Loss (Sections 83-87) Digested by: dlanor

Paris-Manila Perfume Co. vs. Phoenix Assurance Co.

Facts:

On May 22, 1924, defendant (Phoenix Assurance Co.) issued to plaintiff (Paris-Manila Perfume Co.) its fire insurance policy No. 841163 in the sum of P13,000 upon the property of the plaintiff at No. 1 Calle Cisneros, Cavite, insuring plaintiff's property against fire for that amount.

That on July 4, 1924, the property covered by the insurance was completely destroyed by fire for the total loss to the plaintiff of P38.025.56; that under its policy with the defendant, it promptly presented its claim but the defendant wrongfully and unjustly refused to pay it.

Defendant contended among others that the policy of insurance did not cover any loss or damage occasioned by explosion, and the loss was occasioned by an explosion, and was not covered by the policy.

The lower court rendered judgment in favor of the plaintiff.

Issues:

W/N Whether or not the loss of the property was caused mainly by explosion and thus not covered by the insurance policy.

Ruling:

The real cause of the fire is more or less a matter of conjecture, upon which there is little, if any, evidence.

But the fact remains that there was a fire, and that the plaintiffs property was destroyed. It is true that it may be that the explosion was the primary cause of the fire, but that is only a matter of conjecture, and upon that point, the burden of proof was upon the defendant.

Defendant relies upon section 6 of the policy, as follows:

6. Unless otherwise expressly stated in the policy the insurance does not cover —

(h) Loss or damage occasioned by the explosion; but loss or damage by explosion of gas for illuminating or domestic purposes in a building in which gas is not generated and which does not form a part of any gas works, will be deemed to be loss by fire within the meaning of this policy.

In answer to that, plaintiff relies upon section 5, which is as follows:

5. The insurance does not cover —

(d) Loss or damage occasioned directly or indirectly, approximately or remotely by or through or in consequence of:

(1) Earthquake, hurricane, volcanic eruption or other convulsion of nature, and the company shall not be liable for loss or damage arising during or within a reasonable time after any of the said occurrences, unless it be proved by the insured to the satisfaction of the company that such loss or damage was not in any way occasioned by or through or in consequence of any of the said occurrences

Examination of the above provisions would reveal that section 5 excludes not only the damages which may immediately result from an earthquake, but also any damage which may follow the earthquake, and that section 6 excludes only the damages which are the direct result of the explosion itself, and that it does not except damages which occurred from the fire occuring after the explosion, even though the explosion may have been the primary cause of the fire.

Moreover, there was no competent evidence as to whether the explosion caused the fire or the fire caused the explosion.

-sagabal-Digested by: Ichelle S. Malabuyoc

THE EAST FURNITURE INC vs. THE GLOBE &

RUTGERS FIRE INSURANCE CO. OF NEW YORK [G.R. No. L-35848 November 22, 1932]

Facts:

Plaintiff is a duly registered partnership engaged in the sale of furniture; that the defendant is a company engaged in the insurance business. Plaintiff insured against fire the articles existing in its establishment.

On March 2, 1929, a fire broke out in plaintiff's establishment, as a result of which the insured articles therein found were destroyed by the fire.

Defendants defenses are:(1) that the fire in question was of intentional origin; (2) that the claims of loss presented by the plaintiff were false and fraudulent;

(3) that the furniture in question had been mortgaged by the plaintiff to the Manila Finance and Discount Corporation, so that at the time of the fire the plaintiff was not the only party interested therein, contrary to the representations made in its claims of loss; and (4) that the plaintiff violated one of the conditions of the policies by refusing to furnish the defendants with a physical inventory of the contents of its store at the time of the fire.

By agreement of the parties the three cases were tried jointly who after the trial found that the claims presented by the plaintiff were notoriously fraudulent, and, accordingly, sustained defendant's second special defense and dismissed the complaint in each of the three cases. Hence, this petition.

Issue:

W/N fire was of intentional origin W/N the claim of loss were fraudulent Ruling:

Fire of Intentional Origin

We are thus led to the conclusion that defendants' first special defense is well founded — that the fire in question was of intentional origin and was caused with the connivance of the plaintiff. Neither the interest of the justice nor public policy would be promoted by an omission of the courts to expose and condemn incendiarism once the same is established by competent evidence. It would tend to encourage rather than suppress that great public menace if the courts do not expose the crime to public condemnation when the evidence in a case like the present shows that it has really been committed.

Fraudulent claim of loss

We may also consider the damage caused by the fire in relation with defendant's second special defense that plaintiff's claims of loss were false and fraudulent.

To each of the proofs of loss which the plaintiff presented to the respective insurance companies four days after the fire was attached an inventory of the furniture claimed to have been in the building at the

time of the fire. This inventory contains 506 pieces of furniture and 3,700 board feet of lumber of the alleged total value of P52,061.99. This amount was the total loss claimed to have been suffered by the plaintiff, although we note that in its complaints in these cases amended it is conceded that some furniture of the value of about P5,000 was saved.

Regardless of any difference of opinion as to the value of the insured furniture and the extent of the damage caused thereto by the fire in question, the fact that the insured only had approximately 202 pieces of furniture in the building at the time of the fire and sought to compel the insurance companies to pay for 506 pieces conclusively shows that its claim was not honestly conceived. The trial court's conclusion that said claim is notoriously fraudulent, is correct.

Condition 12 of each of the insurance policies sued upon provides that "if the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the Insured or anyone acting on his behalf to obtain any benefit under this policy; or, if the loss or damage be occasioned by the wilful act, or with the connivance of the Insured, — all benefit under this policy shall be forfeited."

J.Notice and Proof of Loss (Sections 88-92) Sharruf & Co. vs Baloise Fire Ins. Co.,

[GR No. 44119, March 30, 1937]

Facts:

Salomon Sharruf and Eskenazi were doing business under the firm name of Sharuff & Co. They applied for insurance the merchandise they had in stock. The insurance companies (Baloise Fire Ins. Co., Sun Insurance Office, Springfield Insurance Co.) sent their representative to asses and examine the goods. As a result, the insurance companies issued insurance policies with the total amount of 40,000.00. They then entered into a partnership, substituting the name Sharruf & Co. with the Sharruf & Eskanzi. About 12.41 o’clock on the morning of September 22, 1933, a fire broke out, burning and damaging the merchandise insured by Sharruf and Eskanzi.

Issue:

Whether or not the claim of loss filed by the plaintiffs is fraudulent.

Ruling:

With respect to the question whether or not the claim of loss filed by the plaintiffs is fraudulent, it is alleged by them that the total value of the textiles contained in cases deposited inside the building when the partnership Sharruf & Eskenazi was formed was P12,000; that of the fancy jewelry with imitation stones from P15,000 to P17,000, and that of the

kitchen utensils and tableware made of aluminum, bronze and glass P10,676. If, as said plaintiffs claim, they had already sold articles, mostly textiles, valued at P8,000, a small quantity of cloth must have been left at the time the fire occured. In their claim, however, the textiles allegedly consumed by fire and damaged by water are assessed by them at P12,000.

The claim of P12,000 is certainly not attributable to a mere mistake in estimate and counting because if they had textiles worth only P12,000 before the fire and they sold goods, mostly textiles, worth P8,000, surely textiles in the same amount of P12,000 could not have been burned and damaged after the fire. Of the kitchen utensils and tableware made of aluminum, bronze and glass, of which, according to the evidence for the plaintiffs, they had a stock valued at P10,676, there were found after the fire articles worth only P1,248.80. Therefore, utensils valued at P9,427.20 were lacking. A considerable amount of kitchen utensils made of noninflammable and fire-proof material could not, by the very nature of things have been totally consumed by the fire. At most, said articles would have been damaged, as the rest, and would have left traces of their existence. The same may be said of the fancy jewels with imitation stones, and others of which the fancy jewels with imitation stones, and others of which the plaintiffs claim to have had a stock worth from P15,000 to P17,000 at the time of the fire, of which only a few valued at P3,471.16, were left after the fire. According to said plaintiffs, all the articles, for the alleged loss of which indemnity is sought, were contained in about 40 showcases and wardrobes. According to the testimony of the fire station chiefs, corrobarated by the photographs of record, the flames caused more damage in the upper part of the rooms than in the lower part thereof; since, of the ten or eleven cases found inside the building after the fire, only a few were partially burned and others scorched judging from their appearance, the goods were damaged more by water than by fire.

According to the inventory made by White & Page, adjusters of the insurance companies, in the presence of the plaintiffs themselves and according to data supplied by the latter, the total value thereof, aside, from the articles not included in the inventories Exhibits B, C, and C-1, assessed at P744.50, amounts to only P8,077.35. If the plaintiffs' claim that at time of the fire there were about 40 cases inside the burnt building were true, a ten or eleven of them were found after the fire, traces of the thirty or twenty-nine cases allegedly burnt would be found, since experience has shown that during the burning of a building all the cases deposited therein are not so reduced to ashes that the least vestige thereof cannot be found. In the case of Go Lu vs. Yorkshire Insurance Co. (43 Phil., 633), this court laid down the following doctrine:

This court will legally presume that in an ordinary fire fifty bales or boxes of bolt goods of cloth cannot be wholly consumed or totally destroyed, and that in the very nature of things some trace or evidence will be left remaining of their loss or destruction.

The plaintiffs, upon whom devolve the legal obligation to prove the existence, at the time of the fire, of the articles and merchandise for the destruction of which they claim indemnity from the defendant companies, have not complied with their duty because they have failed to prove by a preponderance of evidence that when the fire took place there where in the burnt building articles and merchandise in the total amount of the insurance policies or that the textiles and other damaged and undamaged goods found in the building after the fire were worth P40,000. On the contrary, their own witness, Robles, testified that up to the month of September, 1933, there were about 39 or 40 cases belonging to the plaintiffs in his garage on Mabini Street, indicating thereby that the cases of merchandise examined by the agent of the insurance companies on July 25 and August 15, 1933, and for which the insurance policies were issued, were taken from the burned building where they were found. So great is the difference between the amount of articles insured, which the plaintiffs claim to have been in the building before the fire, and the amount thereof shown by the vestige of the fire to have been therein, that the most liberal human judgment can not attribute such difference to a mere innocent error in estimate or counting but to a deliberate intent to demand of the insurance companies payment of an indemnity for goods not existing at the time of the fire, thereby constituting the so-called "fraudulent claim" which, by express agreement between the insurers and the insured, is a ground for exemption of the insurers from civil liability.

Therefore, as the herein plaintiffs-appellees have acted in bad faith in presenting a fraudulent claim, they are not entitled to the indemnity claimed by them by virtue of the insurance policies issued by the defendant-appellant companies in their favor.

Author: Aldrin Montesco Malayan Ins. Co. Vs. Cruz Arnaldo

[154 SCRA 672]

FACTS:

On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, Coronacion Pinca, Fire Insurance Policy No. F-001-17212 on her property for the amount of P14,000.00 effective July 22, 1981, until July 22, 1982

On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the corresponding notice to Pinca.

On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora, agent of MICO.

On January 15, 1982, Adora remitted this payment to MICO,together with other payments.

On January 18, 1982, Pinca's property was completely burned.

On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that her policy had been cancelled earlier. But Adora refused to accept it.

In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to the Insurance Commission. It is because she was ultimately sustained by the public respondent that the petitioner has come to us for relief.

ISSUE:

Whether or not the cancellation of the policy by the insurance company was valid

RULING:

The Supreme Court ruled in favor of the insured.

The above provision (Sec. 77 as invoked by the insurance company) is not applicable because payment of the premium was in fact eventually made in this case. Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped "Payment Received" of the amount of P930.60 on "12-24-81" by Domingo Adora. This is important because it suggests an understanding between MICO and the insured that such payment could be made later, as agent Adora had assured Pinca. In any event, it is not denied that this payment was actually made by Pinca to Adora, who remitted the same to MICO.

It is not disputed that the premium was actually paid by Pinca to Adora on December 24, 1981, who received it on behalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the validity of Pinca's payment and of Adora's authority to receive it.

MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive the premium payment on its behalf. It is clearly provided in Section 306 of the Insurance Code. And it is a well-known principle under the law of agency that:

Payment to an agent having authority to receive or collect payment is equivalent to payment to the principal himself; such payment is complete when the money delivered is into the agent's hands and is a discharge of the indebtedness owing to the principal.

The policy could be cancelled on any of the supervening grounds enumerated in Article 64 (except "non-payment of premium") provided the cancellation was made in accordance therewith and with Article 65.

Section 64 reads as follows:

SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence,

after the effective date of the policy, of one or more of the following:

(a) non-payment of premium;

(b) conviction of a crime arising out of acts increasing the hazard insured against;

(c) discovery of fraud or material misrepresentation;

(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;

(e) physical changes in the property insured which result in the property becoming uninsurable; or

(f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code.

As for the method of cancellation, Section 65 provides as follows:

SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on which the cancellation is based. A valid cancellation must, therefore, require concurrence of the following conditions:

(1) There must be prior notice of cancellation to the insured;

(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the grounds mentioned;

(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address shown in the policy;

(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon written request of the insured, the insurer will furnish the facts on which the cancellation is based.

Thus, it behooved MICO's to make sure that the cancellation was actually sent to and received by the insured. No such proof in support thereto was presented by the insurance company.

As it has not been shown that there was a valid cancellation of the policy, there was consequently no need to renew it but to pay the premium thereon.

Payment was thus legally made on the original transaction and it could be, and was, validly received on behalf of the insurer by its agent Adora. Adora, incidentally, had not been informed of the cancellation either and saw no reason not to accept the said payment.

Lastly, Loss and its amount may be determined on the basis of such proof as may be offered by the insured,

Lastly, Loss and its amount may be determined on the basis of such proof as may be offered by the insured,