Fire Insurance

MALAYAN INSURANCE CO., INC. (MICO) v. GREGORIA CRUZ ARNALDO, and

CORONACION PINCA

Facts:
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 P100,000.00, effective
July 22, 1981, until July 22, 1982 .
October 15, 1981, MICO allegedly cancelled the policy for non-payment, of the premium
and sent the corresponding notice to Pinca.
December 24, 1981, payment of the premium for Pinca was received by Domingo Adora,
agent of MICO
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. She made a demand of
the payment but was rejected by MICO. She then went to the Insurance Commission

Issue:
Whether or not MICO should be held liable to pay for the insured property.

Ruling:
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 that:
SEC. 396. “Any insurance company which delivers to an insurance agent or insurance broker a
policy or contract of insurance shall be deemed to have authorized such agent or broker to
receive on its behalf payment of any premium which is due on such policy or contract of
insurance at the time of its issuance or delivery or which becomes due thereon.”
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.”

PHILIPPINE HOME ASSURANCE CORPORATION v. COURT OF APPEALS and

EASTERN SHIPPING LINES, INC
G.R. No. 106999. June 20, 1996.

Fact:
Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan,
a shipment for carriage to Manila and Cebu, freight pre-paid and in good order and condition.
While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder
located in the accommodation area near the engine room on the main deck level. The incident
forced the master and the crew to abandon the ship.
 Thereafter, SS Eastern Explorer was found to be a constructive total loss and its voyage
was declared abandoned.
After the fire was extinguished, the cargoes which were saved were loaded to another
vessel for delivery to their original ports of destination. ESLI charged the consignees several
amounts corresponding to additional freight and salvage charges.
The charges were all paid Philippine Home Assurance Corporation (PHAS) under protest
for and in behalf of the consignees.

Issue:
Whether or not the fire on the vessel which was caused by the explosion of an acetylene
cylinder loaded on the same was the fault or negligence of the Eastern Shipping Lines.

Ruling:
Yes.

Fire may not be considered a natural disaster or calamity since it almost always arises
from some act of man or by human means.

In the case at bar, it is not disputed that a small flame was detected on the acetylene
cylinder and that by reason thereof, the same exploded despite efforts to extinguish the fire.
Moreover, there was no showing, and none was alleged by the parties, that the fire was caused by
a natural disaster or calamity not attributable to human agency. On the contrary, there is strong
evidence indicating that the acetylene cylinder caught fire because of the fault and
negligence of respondent ESLI, its captain and its crew.

First, the acetylene cylinder which was fully loaded should not have been stored in the
accommodation area near the engine room where the heat generated therefrom could cause the
acetylene cylinder to explode by reason of spontaneous combustion. Respondent ESLI should
have easily foreseen that the acetylene cylinder, containing highly inflammable material, was in
a real danger of exploding because it was stored in close proximity to the engine room.

Second, respondent ESLI should have known that by storing the acetylene cylinder in the
accommodation area supposed to be reserved for passengers, it unnecessarily exposed its
passengers to grave danger and injury. Curious passengers, ignorant of the danger the tank might
have on humans and property, could have handled the same or could have lighted and smoke
cigarettes while repairing in the accommodation area.

Third, the fact that the acetylene cylinder was checked, tested and examined and
subsequently certified as having complied with the safety measures and standards by qualified
experts 7 before it was loaded in the vessel only shows to a great extent that negligence was
present in the handling of the acetylene cylinder after it was loaded and while it was on board the
ship. Indeed, had the respondent and its agents not been negligent in storing the acetylene
cylinder near the engine room, then that same would not have leaked and exploded during the
voyage.
 K. S. YOUNG v. THE MIDLAND TEXTILE INSURANCE COMPANY

Facts:
The purpose of the present action is to recover the sum of P3,000 upon an insurance
policy. The lower court rendered a judgment in favor of the plaintiff and against the defendant
for the sum of P2,708.78, and costs. From that judgment the defendant appealed to this court.
The undisputed facts upon which said action is based are as follows: The plaintiff occupied a
building at ‘321 Calle Claveria, as a residence and bodega (storehouse).On the 29th of May,
1912, the defendant, in consideration of the payment of a premium of P60, entered into a
contract of insurance with the plaintiff promising to pay to the plaintiff the sum of P3,000, in
case said residence and bodega and contents should be destroyed by fire. One of the conditions
of said contract was that no hazardous goods be stored or kept in the building. On the 4th or 5th
of February, 1913, the plaintiff placed in said residence and bodega three boxes which belonged
to him and which were filled with fireworks for the celebration of the Chinese new year. On the
18th day of March, 1913, said residence and bodega and the contents thereof were partially
destroyed. Fireworks were found in a part of the building not destroyed by the fire; that they in
no way contributed to the fire, or to the loss occasioned thereby.

Issue:
Whether or not the placing of said fireworks in the building insured, under the conditions
above enumerated, they being “hazardous goods,” is a violation of the terms of the contract of
insurance.

Ruling:
Yes.
The word “stored” has been defined to be a deposit in a store or warehouse for
preservation or safe keeping; to put away for future use, especially for future consumption; to
place in a warehouse or other place of deposit for safe keeping. Said definition does not include a
deposit in a store, in small quantities, for daily use.
“Daily use” precludes the idea of deposit for preservation or safe keeping, as well as a
deposit for future consumption or safe keeping. A violation of the terms of a contract of
insurance, by either party, will constitute the basis for a termination of the contractual relations,
at the election of the other.
The right to terminate the contractual relations exists even though the violation was not
the direct cause of the loss. In the present case, the deposit of the “hazardous goods,” in the
building insured, was a violation of the terms of the contract. Although the hazardous goods did
not contribute to the loss, the insurer, at his election, was relieved from liability Said deposit
created a new risk, not included in the terms of the contract. The insurer had neither been paid,
nor had he entered into a contract, to cover the increased risk.

Contracts of insurance are contracts of indemnity, upon the terms and conditions
specified therein. Parties have a right to impose such reasonable conditions at the time of the
making of the contract as they deem wise and necessary. The rate of premium is measured by the
character of the risk assumed. The insurer, for a comparatively small consideration, undertakes to
guarantee the insured against loss or damage, upon the terms and conditions agreed upon, and
upon no other. When the insurer is called upon to pay, in case of loss, he may justly insist upon a
fulfillment of the terms of the contract. If the insured cannot bring himself within the terms and
conditions of the contract, he is not entitled to recover for any loss suffered. The terms of the
contract constitute the measure of the insurer’s liability. If the contract has been terminated, by a
violation of its terms on the part of the insured, there can be no recovery. Compliance with the
terms of the contract is a condition precedent to the right of recovery. Courts cannot make
contracts for the parties. While contracts of insurance are construed most favorably to the insured
yet they must be construed according to the sense and meaning of the terms which the parties
themselves have used. Astute and subtle distinctions should not be permitted, when the language
of the contract is plain and unambiguous. Such distinctions tend to bring the law itself into
disrepute. The judgment of the lower court is revoked and the defendant is relieved from any
responsibility under said complaint, and, without any finding as to costs.