TITLE 2 Section 172.
A contract of fire insurance is not affected by any act of
FIRE INSURANCE
Section 169. As used in this Code, the term fire insurance shall
include insurance against loss by fire, lightning, windstorm, tornado
or earthquake and other allied risks, when such risks are covered by
extension to fire insurance policies or under separate policies.
FIRE INSURED AGAINST
 The insured is entitled to recover the loss suffered where the cause of
the damages is a hostile fire, that is, one which burns at a place where
it is not intended to be, or breaks out from where it is intended to be
and becomes uncontrollable.
 And where the fire that caused the loss is a friendly fire, that is one
which is confined w/in the place where it was intended to be and
employed for the ordinary purpose of lighting, heating or
manufacturing, recovery cannot be had for loss or damage caused
thereby.
EXAMPLE:
 Damage caused by smoke from a lamp when no ignition occurred
outside the lamp cannot be recovered.
 Damage done to sugar by the heat of the usual fired employed for
refining, being accumulated by the mismanagement of the insured,
who inadvertently kept the top of their chimney closed, was not
recoverable.
 In both examples, it will be noted that fire that caused damage
remained at the place where it was intended to be and, accordingly,
such fire was a friendly fire for which there should be no recovery for
the damage cause thereby.
Section 170. An alteration in the use or condition of a thing insured
from that to which it is limited by the policy made without the
consent of the insurer, by means within the control of the insured,
and increasing the risks, entitles an insurer to rescind a contract of
fire insurance.
Section 171. An alteration in the use or condition of a thing insured
from that to which it is limited by the policy, which does not increase
the risk, does not affect a contract of fire insurance.
the insured subsequent to the execution of the policy, which does
not violate its provisions, even though it increases the risk and is
the cause of the loss.
ALTERATIONS IN THE USE OR CONDITION OF THING INSURED
 An alteration in the use or condition of thing insured will entitle the
insurer to rescind the contract of insurance provided the ff requisites
are present:
1. There must be a violation of the provisions of the policy;
2. The alteration was made w/o the consent of the insurer;
3. The alteration was made by means within the control of the
insured;
4. The alteration increased the risk of loss.
WHEN TRANSFER TO ANOTHER BUILDING IS ALTERATION
 In case the policy provides that any transfer effected by the insured of
the property insured from one place to another requires the consent of
the insurer, any transfer made by the insured w/o the consent of the
insurer constitutes alteration which would free the latter from any
liability.
 See: Malayan Insurance Co. Inc. v PAP Co., Ltd. (200784) p.303
VIOLATION POLICY NECESSARY
 Increase of the risk of loss alone will not entitle the insurer to rescind a
contract of insurance. There must be a corresponding violation of the
provision of the policy, otherwise there is no right to rescind the policy.
 Thus, a contract of fire insurance is not affected by any act of the
insured subsequent to the execution of the policy, which does not
violate its provisions, even though it increases the risk and is the
cause of the loss.
EXAMPLE:
 A insured his building against fire with B Co. after the effectivity of the
policy, the insured stored gasoline, paints and varnishes w/in the
premises insured.
 The building was burned and the insurer refused to pay the loss on the
ground that the risk of fire was increased by the storage of gasoline,
paints and varnishes.
Q: Was the refusal correct?
 A: The refusal to pay was not correct and the insurer was liable as
there was no provision in the policy prohibiting the keeping of
gasoline, paints, varnishes upon the premises insured.
If the insurer intended to rely upon a condition of that character, it
ought to have been expressed in the policy.
 A fire insurance policy was issued describing the building insured as
unoccupied at the first floor. Said floor was later on occupied.
Q: Was there an alteration which avoided the policy?
A: There was no alteration. The policy did not clearly and categorically
require that the first floor of the house should remain unoccupied for
the duration of the policy.
The change from unoccupied to occupied did not, therefore, violate an
express limitation in the policy. The description of the house cannot be
said to be a limitation to its use.
INCREASE IN RISK OF LOSS NECESSARY
 The right of the insurer to rescind a contract of insurance is premised
on the fact that an insured paid premium based upon the risk at the
time the policy was issued, and when the risk was increased, the
insured should pay a premium based upon the increased risk,
 Accordingly, when the insured does not pay premium upon the
increased risk, the insurer is entitled to rescind the contract.
 Therefore, the alteration in the use or condition of the thing insured in
violation of the provision of the policy must increase the risk of loss,
otherwise, the policy is not affected thereby.
 However, although increase in the risk of loss, as rule, is necessary,
when the policy provides that a violation of specified provisions shall
avoid it, increase in the risk of loss is not necessary to enable the
insurer to avoid liability.
EXAMPLE:
1. Risk of loss increased:
 Use of basement as dancehall and for gambling is an increase of
risk avoiding fire policy covering dwelling.
 Change from dwelling to boarding house increases the risk and
avoids the policy.
2. Risk of loss not increased:
 Change from occupancy of building to vacancy did not increase the
risk of loss.
ALTERATION MUST BE WITHIN CONTROL OF INSURED
 An alteration in the use or condition of the thing insured must be by
means w/in the control of the insured as to entitle the insurer to
rescind the contract.
 Thus, where alterations were made by a tenant of the insured w/o the
consent of insured, the policy was not thereby avoided. But material
alteration made by a tenant with the knowledge of insured will forfeit
the policy.
Section 173. If there is no valuation in the policy, the measure of
indemnity in an insurance against fire is the expense it would be to
the insured at the time of the commencement of the fire to replace
the thing lost or injured in the condition in which it was at the time of
the injury; but if there is a valuation in a policy of fire insurance, the
effect shall be the same as in a policy of marine insurance.
Section 174. Whenever the insured desires to have a valuation
named in his policy, insuring any building or structure against fire,
he may require such building or structure to be examined by an
independent appraiser and the value of the insured’s interest therein
may then be fixed as between the insurer and the insured. The cost
of such examination shall be paid for by the insured. A clause shall
be inserted in such policy stating substantially that the value of the
insured’s interest in such building or structure has been thus fixed.
In the absence of any change increasing the risk without the
consent of the insurer or of fraud on the part of the insured, then in
case of a total loss under such policy, the whole amount so insured
upon the insured’s interest in such building or structure, as stated in
the policy upon which the insurers have received a premium, shall
be paid, and in case of a partial loss the full amount of the partial
loss shall be so paid, and in case there are two (2) or more policies
covering the insured’s interest therein, each policy shall contribute
pro rata to the payment of such whole or partial loss. But in no case
shall the insurer be required to pay more than the amount thus
stated in such policy. This section shall not prevent the parties from
stipulating in such policies concerning the repairing, rebuilding or
replacing of buildings or structures wholly or partially damaged or
destroyed.
MEASURE OF INDEMNITY
 In case of open or unvalued policy, the measure of indemnity in fire
insurance is the expense it would be to the insured to replace the thing
lost or insured in the condition in which it was at the time of the injury.
  The reason for such rule is that the object of property insurance is the
indemnity of the insured and, therefore, the insured may recover the
value of the damage at the time of the loss, but in no case exceeding
the maximum amount of recovery stipulated in the policy.
 And in case of valued policy, the valuation agreed upon shall be
conclusive between the parties in the adjustment of the loss.
EXAMPLE:
 A was the owner of a house that was actually built at the expense of
P5M. He insured the said house under an open policy wherein the
maximum amount of liability of the insurer was P7M. After 5 yrs the
price of building materials considerably increased and to rebuild a
house in the same condition as the house insured, the amount of P6M
would be spent.
 The building was then burned. The insurer is liable for P6M and not
only P5M since to rebuild the house it would cost P6M.
INSURER’S LIABILITY IN VALUED POLICY
 In case of a valued policy, upon a total loss, the insurer shall pay the
whole amount so insured and in case of partial loss, the full amount of
the partial loss shall be paid.
 It is noteworthy that in case of fire insurance, the insurer shall pay the
full amount of the partial loss while in marine insurance, the principle
of co-insurance shall apply.
 However, in fire insurance the parties may validly agree on the
application of co-insurance.
 And whenever co-insurance is provided in fire insurance policy, the
loss shall be ratably distributed between the insured and the insurer.
OPTION TO REBUILD CLAUSE
 The law expressly allows the parties to agree on the repairing,
rebuilding, or replacing of the buildings or structures, wholly or partially
damaged or destroyed, instead of the payment of the value of the loss.
 And whenever the “Option to Rebuild” is stipulated, the insurer’s
obligation is an alternative one, that is, it may either pay the amount
of the loss or rebuild the building damaged.
 In such case, the insurer must give notice of the election to rebuild,
otherwise, it must pay the amount of the loss.
Section 175. No policy of fire insurance shall be pledged,
hypothecated, or transferred to any person, firm or company who
acts as agent for or otherwise represents the issuing company, and
any such pledge, hypothecation, or transfer hereafter made shall be
void and of no effect insofar as it may affect other creditors of the
insured.
PRIMA FACIE EVIDENCE OF ARSON (PD 1613)
Section 6. Prima Facie evidence of Arson. Any of the following
circumstances shall constitute prima facie evidence of arson:
1. If the fire started simultaneously in more than one part of the
building or establishment.
2. If substantial amount of flammable substances or materials
are stored within the building note necessary in the business of
the offender nor for household us.
3. If gasoline, kerosene, petroleum or other flammable or
combustible substances or materials soaked therewith or
containers thereof, or any mechanical, electrical, chemical, or
electronic contrivance designed to start a fire, or ashes or
traces of any of the foregoing are found in the ruins or premises
of the burned building or property.
4. If the building or property is insured for substantially more
than its actual value at the time of the issuance of the policy.
4. If during the lifetime of the corresponding fire insurance
policy more than two fires have occurred in the same or other
premises owned or under the control of the offender and/or
insured.
5. If shortly before the fire, a substantial portion of the effects
insured and stored in a building or property had been withdrawn
from the premises except in the ordinary course of business.
6. If a demand for money or other valuable consideration was
made before the fire in exchange for the desistance of the
offender or for the safety of the person or property of the victim.