No. L-9370 – K. S. YOUNG, plaintiff and appellee, vs. THE MIDLAND TEXTILE INSURANCE COMPANY, defendant and appellant.
JOHNSON, J.
Rule Synopsis
Violation of a condition in a fire insurance contract by the insured, prohibiting the storage of hazardous goods in the insured premises is a ground for the denial of the claim, even if the said storage did not contribute to the occurrence of the risk insured against, i.e. fire.
Facts
Young took a fire insurance policy from The Midland Textile and Insurance Co. (Midland), for his residence and bodega. Warranty B of said policy prohibits the storage, keeping or selling of hazardous goods, and the carrying out of hazardous trade or processes in the premises insured. However, sometime, Young stored 3 boxes of fireworks in the bodega. About a month later, the insured premises were partially destroyed by fire. It was stated that the firecrakers were given to Young, and he intended to use them for the Chinese New Year, but he then failed to do so on ground of some ordinance proscribing the use of such firecrackers. Furthermore, that these were kept in the Bodega until after the fire when he was able to send them to a friend in the province. The parties agreed that the said fireworks were “hazardous goods” within the meaning of the condition in the insurance policy, and that the same did not contribute to the fire as the place where the firecrackers were kept was not destroyed thereby. Young filed a claim with Midland, the latter refused.
Thus, Young filed a complaint to recover the proceeds of the policy.
The lower court ruled in the favor of Young. The SC reversed, Midland not liable.
Issue
Was the placing of the fireworks in the building insured, under the conditions stated, they being “hazardous goods,” a violation of the terms of the contract of insurance and especially of “warranty B”?
Ruling and Discussion
Yes. The placing of the fireworks in the building insured, under the conditions stated, was a violation of the terms of the contract of insurance and especially of “warranty B”.
Young argued that the firecrakers were not “stored” in the insured premises within the meaning of the condition in the fire insurance policy. Midland argued otherwise. Thus, the Court here resolved the meaning of the word “stored” as used in the policy condition.
“Store” means, “store” 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 (Century Dictionary). It precludes deposit in a store, in small quantities, for daily use.
In this case, Young makes no claim that he deposited the fireworks in the bodega with any other idea than “for future use”—for future consumption. It seems clear then that the “hazardous goods” in question were “stored” in the bodega, as that word is generally defined.
Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The parties have a right to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary. The rate of premium is measured by the character of the risk assumed.
The compliance of the insured with the terms of the contract is a condition precedent to the right of recovery. The fact that the storing of the said fireworks did not contribute to the fire is irrelevant, if the “storing” was a violation of the terms of the contract. The violation of the terms of the contract, by virtue of the provisions of the policy itself, terminated, at the election of either party, the contractual relations.
Such storage increases the risk that the insurer originally assumed. As stated by the Court: [a]n increase of risk which is substantial and which is continued for a considerable period of time, is a direct and certain injury to the insurer, and changes the basis upon which the contract of insurance rests.
Dispositive
Judgment reversed.