No. L-36232 – PIONEER INSURANCE AND SURETY CORPORATION, petitioner-appellant, vs. OLIVA YAP, represented by her attorney-in-fact, CHUA SOON POON, respondent-appellee.
FERNANDEZ, J.
Rule Synopsis
Failure to of the insured to disclose co-insurers (usually in fire insurance policies), where the same was required under the policy, avoids the contract of insurance. This is a standard provision insurance contracts and intended to reduce the moral hazard of issuing the insurance.
Facts
Yap took out a Fire Insurance Policy with Pioneer for her two-storey store building. The policy requires Yap to give Pioneer notice of co-insurers covering the same subject matter under the condition that failure to give such notice shall lead to the forfeiture of the proceeds under the policy. At the time of issuance of policy Yap had a P20k fire insurance with Great American Insurance Co., this was noted in the policy with Pioneer as co-insurance. A subsequent endorsement on the policy indicated Northwest Insurance as a co-insurer. Yap furthermore took out another insurance from Federal Insurance Co. Inc. A fire then broke on Yap’s store. She filed a claim with Pioneer but the latter denied on ground of breach of condition on the policy.
Yap filed a complaint for recovery of the face value of the insurance proceeds with the CFI.
The CFI ruled in favor of Yap. The CA affirmed. The SC reversed.
Issues
- Should Pioneer be absolved from liability on Fire Insurance on account of any violation by Yap of the co-insurance clause therein?
- Was the formal requirement of endorsing the policy of co-insurance waived by Pioneer “since there was absolutely no showing that it was not aware of said substitution and preferred to continue the policy”?
Ruling and Discussion
- Yes. Pioneer should be absolved from liability on Fire Insurance on account of any violation by Yap of the co-insurance clause therein.
Yap’s argument: The Great American Insurance policy was substituted by the Federal Insurance policy for the same amount, and because it was a mere case of substitution, there was no necessity for its endorsement on policy with Pioneer.
The SC held that there is no evidence to establish and prove such a substitution. CA’s finding to the effect that the policy issued by Federal was a substitution of the policy issued by Great American was unsubstantiated, contrary to stipulation and admission of Yap, and is grounded entirely on speculation, surmises or conjectures, hence, not binding on the Supreme Court.
By the plain terms of the policy, other insurance without the consent of petitioner would ipso facto avoid the contract. It required no affirmative act of election on the part of the company to make operative the clause avoiding the contract, wherever the specified conditions should occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance.
A clause in a policy to the effect that the procurement of additional insurance without the consent of the insurer renders the policy void is a valid provision. Upon violation, the insurer may terminate the contract at any time, at its option, by giving notice and refunding a ratable portion of the premium. (Milwaukee Mechanids’ Lumber Co. vs. Gibson)
The purpose of said Other Insurance Clauses in the insurance policies was to reduce moral hazard, that is, to prevent over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a fire would be profitable to the insured.
These conditions partake the nature, and must be deemed to be a warranty. (General Insurance & Surety Corporation vs. Ng Hua) - No. The formal requirement of endorsing the policy of co-insurance was not waived by Pioneer.
Yap has the burden of proof to show that Pioneer was aware of the substitution. Section 1, Rule 131 of the Revised Rules of Court, requires each party to prove his own allegations. The CA shifted to Pioneer, Yap’s burden of proving her proposition that Pioneer was aware of the alleged substitution, and with such knowledge preferred to continue the policy.
Furthermore, a waiver must be express. If it is to be implied from conduct mainly, said conduct must be clearly indicative of a clear intent to waive such right. Nothing less than a clear, positive waiver, made with full knowledge of the circumstances, must be required.
Dispositive
Judgment reversed and set aside.