New Life Enterprises v. CA (G.R. No. 94071.

March 31, 1992)

Facts: May 15, 1981: Western Guaranty Corporation issued Fire Insurance Policy to New Life
Enterprises for P350,000the policy was renewed on May 13, 1982. July 30,1981: Reliance Surety and
Insurance Co., Inc. then issued a Fire Insurance Policy to New Life for P300,000. In Nov. 12, 1981,
Reliance Surety issued additional insurance under a separate policy for P700,000 to New Life. Feb. 8,
1982: Equitable Insurance Corporation issued a Fire Insurance Policy to New Life for P200,000. On Oct.
19, 1982 at 2 am, a fire, which was electrical in nature, gutted the New Life building and destroyed its
stocksthe stocks were insured for P1,550,000. Julian Sy, a founding partner of New Life, went to the
agent of Reliance to file his claim. He submitted the fire clearance, the insurance policies and inventory of
stocks. He further testified that the three insurance companies are sister companies. His claims were
rejected by all three, and they maintained that Sy violated the "Other Insurance Clause". RTC: favored
New Life, ruled against the three insurance companies. CA: reversed, stating there was failure to state or
endorse the other insurance coverage by Sy.
Issue: WON Sys claim will prosper, given that he did not disclose to the other companies all the
other policies he had taken out.
Held: NO. CA AFFIRMED. The policy issued by Western did not declare Reliance and Equitable as coinsurers on the same stocks, while Reliance's Policies covering the same stocks did not likewise declare
Western and Equitable as co-insurers. The coverage by other insurance or co-insurance effected or
subsequently arranged by Western, Reliance and Equitable were neither stated nor endorsed in the
policies of each others issued policies, warranting forfeiture of all benefits if one followed the express
stipulation in Policy Condition No. 3. The insured is specifically required to disclose to the insurer any
other insurance and its particulars which he may have effected on the same subject matter. The knowledge
of such insurance by the insurer's agents, even assuming the acquisition thereof by the former, is not the
"notice" that would estop insurers from denying the claim. Besides, the so-called theory of imputed
knowledge (knowledge of the agent is knowledge of the principal) has been refuted by the CAs factual
findings in this case, which the SC affirmed.
In the case of Pacific Banking Corporation vs. Court of Appeals, et al, the Court made a pronouncement
that the obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus
avert the perpetration of fraud. There has to be concrete evidence of fraud or false declaration for the
claim of fraud to prosper. Mere inference or suspicion of perpetration of fraud is not sufficient.

Geagonia v. CA (G.R. No. 114427. February 6, 1995)

Geagonia (store owner ) obtained a fire insurance policy for P100,000 from Country Bankers. The 1 year
policy covered the stock trading of dry goods, and had a provision that stated:
"3. The insured shall give notice to the Company of any insurance or insurances already effected, or
which may subsequently be effected, covering any of the property or properties consisting of stocks in
trade, goods in process and/or inventories only hereby insured, and unless notice be given and the
particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to
Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or

damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition
shall not apply when the total insurance or insurances in force at the time of the loss or damage is not
more than P200,000."
Geagonias stocks were destroyed by fire. He filed a claim which was denied because his stocks were
covered by two other fire insurance policies from PFICthe value of each policy coming to P100,000,
for a total of P200,000. Geagonia filed a complaint against Country Bankers in the Insurance Commission
for the recovery of P100,000 under fire insurance policy and damages. He claimed that by the time he got
the policy from Country Bankers, he knew the existence of the other two policieswhich were payable to
his creditor Cebu Tesing Textilesbut he had no knowledge of the provision in Country Bankers policy
requiring him to inform it of the prior policies and this requirement was not mentioned to him by its
agent. Insurance Commission: Geagonia did not violate Condition 3 as he had no knowledge of the
existence of the two policies obtained from PFICit was Cebu Tesing Textiles which procured the PFIC
policies without informing him or securing his consent. CA: reversed the decision of the Insurance
Commission because Geagonia knew of the existence of the two other policies issued by PFIC.
Issue: WON Geagonia violated Condition 3 by his non-disclosure, hence preventing him from
recovering from Country Bankers
Held: IT IS A VIOLATION, BUT HE IS NOT PREVENTED FROM RECOVERING. Geagonia
knew of the prior policies issued by PFIC. His letter to Country Bankers for his claim conclusively proves
this knowledge. His testimony to the contrary before the Insurance Commissioner, which the Commission
relied upon, cannot prevail over a written admission made ante litem motam. Conditions or exceptions in
policies which tend to forfeit said policies should be construed most strictly against those for whose
benefits they are inserted, and most favorably toward those against whom they are intended to operate.
However, Condition 3 of the subject policy is not totally free from ambiguity. The SC concluded that the
conditions should be interpreted as: (a) the prohibition applies only to double insurance, and (b) the
nullity of the policy shall only be to the extent exceeding P200,000 of the total policies obtained. By
stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the
time of loss does not exceed P200,000, Country Bankers was amenable to assume a co-insurer's liability
up to a loss not exceeding P200,000. What it had in mind was to discourage over-insurance. The ratio
behind incorporating "other insurance" clauses in fire policies is to prevent over-insurance and avert
perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a
total amount that exceeds the property's value, the insured may have an inducement to destroy the
property for the purpose of collecting the insurance. The public as well as the insurer is interested in
preventing a situation in which a fire would be profitable to the insured.

American Home Assurance Co. v. Antonio Chua (G.R. No. 130421. June 28, 1999)
Facts: 1990: Chua obtained a fire insurance policy from American Home covering the stock-in-trade of
his business, Moonlight Enterprises. The insurance was due to expire on Mar. 25. Apr. 5: Chua issued a
check for P2,983.50 to AHs agent as payment for the renewal of the policyChua then received a
Renewal Certificate. The corresponding official receipt for the check was issued on Apr. 10. A new

insurance policy was issued, whereby AH undertook to indemnify Chua for any damage or loss arising
from fire up to P200,000 for March 25, 1990-March 25, 1991.
Apr. 6, 1990: Moonlight Enterprises was completely razed by fire. Total loss was estimated between
P4,000,000- P5,000,000. Chua filed an insurance claim with AH and four other co-insurers. AH refused to
honor the claim, asserting that Chua violated several conditions of the policythe condition pertinent to
us from this case was his alleged failure to notify AH of any insurance already effected to cover the
insured goods. TC: in favor of Chua, held that AH failed to show that such omission was intentional and
fraudulent. It noted that AHs investigation of the claim was done in collaboration with the representatives
of the other insurance companies, who found no irregularity. In fact, two of the companies promptly paid
the claims filed by Chua. CA affirmed this.
Issue: WON the non-disclosure of Chua of the other policies will prevent him from claiming from
American Home Assurance.
Held: NO. Where the insurance policy specifies as a condition the disclosure of existing co-insurers, nondisclosure thereof is a violation that entitles the insurer to avoid the policy. This condition is common in
fire insurance policies and is known as the other insurance clause. The purpose for the inclusion of this
clause is to prevent an increase in the moral hazard. Sec. 75 of the Insurance Code provides: A policy
may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an
immaterial provision does not avoid the policy.
The documents in question are the income tax returns for 1987 to 1989. The finding of fact by the CA that
the BIR certified that Moonlight Enterprises paid the proper taxes during the period, is conclusive. As to
the other insurance clause, the allegation of fraud will prosper only if the failure to disclose is
intentional and fraudulent.
To constitute a violation the other existing insurance contracts must be upon the same subject matter and
with the same interest and risk. Here, Chua might have failed to disclose the information of having other
insurance contracts, but petitioner is estopped from invoking this, because petitioner's loss adjuster
admitted previous knowledge of the co-insurers, hence there was no deception. AHs loss adjuster had
known of the other existing insurance contracts, yet, he did not use that as basis for his recommendation
of denial. The loss adjuster, being an employee of AH, is deemed a representative of the latter whose
awareness of the other insurance contracts binds AH. Hence there was no violation of the other insurance
clause by Chua.

United Merchants Corp., v. Country Bankers Insurance Corp. (G.R. No. 198588, July 11, 2012)
Facts: United Merchants Corporation (UMC) buys, sells and manufactures Christmas lights, the products
of which are stored and assembled in a leased warehouse. In September 1995,UMCs stocks in trade of
Christmas lights were insured against fire with defendant Country Bankers Insurance Corporation (CBIC)
for P15 Million. Subsequently in May 1996, CBIC issued an Endorsement, adding to the perils insured
against typhoon, flood, ext. cover, and full earthquake", and increasing sum insured to P50 Million. In
July 1996, A fire gutted the warehouse, and UMC demanded for at least 50% of its claim from the

insurance company, but the latter refused. CBIC contended that UMCs claim must be denied due to
breach of Condition No. 15 of the Insurance Policy regarding fraud.
UMC filed a complaint and insisted that it must be rightfully granted in its claim, as such was based on
Insurance Policy, the Sworn Statement of Formal Claim earlier submitted, and the Certification by the
Bureau of Fire Protection. The Bureau certified that there was no proof that the fire was set with fraud,
malice or willful intent. CBIC on the other hand averred that the claim was fraudulent because UMCs
Statement of Inventory did not show evidence that it had stocks as of some date prior to when the fire
broke out. RTC ruled in favor of UMC, while the CA overturned said decision.
Issue: WON CA made an erroneous pronouncement when it ruled that there was fraud committed
by the UMC, in the absence of materially convincing evidence
Held: No. An insurer who seeks to defeat a claim because of an exception or limitation in the policy has
the burden of establishing that the loss comes within the purview of the exception or limitation. In the
present case, CBIC failed to discharge its primordial burden of establishing that the damage or loss was
caused by arson, a limitation in the policy. CBIC failed to prove that the fire was set out intentionally and
maliciously. It failed to rebut the certification of the Bureau of Fire Protection that the fire was accidental
in origin, which enjoys the presumption of regularity. However, the acquittal for arson does not bar the
investigation of fraud on the part of UMC, because the grounds were raised separately.
As to the proof appreciated, the Court cited the case of Uy Hu & Co. v. The Prudential Assurance Co.,
Ltd., which says that if any fraudulent means or devices are used by the insured to obtain any benefit and
it is conclusive that the evidence that the proof submitted was false and fraudulent as to kind, quality and
amount of the goods and their value destroyed by the fire, such a proof of claim is a bar against the
insured from recovering on the policy even for the amount of his actual loss. In this case, the invoices
submitted by UMC as proof were not proved to be genuine. There is inevitable conclusion that UMC
padded its claim and was guilty of fraud, UMC violated Condition No. 15 of the Insurance Policy. Thus,
UMC forfeited whatever benefits it may be entitled under the Insurance Policy, including its insurance
claim.