serve as a notice of loss, thereafter, the former did not furnish the latter whatever pertinent
documents were necessary to prove and estimate its loss. Instead, petitioner shifted upon private respondent
the burden of fishing out the necessary information to ascertain the particular account of the articles
destroyed by fire as well as the amount of loss. It is noteworthy that private respondent and its adjuster
notified petitioner that insured had not yet filed a written claim nor submitted the supporting documents in
compliance with the requirements set forth in the policy. Despite the notice, the latter remained unheedful.
Since the required claim by insured, together with the preliminary submittal of relevant documents had not
been complied with, it follows that private respondent could not be deemed to have finally rejected
petitioner's claim and therefore the latter's cause of action had not yet arisen. Compliance with condition No.
11 is a requirement sine qua non to the right to maintain an action as prior thereto no violation of petitioner's
right can be attributable to private respondent. This is so, as before such final rejection, there was no real
necessity for bringing suit. Petitioner should have endeavored to file the formal claim and procure all the
documents, papers, inventory needed by private respondent or its adjuster to ascertain the amount of loss and
after compliance await the final rejection of its claim. Indeed, the law does not encourage unnecessary
litigation.

Lopez v. Compania de Seguros Lopez insured his tractor and trailer with Compania de Seguros from loss
or damage. When Lopez applied for the said insurance policy, he claimed that no insurance company rejected
his application for insurance coverage in the past. However, in truth and in fact, American International
Underwriters of the Philippines once rejected his application for insurance coverage. During the coverage, the
insured vehicles figured in an accident. Lopez then claimed from Compania. However, 28 April 1960,
Compania rejected the claim on the ground of concealment. On 27 May 1960, the Lopez filed a complaint
against Compania with the Insurance Commissioner. Lopez suggested that the matter be brought to
arbitration. However, Compania rejected the idea. Thus, on 19 September 1961, Lopez sued Compania in the
Manila CFI. Compania sought for the dismissal of the case on the ground of prescription as pursuant to the
policies issued to Lopez, a suit arising from the rejection of a claim must be filed within 12 months after such
rejection was made xxx xxx xxx. The CFI ruled for Compania and dismissed the complaint. The issue herein
is whether or not the complaint filed with the Insurance Commissioner a commencement of an
action? The court ruled that the filing of a complaint within the insurance commissioner is not a
commencement of an action. The terms action and suit are synonymous, and the determinative or
operative fact which converts a claim into an action or suit is the filing of the same with a court of
justice. Filed elsewhere, as with some other body or office not a court of justice, the claim may not properly
be categorized under either term. An action or suit is essentially for the enforcement or protection of a
right, or the prevention or redress of wrong. (Rule 2, Sec. 1, Rules of Court.) There is nothing in the
Insurance Law, Act No. 2427, as amended, or in any of its allied legislations, which empowers the Insurance
Commissioner to adjudicate disputes relating to an insurance companys liability to an insured under a policy
issued by the former to the latter. The validity of an insureds claim under a specific policy, its amount, and all
such other matters as might involve the interpretation and construction of the insurance policy, are issues
which only a regular court of justice may resolve and settle. Consequently, a complaint filed by the insured
with the Office of the Insurance Commissioner is not an action or suit.

CANCELLATION POLICY

Malayan Insurance v. Cruz-Arnaldo Pinca applied for and was granted a fire insurance policy on her
property by Malayan. Malayan cancelled Pincas policy because of non-payment of premium. Pincas property
was the destroyed by fire. Pinca then demanded for payment of indemnity. However, Malayan rejected the
claim. In the SC, Malayan insists that Pinca is not entitled to indemnity because the policy never came into
force because the premium had not been paid, thus there was no existing insurance at the time of the loss
sustained by Pinca because her policy never became effective for non-payment of premium. The question
herein is was the policy validly cancelled thus exonerating Malayan from liability? The court held that a
valid cancellation of policy requires the concurrence of the following conditions:
1) Prior notice of cancellation to insured;
2) Notice must be based on the occurrence after effective date of policy of one or more of the grounds
mentioned;
3) Must be in writing, mailed or delivered to the insured at the address shown in the policy; and
4) Must state the grounds relied upon provided in Sec. 64 of the Insurance Code and upon request of
insured, to furnish facts on which cancellation is based.
In this case, Malayan claims it cancelled the policy in question on October 15, 1981, for non-payment of
premium. To support this assertion, it presented one of its employees, who testified that "the original of the
endorsement and credit memo" presumably meaning the alleged cancellation were sent the assured by mail
through our mailing section." However, there is no proof that the notice, assuming it complied with the other
requisites mentioned above, was actually mailed to and received by Pinca. All MICO offers to show that the
cancellation was communicated to the insured is its employee's testimony that the said cancellation was sent
"by mail through our mailing section," without more. The petitioner then says that its "stand is enervated (sic)
by the legal presumption of regularity and due performance of duty," (not realizing perhaps that "enervated"
means "debilitated," not "strengthened").

WARRANTIES

Sta. Ana v. Commercial Union Insurance Ulpiano Sta. Ana insured his fire against fire with Phoenix
Assurance Company. Later, he obtained another insurance coverage with Guardian Assurance Company. Sta.
Ana later mortgaged the insured property. The insurance policies were also endorsed to the mortgagee. The
property was later re-insured with different insurers. Later on, the insured house was gutted by fire. He
claimed from each and every insurer however, the companies refused to pay the indemnity due because the
amount claimed was more than the real value of the insured property, and that each company was not
informed that other companies are insuring the said property. Santa Ana maintains that he gave the required
notice to all the insurance companies: To Kerr & Company through their sub-agent, Mariano Morelos; to the
Pacific Commercial Company through their employee, Guillermo de Leon; and to the 'Filipinas, Compaia de
Seguros' through their agent, Juan Grey; telling them he had paid for other insurance on the same property.
However, he has been contradicted in this by all the persons mentioned. The issue is whether or not the
insurers were given proper notice that the insured property was insured by other insurers? The court
held that the insurers were not given notice. Without deciding whether notice of the existence of other
insurances upon the same property must be given in writing, or whether a verbal notice is sufficient to render
an insurance valid which requires such notice, whether oral or written, it is held that in the absolute absence
of such notice, when it is so required in a fire insurance policy as a condition for its validity, the policy is null
and void.

Ang Giok Chip v. Springfield Fire & Marine Giok Chip owned a warehouse in Manila. He insured the
contents of the warehouse with three insurance companies, one of which is Springfield. One day, the
warehouse was razed by fire and the things stored therein were destroyed. Giok Chip then filed a claim with
Springfield. However, the latter denied the claim because he violated a warranty which provided that the
allowable quantity of hazardous goods which can be stored in the warehouse cannot exceed 3% of the total
value of the whole of the goods contained in the warehouse. Apparently, the warranty is in the riderThe
question, as stated in the first paragraph of the decision, is 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 for not complying with the Philippine Insurance Act. The answer is yes. Sec. 65 of the
Insurance Law provides that 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. 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.