G.R. No. 94071 – NEW LIFE ENTERPRISES and JULIAN SY, petitioners, vs. HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION, RELIANCE SURETY AND INSURANCE CO., INC. and WESTERN GUARANTY CORPORATION, respondents.
REGALADO, J.
Rule Synopsis
Violation of conditions in the insurance policy, where the same had been stipulated clearly and unambiguously, must be complied with in good faith. Failure of the insured to do so is a ground for the forfeiture of benefits or proceeds under the policy.
Facts
Julian Sy, for New Life Enterprises took out 3 fire insurance policies for its building and the stocks thereon from: Western Guaranty Corporation (Western – 350k), Reliance Surety and Insurance Co., Inc. (Reliance – 300k + 700k), and Equitable Insurance Corporation (Equitable – 200k). The building was gutted by fire resulting to a P1.55M loss. Sy filed a claim to recover proceeds from the 3 insurers, but all denied on the ground of breach of policy conditions (i.e. failure to disclose co-insurers). Sy averred that the insurers were sister companies and that each knew the existence of the other insurance policies.
Sy filed a case for recovery of the proceeds against the 3 insurers.
Th RTC ruled in favor of Sy and New Enterprises. The CA reversed. The SC affirmed; the insurers were not liable.
Issues
- Was Condition No. 3 (Other Insurance Clause) of the insurance contracts violated by Sy and New Enterprises thereby resulting in their forfeiture of all the benefits thereunder?
- Was Condition No. 27 (12-month period for filing an action) of the insurance contracts violated by Sy and New Enterprises thereby resulting in their forfeiture of all the benefits thereunder?
Ruling and Discussion
- Yes. Sy and New Enterprises violated Condition No. 3 (Other Insurance Clause) of the insurance contracts.
Sy admitted that the other insurance taken were not stated or endorsed in the other respective policies taken from the 3 insurers. For Western and Reliance, the co-insurers where not stated, whereas in Equitable, the policy even stated “nil” for the space where the co-insurers were required to be declared. However, as defense, he said that the insurance agents (agent for Reliance and Equitable was the same) of the 3 insurers knew of the existence of the subject policies, and that he was not informed of the requirement to disclose the same. He finally argued that he did not even read the policy.
As to the construction of the contract. The terms of the contract are clear and unambiguous. It requires Yap to declare co-insurers. No interpretation or construction was required. The rule on construction that insurance contracts are to be construed liberally in favor of the insured and strictly against the insurer finds no application where the words employed were clear and free from ambiguity. In such case, the words are to be understood in their ordinary meaning and must bind the parties thereto with the force of law.
As to the alleged knowledge of the insurance agents (theory of imputed knowledge). Such knowledge cannot be considered the “notice” required under the policies, it cannot be the basis to bar the insurers from denying the claim. Furthermore, the same was of dubious application to the case and was refuted by the insurers. Sy also contradicted himself in saying that he informed the agents of the co-insurers, yet likewise claimed that he did not read the policies. Also, his claim that the insurers were sister companies was unfounded. It was noted by the SC that the use of common agents and adjusters were common in the insurance business but the same doesn’t mean that the companies were related.
As to the diligence required of the insured. As a majority rule, insured persons may accept policies without reading them, and that this is not negligence per se. However, it is and was incumbent upon petitioner Sy to read the insurance contracts, and this can be reasonably expected of him considering that he has been a businessman since 1965 and the contract concerns indemnity in case of loss in his money-making trade of which important consideration he could not have been unaware as it was precisely the reason for his procuring the same. - Yes. Sy and New Enterprises violated Condition No. 27 (12-month period for filing an action) of the insurance contracts.
Condition No. 27 of the policies provide that an action before the Insurance Commission or other court of competent jurisdiction must be brought within 12 months from the time the claim was rejected.
Citing the trial court: [t]he condition contained in an insurance policy that claims must be presented within one year after rejection is not merely a procedural requirement but an important matter essential to a prompt settlement of claims against insurance companies as it demands that insurance suits be brought by the insured while the evidence as to the origin and cause of destruction have not yet disappeared.
The period shall be reckoned from the date of the denial of the claim by the insurer, and not from the rejection of the petition for reconsideration as contended by Yap, otherwise, the purpose of such conditions will be defeated.
Dispositive
Judgment affirmed.