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Santa Ana vs.

Commercial Union (1930)

1. In 1923, Sta. Ana built his house in Pasig and insured it against fire for (1) P3,000 to Phoenix
Assurance Company and (2) P6,000 to Guardian Assurance Company, Limited, for a period
of one year.
2. In November 1925, Santa Ana mortgaged this house to Garcia for P5,000, for a period
of two years, the contract being drawn up as a retro sale for the sum of P5,000. The 2
policies were endorsed to Garcia.
3. In December 1925, Santa Ana reinsured said house with the defendant companies, the
Globe and Rutgers Fire Insurance Company of New York,
and the Commercial Union Assurance Company Limited of London, through their common
agent duly authorized to represent them in the Philippine Islands, the Pacific Commercial
Company which was to be effective for one year.
4. On September 20, 1926, Santa Ana took out another insurance policy on the house in
question for P6,000 in the "Filipinas, Compania de Seguros, which issued the one-year policy
upon receiving from Sta. Ana premium thereon.
5. Twelve hours before the expiration of the policies issued by the Phoenix Assurance
Company and the Guardian Assurance Company, Limited for P3,000 and P6,000
respectively, the entire house was burned.
6. Santa Ana gave notice in due time of the loss to each and every one
of the companies in which he had insured the house and demanded payment of the
respective policies.
7. The insurance companies refused payment on the ground that the claim of P21,000 filed by
him was fraudulent, being in excess of the real value of the insured property; that none of
said companies had been informed of the existence of the other policies in the other
companies, and that the fire was intentional.
8. Sta. Ana filed civil cases in RTC against The Commercial Union AssuranceCompany,
Limited in case No. 31263; the Globe and Rutgers Fire Insurance Company of New York in
case No. 31264; and the Phoenix Assurance Company, Limited, the Guardian Assurance
Company, Limited, and the "Filipinas, Compania de Seguros", incase No. 31322. All the
defendants are absolved in their alleged liabilities by the RTC. Hence this petition.
ISSUE:Can the insured claim against the insurance companies?

 Without deciding whether notice of other insurance 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, the SC held that in the absolute absence of such notice
when it is one of the conditions specified in the fire insurance policy, the policy is null and
void. Since the policy is null and void, plaintiff cannot recover from the defendants
insurance companies.
 The SC upheld the finding of the trial court that the policies provide that no other insurance
should be admitted upon the property thereby assured without the consent of said
companies duly given by endorsement.

Ang Giok Chip v Springfield G.R. No. L-33637 December 31, 1931

J. Malcolm


Ang insured his warehouse for the total value of Php 60,000. One of these, amounting to 10,000,
was with Springfield Insurance Company. His warehouse burned down, then he attempted to
recover 8,000 from Springfield for the indemnity. The insurance company interposed its defense on
a rider in the policy in the form of Warranty F, fixing the amount of hazardous good that can be
stored in a building to be covered by the insurance. They claimed that Ang violated the 3 percent
limit by placing hazardous goods to as high as 39 percent of all the goods stored in the building. His
suit to recover was granted by the trial court. Hence, this appeal.

Issue: 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 because not complying with the
Philippine Insurance Act.

Held: No. The warranty is valid. Petition dismissed.


The Insurance Act, Section 65, taken from California law, states:

"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."

Warranty F, indemnifying for a value of Php 20,000 and pasted on the left margin of the policy

It is hereby declared and agreed that during the currency of this policy no hazardous goods be stored
in the Building to which this insurance applies or in any building communicating therewith,
provided, always, however, that the Insured be permitted to stored a small quantity of the hazardous
goods specified below, but not exceeding in all 3 per cent of the total value of the whole of the
goods or merchandise contained in said warehouse, viz; . . . .

Also, the court stated a book that said, "any express warranty or condition is always a part of the
policy, but, like any other part of an express contract, may be written in the margin, or contained in
proposals or documents expressly referred to in the policy, and so made a part of it."

“It is well settled that a rider attached to a policy is a part of the contract, to the same extent and
with like effect as it actually embodied therein. In the second place, it is equally well settled that an
express warranty must appear upon the face of the policy, or be clearly incorporated therein and
made a part thereof by explicit reference, or by words clearly evidencing such intention.”

The court concluded that Warranty F is contained in the policy itself, because by the contract of
insurance agreed to by the parties it was made to be a part. It wasn’t a separate instrument agreed to
by the parties.

The receipt of the policy by the insured without objection binds him. It was his duty to read the
policy and know its terms. He also never chose to accept a different policy by considering the earlier
one as a mistake. Hence, the rider is valid.

Young vs. Midland Textile insurance company

[G.R. No. 9370. March 31, 1915.]


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

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.


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.



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.
American Home Assurance Company v. Tantuco Enterprises
Tantuco Enterprises (Tantuco) was a domestic corporation engaged in the manufacture of
coconut oil. It maintained two coconut oil mills (old and new) for the purpose of its business. These
two buildings were covered under fire insurance policies issued by American Home Assurance
Company (American) – the one being insured for Php 3 million and the new one for Php 6 million.
One night, the new mill was gutted by fire. Afterwards, Tantuco sent a letter to American
claiming for the insurance proceeds under the fire insurance policy issued by the latter. But
American declined the claim, stating that no insurance policy was issued to cover the new one, because the
two insurance policies issued in favor of Tantuco were for the old one.
Thus, a complaint for specific performance with claims for damages was filed by Tantuco
with the Regional Trial Court (RTC), which rendered a decision in favor or Tantuco, directing
American to pay Tantuco the insurance proceeds. This decision was affirmed by the Court of
Appeals (CA). Hence, the petition for review with the Supreme Court (SC).
American argued that the insurance policy which purportedly covered the new mill
contained not the description of the new mill but of the old mill. Thus, since the insurance contract is
the law between the parties, it should be interpreted that the parties’ intention was to insure the old
mill, not the new mill. Also, granting the description in the policy was incorrect, Tantuco failed to
bring the matter to American, despite the fact that it had already been 3 years from the time of the
perfection of the contract. It was argued that Tantuco was already in estoppel.

Is the argument of American tenable?

Ruling and Discussion:

No, the argument of American is not tenable.
The Court said that, in construing the words descriptive of a building insured, the greatest
liberality is shown by the courts in giving effect to the insurance. In view of the custom of insurance
agents to examine buildings before writing policies upon them, and since a mistake as to the identity
and character of the building is extremely unlikely, the courts are inclined to consider that the policy
of insurance covers any building which the parties manifestly intended to insure, however inaccurate
the description may be.
Therefore, despite the mis-description in the policy, it was construed that the parties
intended that the new oil mill was to be insured, since it was stated therein. Also, it was ratiocinated
that it would be absurd to construe that Tantuco opted to insure twice the old mill, while leaving the
new mill uninsured. It is to be noted that a second agreement over the same realty results in over-
insurance. Further, it was found that the mis-description was attributed to the misunderstanding
between the general agent of American and the policy issuing clerk. Thus, the discrepancy happened
during the preparation of the written agreement.
Anent the argument of estoppel, the Court said that American could not invoke estoppel as
it was responsible for the non-correction of the description. It was found that, from the testimonies,
the agent of Tantuco brought the matter up with the general agent of American, who said that “what
is important is the words ‘new oil mill’.” It is therefore evident that what the parties intended, in the first
place, was to insure the new mill under the file insurance policy concerned, and not the old mill.
Therefore, American should pay the insurance proceeds to Tantuco.
Qua Chee Gan vs Law Union and Rock Insurance Co., Ltd.
Facts: Qua Chee Gan owns four warehouses in Albay. He was using these warehouses to house
crops like copra and hemp. All warehouses were insured by Law Union and Rock Insurance for the
amount of P370,000.00. The insurance states that Qua Chee Gan should install 11 hydrants in the
warehouses’ premises. Qua Chee Gan installed only two, but Law Union nevertheless went on with
the insurance policy and collected premiums from Qua Chee Gan. The insurance contract also
provides that “oil” should not be stored within the premises of the warehouses.
In 1940, three of the warehouses were destroyed by fire. The damage caused amounted to P398k.
Qua Chee Gan demanded insurance pay from Law Union but the latter refused as it alleged that
after investigation from their part, they found out that Qua Chee Gan caused the fire. Law Union in
fact sued Qua Chee Gan for Arson.
Qua Chee Gan was acquitted in the arson case. He then demanded that Law Union pay up. This
time, Law Union averred that the insurance contract is void because Qua Chee Gan failed to install
11 hydrants; and that gasoline was found in one of the warehouses.
ISSUE: Whether or not the insurance contract is void.
HELD: No. Law Union cannot exempt itself from paying Qua Chee Gan because it is estopped
from invoking the same. It is a well settled rule of law that an insurer which with knowledge of facts
entitling it to treat a policy as no longer in force, receives and accepts a premium on the policy,
estopped to take advantage of the forfeiture.
Also, gasoline is not one of those items specifically prohibited from the premises of the warehouses.
What was mentioned was the word “oil” which could mean anything (from palm oil to lubricant and
not gasoline or kerosene). This ambiguity is to be interpreted against Law Union because a contract
of insurance is a contract of adhesion. Further, oil is incidental to Qua Chee Gan’s business, it being
used for motor fuel.

Pioneer Insurance and Surety Corp.(PISC) v. Olivia Yap (1974)

The validity of a clause in a fire insurance policy to the effect that the procurement of additional
insurance without the consent of the insurer renders ipso facto the policy void.

Olivia Yap was the owner of a store in a 2 storey building where she sold shopping bags and
footwears. Chua Soon Poon, Yap’s son-in-law was in charge of the store. Yap took out a Fire
Insurance from Pioneer Insurance (PISC) with a face value of 25K covering her stocks, office
furnitures, etc. Among the conditions in the policy was the co-insurance clause wherein without the
consent of PISC, no other insurance may be availed of by Yap. A violation of such condition results
to the nullity of the insurance. Nonetheless, two other insurance was taken by Yap for the same
property, these are: 1) For P20K with Great American insurance with the consent of PISC; and 2)
For P20K with Federal Insurance without the written consent of PISC.
One fateful night, a fire broke out in the building. Upon claim by Yap of the insurance
proceeds, PISC denied on the ground that there has been a violation of the co-insurance clause.
RTC and CA ruled in favor of Yap.

WON PISC should be absolved from liability on the Fire Insurance on account of the
violation of the co-insurance clause.
Ruling and Discussion:
Yes, PISC is absolved from its liability by reason of Yap’s violation of the co-insurance
clause contained in the Policy.
Additional insurance, unless consented to, or unless a waiver was shown, ipso facto avoided
the contract, and the fact that the company had not, after notice of such insurance, cancelled the
policy, did not justify the legal conclusion that it had elected to allow it to continue in force. The
reason behind such requirement is to prevent over-insurance and thus avert the perpetration of
In the instant case, it is without doubt that the insured has taken up another insurance with
Federal Insurance over the same property and over the same risk without the consent of PISC.
Hence, Yap violated the conditions of the policy resulting to PISC being absolved of its liability.

Prudential Guarantee Assurance Inc. vs. Trans Asia Shipping Lines

G.R. No. 151890
June 20, 2006
Trans Asia is the owner of the vessel M/V Asia Korea. Prudential Guarantee and Assurance Inc.
insured said vessel for loss/damage of the hull and machinery arising from perils of fire and
explosion beginning from the period of July 1, 1993 until July 1, 1994. While the policy was in force,
a fire broke out. Trans Asia file its notice of claim for damages sustained by the vessel. It also
reserved its right to subsequently notify Prudential as to the full amount of the claim upon final
survey and determination by the average adjuster Richard Hogg International of the damage
sustained by the reason of fire. Trans Asia executed a document denominated "Loan and Trust
Receipt" amounting to Php 3,000,000. Prudential Guarantee and Assurance Inc. denied the former's
claim and requested for the return of the said amount. The insurance company contends that there
was a breach in the policy conditions, specifically, "Warranted Vessel Classed and Class Maintained".
The trial court held that Trans Asia failed to prove its compliance with the terms of the warranty. It
further explained that the concealment made by Trans Asia is sufficient to avoid the policy.
Prudential, as the injured party, is entitled to rescind to rescind the contract. The trial court
dismissed the complaint and directed Trans Asia to return the "loan" extended by Prudential.
The Court of Appeals reversed the decision of the trial court. It contends that Prudential had the
burden to show that there was a breach in the warranty and which it failed to do so. The Court
considered Prudential's admission that, at the time the insurance contract was entered into, the
vessel was properly classed by the Bureau Veritas, a classification recignized by the industry. It
further contends that then subject warranty was in a form of a rider, hence, such contract should be
counstrued against Prudential. Finally, it interpreted the transaction between the parties as one of
subrogation, instead of a loan. Thus, the amount given to Trans Asia was considered to be a partial
payment to its claim under the policy.
1.) WON there was a breach in the warranty of the contract.
2.) WON such contract partakes the nature of a loan.
The Supreme Court held that:
1.) Prudential failed to establish that Trans Asia had violated and breached the policy condition
provided in the insurance contract. The latter was able to establish proof of loss and coverage of the
loss. Prudential also made a categorical admission at the time of the procurement of the insurance
contract that the vessel was properly classified by the Bureau Veritas.
Assuming that there was a breach in the policy, the renewal of the insurance policy for two
consecutive years after the loss is deemed as a waiver on the part of Prudential. Breach of a warranty
or of a condition renders the contract defeasible at the option of the insurer; but if he so elects, he
may waive his privilege and power to rescind by the mere expression of an intention so to do.
2.) the amount granted by Prudential to Trans Asia, evidenced by a document denominated as a
"Loan and Trust Receipt", constitued partial payment on the policy. Under said agreement,
Prudential is obligated to hand over to Trans Asia "whatever recovery the latter may make" and the
latter to deliver to the former "all document necessary to prove its interest in the said property."
Prudential was given the right of subrogation to whatever net recovery Trans Asia may obtain from
third parties resulting from the fire.

Gen. Insurance & Surety Corp v. NG Hua - Misrepresentation

106 PHIL 1117
> In 1952, General issued a fire policy to Ng Hua to cover the contents of the Central Pomade
Factory owned by him.
> There was a provision in the policy that should there be any insurance already effected or to be
subsequently procured, the insured shall give notice to the insurer.
> Ng Hua declared that there was non. The very next day, the building and the goods stored
therein burned.
> Subsequently, the claim of Ng Hua for the proceeds was denied by General since it discovered
that Ng Hua had obtained an insurance from General Indemnity for the same goods and for the
same period of time.

Whether or not General Insurance can refuse to pay the proceeds.

Violation of the statement which is to be considered a warranty entitles the insurer to rescind the
contract of insurance. Such misrepresentation is fatal.