Warranties

1. Qua Chee Gan v. Law Union and Rock Insurance Co., Ltd., 98 Phil. 85 (1955)

Facts:

The contract of insurance is one of perfect good faith (uferrimal fidei) not for the
insured alone, but equally so for the insurer; in fact, it is mere so for the latter, since its
dominant bargaining position carries with it stricter responsibility.

FACTS:

Qua Chee Gan owns four warehouses in Albay. He was using these warehouses for the
storage of stocks of 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 P398,562.81. Qua Chee Gan demanded insurance pay from Law Union but the latter
refused claiming violation of warranties and conditions, filing of fraudulent claims, and
that the fire had been deliberately caused by Qua Chee Gan. Law Union in fact sued
Qua Chee Gan for Arson.

Qua Chee Gan was acquitted by the trial court 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.

ISSUES: 1) Whether or not the insurance company can void the policies it had issued 2)
Whether or not the insured violated the "Hemp Warranty" provisions of the policy against
the storage of gasoline. HELD:

1)

No. Law Union cannot exempt itself from paying Qua Chee Gan.

Where the insurer, at the time of the issuance of a policy of insurance, has knowledge of
existing facts which, if insisted on, would invalidate the contract from its very inception,
such knowledge constitutes a waiver of conditions in the contract inconsistent with the
facts, and the insurer is estopped thereafter from asserting the breach of such
conditions. The law is charitable enough to assume, in the absence of any showing to
the contrary, that an insurance company intends to execute a valid contract in return for
the premium received; and when the policy contains a condition which renders it
voidable at its inception, and this result is known to the insurer, it will be presumed to
have intended to waive the conditions and to execute a binding contract, rather than to
have deceived the insured into thinking he is insured when in fact he is not, and to have
taken his money without consideration. The appellant insurance company is barred by
waiver (or rather estoppel) to claim violation of the so-called fire hydrants warranty, for
the reason that knowing fully all that the number of hydrants demanded therein never
existed from the very beginning, the insurance company nevertheless issued the policies
in question subject to such warranty, and received the corresponding premiums. To
allow a company to accept one's money for a policy of insurance which it then knows to
be void and of no effect, though it knows as it must, that the assured believes it to be
valid and binding, is so contrary to the dictates of honesty and fair dealing, and so
closely related to positive fraud, as to the abhorrent to fair-minded men. The appellant
company so worded the policies that while exacting the greater number of fire hydrants
and appliances, it kept the premium discount at the minimum of 2 1/2%, thereby giving
the insurance company a double benefit. Such abnormal treatment of the insured
strongly points at an abuse of the insurance company's selection of the words and terms
of the contract, over which it had absolute control. 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, is estopped to take advantage of the
forfeiture. It cannot treat the policy as void for the purpose of defense to an action to
recover for a loss thereafter occurring and at the same time treat it as valid for the
purpose of earning and collecting further premiums. Moreover, taking into account the
well known rule that ambiguities or obscurities must be strictly interpreted against the
party that caused them, the "memo of warranty" invoked by appellant bars the latter from
questioning the existence of the appliances called for in the insured premises

2)

No.

The ambiguity must be held strictly against the insurer and liberally in favor of the
insured, specially to avoid a forfeiture.

Insurance is, in its nature, complex and difficult for the layman to understand. Policies
are prepared by experts who know and can anticipate the hearing and possible
complications of every contingency. So long as insurance companies insist upon the use
of ambiguous, intricate and technical provisions, which conceal rather than frankly
disclose, their own intentions, the courts must, in fairness to those who purchase
insurance, construe every ambiguity in favor of the insured.

Appellee admitted that there were 36 cans of gasoline in the building designed.
However, gasoline is not specifically mentioned among the prohibited articles listed in
the so-called "hemp warranty." The cause relied upon by the insurer speaks of "oils",
 and is uncertain because, "Oils" usually mean "lubricants" and not gasoline or kerosene.
If the company intended to rely upon a condition of that character, it ought to have been
plainly expressed in the policy. The contract of insurance is one of perfect good faith
(uferrimal fidei) not for the insured alone, but equally so for the insurer; in fact, it is mere
so for the latter, since its dominant bargaining position carries with it stricter
responsibility. Also, the gasoline kept in Bodega No. 2 was only incidental to his
business, being no more than a customary 2 day's supply for the five or six motor
vehicles used for transporting of the stored merchandise. "It is well settled that the
keeping of inflammable oils on the premises though prohibited by the policy does not
void it if such keeping is incidental to the business."

Double Insurance

2. Geagonia v. Court of Appeals 241 SCRA 152, 160 (1995)

Condition 3 in the private respondent's policy No. F-14622 does not absolutely declare void any
violation thereof. It expressly provides that the condition "shall not apply when the total
insurance or insurances in force at the time of the loss or damage is not more than
P200,000.00."

FACTS

Petitioner, as the owner of Norman’s Mart, obtained insurance from private respondent CBIC.
The insurance policy contained the following condition:

"3. The insured shall give notice to the Company of any insurance or insurances
already effected, or which may subsequently be effected, covering any of the property
or properties consisting of stocks in trade, goods in process and/or inventories only
hereby insured, and unless such notice be given and the particulars of such insurance or
insurances be stated therein or endorsed in this policy pursuant to Section 50 of the
Insurance Code, by or on behalf of the Company before the occurrence of any loss or
damage, all benefits under this policy shall be deemed forfeited, provided however, that
this condition shall not apply when the total insurance or insurances in force at the time
of the loss or damage is not more than P200,000.00."

The building subject of fire insurance was razed by fire. Consequently, Petitioner claimed before
CBIC for the proceeds. CBIC refused alleging that Petitioner did not inform of a previous insurance
obtained by its creditor Cebu Tesing Textiles over the same property and in violation of Condition 3.

ISSUE

Whether or not the policy is avoided by the fact that petitioner did not inform of its other insurance
policies over the subject property.
RULING
NO. It must, however, be underscored that unlike the "other insurance" clauses involved in General
Insurance and Surety Corp. vs. Ng Hua or in Pioneer Insurance & Surely Corp. vs. Yap, which read:

"The insured shall give notice to the company of any insurance or insurances already effected, or
which may subsequently be effected covering any of the property hereby insured, and unless such
notice be given and the particulars of such insurance or insurances be stated in or endorsed on this
Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under
this Policy shall be forfeited," or in the 1930 case of Santa Ana vs. Commercial Union Assurance Co.28
which provided "that any outstanding insurance upon the whole or a portion of the objects thereby
assured must be declared by the insured in writing and he must cause the company to add or insert it in
the policy, without which such policy shall be null and void, and the insured will not be entitled to
indemnity in case of loss," Condition 3 in the private respondent's policy No. F-14622 does not
absolutely declare void any violation thereof. It expressly provides that the condition "shall not apply
when the total insurance or insurances in force at the time of the loss or damage is not more than
P200,000.00."

3. Malayan Ins. Co., Inc. vs. Phils. First Ins. Co., Inc. and Reputable Forwarder Services, Inc., G.R.
No. 184300, July 11, 2012

Facts:

Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Forwarder Services,
Inc. (Reputable) had been annually executing a contract of carriage, whereby the latter
undertook to transport and deliver the former’s products to its customers, dealers or salesmen.
On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from
respondent Philippines First Insurance Co., Inc. (Philippines First) to secure its interest over its
own products. Philippines First thereby insured Wyeth’s nutritional, pharmaceutical and other
products usual or incidental to the insured’s business while the same were being transported or
shipped in the Philippines. The policy covers all risks of direct physical loss or damage from any
external cause, if by land, and provides a limit of P6,000,000.00 per any one land vehicle. On
December 1, 1993, Wyeth executed its annual contract of carriage with Reputable. It turned out,
however, that the contract was not signed by Wyeth’s representative/s. Nevertheless, it was
admittedly signed by Reputable’s representatives, the terms thereof faithfully observed by the
parties and, as previously stated, the same contract of carriage had been annually executed by
the parties every year since 1989. Under the contract, Reputable undertook to answer for “all
risks with respect to the goods and shall be liable to the COMPANY (Wyeth), for the loss,
destruction, or damage of the goods/products due to any and all causes whatsoever, including
theft, robbery, flood, storm, earthquakes, lightning, and other force majeure while the
goods/products are in transit and until actual delivery to the customers, salesmen, and dealers
of the COMPANY”. The contract also required Reputable to secure an insurance policy on
Wyeth’s goods. Thus, on February 11, 1994, Reputable signed a Special Risk Insurance Policy
(SR Policy) with petitioner Malayan for the amount of P1,000,000.00. On October 6, 1994,
during the effectivity of the Marine Policy and SR Policy, Reputable received from Wyeth 1,000
boxes of Promil infant formula worth P2,357,582.70 to be delivered by Reputable to Mercury
Drug Corporation in Libis, Quezon City. Unfortunately, on the same date, the truck carrying
Wyeth’s products was hijacked by about 10 armed men. They threatened to kill the truck driver
and two of his helpers should they refuse to turn over the truck and its contents to the said
highway robbers. The hijacked truck was recovered two weeks later without its cargo. Malayan
questions its liability based on sections 5 and 12 of the SR Policy. The RTC rendered its
Decision finding Reputable liable to Philippines First for the amount of indemnity it paid to
Wyeth. Malayan was found by the RTC to be liable to Reputable to the extent of the policy
coverage the CA rendered the assailed decision sustaining the ruling of the RTC,

Issues:

1. Whether Reputable is a private carrier;

2. Whether Reputable is strictly bound by the stipulations in its contract of carriage with Wyeth,
such that it should be liable for any risk of loss or damage, for any cause whatsoever, including
that due to theft or robbery and other force majeure.

Ruling:

On the first issue Reputable is a private carrier. A common carrier becomes a private carrier
when it undertakes to carry a special cargo or chartered to a special person only. For all intents
and purposes, therefore, Reputable operated as a private/special carrier with regard to its
contract of carriage with Wyeth. On the second issue Reputable is bound by the terms of the
contract of carriage. The extent of a private carrier's obligation is dictated by the stipulations of a
contract it entered into, provided its stipulations, clauses, terms and conditions are not contrary
to law, morals, good customs, public order, or public policy. Thus, being a private carrier, the
extent of Reputable's liability is fully governed by the stipulations of the contract of carriage, one
of which is that it shall be liable to Wyeth for the loss of the goods/products due to any and all
causes whatsoever, including theft, robbery and other force majeure while the goods/products
are in transit and until actual delivery to Wyeth's customers, salesmen and dealers.

Notice of Loss

4. Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., 212 SCRA 194, August 5,
1992

Premiums

5. Arce v. Capital Insurance & Surety Co., Inc., 117 SCRA 63 (1982)
6. UCPB Gen. Insurance Co. Inc. vs. Masagana Telamart, Inc. G.R. No. 137172. April 4, 2001
7. Makati Tuscany Condo. Corp. v. Court of Appeals, GR. No. 95546, 6 Nov. 1992
8. Jaime Gaisano vs. Development Insurance and Surety Corp., G.R. No. 190702, February 27,
2017

Reinstatement

9. Violeta R. Lalican vs. The Insular Life Assurance Co. Ltd, G.R. No. 183526 August 25, 2009
Marine Insurance

10. Aboitiz Shipping Corporation vs. Court of Appeals, et. al., G.R. No. 121833, Oct. 17, 2008
11. FGU Insurance Corp. vs. The Court of Appeals, et. al., G.R. No. 137775, March 31, 2005

On Presentation of Policies

12. Malayan Insurance Co., Inc. v. Regis Brokerage Corp., G.R. No. 172156, Nov. 23, 2007, 538
SCRA 681
13. ITCSI vs. FGU Insurance Corp., G.R. No. 161539, June 27, 2008

Subrogation

14. Keppel Cebu Shipyard, Inc. v. Pioneer Ins.., G.R. Nos. 180880-81, Sept. 25, 2009, 601 SCRA 96
15. Malayan Ins. Co., Inc. vs. Rodelio Alberto and Enrico Alberto Reyes, G.R. No. 194320, Feb.1,
2012

Fire Insurance

16. Uy Hu & Co. v. The Prudential Assurance Co., Ltd. 51, Phil. 231 (1927)
17. Malayan Insurance Co., Inc., vs. PAP Ltd. Co. (Phil. Br.) G.R. No. 200784, Aug. 07, 2013
18. United Merchants Corp. vs. Country Bankers Ins. Corp., G.R. No. 198588 July 11, 2012

Surety

19. Stronghold Insurance Co., Inc. vs. Tokyu Construction Co., Ltd., G.R. Nos. 158820-21, June 5,
2009
20. First Lepanto-Taisho Ins. Corp. vs. Chevron Phils., Inc., G.R. No. 177839, Jan. 18, 2012

On Motor Vehicle Insurance

 21. Perla Compania De Seguros, Inc. petitioner, vs. The Court of Appeals G.R. No. 96452 May 7,
1992
22. Paramount Ins. Corp. vs. Sps. Yves and Maria Teresa Remondeulaz, G.R. No. 173773, Nov. 28,
2012
23. Alpha Insurance and Surety Co. vs. Arsenia Sonia Castor, G.R. No. 198174, Sept. 2, 2013

Other Insurance Clause

24. Malayan Insurance Co., Inc. vs. Phils. First Insurance Co., Inc. G.R. No. 184300, July 11, 2012

On the Liability of Insurer for Loss Due to Negligence

25. FGU Insurance Corp. vs. The Court of Appeals, et. al., G.R. No. 137775, March 31, 2005