28 NEW LIFE ENTERP.

v CA COMM – INSURANCE
5 G.R. No. 94071 March 31, 1992 Regalado Enciso
Petitioner/s: Respondent/s:
New Life Enterprises & Julian Sy CA, Equitable Insurance Corporation, Reliance Surety
Insurance Co., Inc., & Western Guaranty Corporation
Recit-Ready Summary
Julian Sy (a businessman engaged in selling construction materials under the trade name New Life
Enterprises) obtained fire insurance policies from 3 different companies for his inventory of construction
materials or stocks in trade. (a total of 4 fire insurance policies were availed): 
(1) Western Guaranty Insurance – P350K (May 15, 1981)
(2) Reliance Surety Insurance – P300k and P700k (July 30, 1981)
(3) Equitable Insurance – P200k (Feb. 8, 1982)
 
On October 19, 1982 at 2am, fire broke out and destroyed his stocks in trade and building. Mr. Sy went
to Reliance to claim but he was refused. Same thing happened with the other 2 insurers. The 3 insurance
companies refused Mr. Sy’s claim for violating Policy Condition No. 3 “Other Insurance Clause”,
which mandated him to give notice of any insurance or insurances already effected or subsequently effected
covering the stocks in trade.

Mr. Sy alleges that

 Insurance agents Leon Alvarez (for Western) and Yap Kam Chuan (for Reliance and Equitable)
already knew about the existence of the additional insurance coverage;
 New Life Enterprises was not informed about the requirement that such other or additional
insurance should be stated in the policy, as they have not even read policies.

RTC: favored New Life. CA: reversed and ruled in favor of the 3 insurers.

Is Policy Condition No. 3 “Other Insurance Clause” violated? YES

The insured is specifically required to disclose to the insurer any other insurance and its particulars
which he may have effected on the same subject matter. 

The knowledge of such insurance by the insurer's agents, even assuming the acquisition thereof by the
former, is NOT the "notice" that would estop the insurers from denying the claim. Imputed knowledge
(knowledge of the agent is knowledge to the principal) is inapplicable here, as ruled by the CA, whose
factual findings are acceptable.

RTC’s conclusion that Reliance and Equitable are sister companies because they share the same
insurace agent is unfounded. Availment of the services of the same agents and adjusters by different
companies is a common practice in the insurance business.

New Life Enterprise should have exercised ordinary care and prudence. New Life Enterprises’
conformity to the terms of the policy is implied from his failure to express any disagreement with what
was provided for. In this case, it was incumbent upon Mr. Sy to read the insurance contracts. This was
reasonably expected of him considering he was a businessman since 1965. The contract concerned
indemnity in case of loss in his money-making trade.

Lastly, Policy Condition No. 27 states that Mr. Sy should have brought an action in court within 1 year
from the receipt of denial on his claim. Assuming arguendo that New Life Enterprises felt the legitimate
need to clarify the policy conditions violated – they still had 8 months to file an action in court.
Therefore, their claim was filed out of time.

Doctrine: When the terms of the contract are clear and unambiguous, an insured is specifically required to

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disclose to the insurer any other insurance and its particulars which he may have effected on the same subject
matter. There is no need for the use of statutory construction.
Facts
1. Julian Sy and Jose Sy Bang formed a business partnership in the name of New Life Enterprises.
The partnership engaged in the sale of construction materials in a 2-storey building in Iyam,
Lucena City.
2. Julian insured the stocks in trade with Western Guaranty Corporation, Reliance Surety and
Insurance Co, and Equitable Insurance Corporation.
3. On May 15, 1981, Western Guaranty Corporation issued Fire Insurance Policy No. 37201 for
350K pesos. The policy was renewed on May 13, 1982.
4. On July 30, 1981, Reliance Surety and Insurance Co. issued Fire Insurance Policy No. 69135
for 300K pesos. Additional insurance was issued by Reliance for 700K pesos. (Total: 1M pesos)
5. On February 8, 1982, Equitable Insurance Corporation issued Fire Insurance Policy No. 39328
for 200K pesos.
6. On October 19, 1982, a fire broke out at 2AM. At the time, the stocks in the trade inside the
building were insured in the total amount of 1.55M pesos. The building and the stocks inside were
burned.
7. The headquarters of the Philippine Constabulary in Camp Crame certified that the cause of the
fire was electrical in nature.
8. After the fire, Julian asked an agent of Reliance to accompany him to the Reliance office so he
could file an insurance claim. To support his claim, he submitted the fire clearance, insurance
policies, and stock inventories.
9. Julian claims that the 3 companies are sister companies. He also claims that Equitable’s claims
manager told him to go first to Reliance. If Reliance agrees to pay, Equitable would as well. The
other insurance companies showed the same sentiment.
10. Ultimately the 3 insurance companies denied Julian’s claim for payment.
11. Western’s claim manager Bernard Razon told Julian that his claim is denied for breach of
policy conditions. Reliance VP Mary Dee Co and Equitable VP Elma Bondad said the same
thing to Julian, thru letters.
12. Atty. Serafin Dator, acting in behalf of Julian, sent a letter to Reliance VP Co, asking what specific
policy conditions were violated. VP Co said that Policy Condition No. 3 , otherwise known as
“Other Insurance Clause” was violated. The clause provides that the insured must give notice of
any insurance or insurances already effected or subsequently effected covering the stocks.
13. Julian filed separate civil actions against the 3 insurance companies in RTC Lucena City. The
cases were consolidated.
14. RTC ruled in favor of Julian and New Life Enterprises.
a. Equitable ordered to pay 200K and attorney’s fees worth 20K. 12% interest per annum
from Equitable’s receipt of fire claim (Feb. 14, 1983) until fully paid.
b. Reliance ordered to pay 1M pesos and 100K attorney’s fees. Same interest as the
previous point.
c. Western ordered to pay 350K pesos plus 100K attorney’s fees. Same interest (but from
Feb. 5, 1982 until fully paid).
15. CA reversed the RTC.
Point/s of Contention
Julian Sy
- Insurance  agent Leon Alvarez (for Western) and Yap Kam Chuan (for Reliance  and Equitable)
knew about the existence of the additional insurance coverage and
- Julian and New Life Enterprises were not informed about  the requirement that such other or
additional insurance should be stated  in the policy,  as  they have  not even  read policies
Issue/s Ruling
1. WN Policy Condition 3 of the insurance contracts was violated. 1. Yes
2. WN SC may relax the enforcement of the one-year prescriptive period in the 2. No
said policies entered into by New Life.
Rationale
1. The terms of the contract are clear and unambiguous.

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  Policy Condition No. 3 of said insurance policies is uniformly contained in all the insurance
contracts of herein petitioners.
 The insured is specifically required to disclose to the insurer any other insurance and
its particulars which he may have effected on the same subject matter. 
 The knowledge of such insurance by the insurer's agents, even assuming the
acquisition thereof by the former, is NOT the "notice" that would stop the insurers from
denying the claim. (In short, Julian should have informed the insurance company, NOT
the insurance agent). 
 While petitioner Sy claimed that he had informed insurance agent Alvarez regarding
the co-insurance on the property, he contradicted himself by inexplicably claiming
that he had not read the terms of the policies)
 The so-called theory of imputed knowledge (knowledge of the agent is knowledge of
the principal), does not apply and has been refuted by the CA based on the factual
findings.
 The conclusion of the RTC that Reliance and Equitable are "sister
companies" is an unfounded conjecture drawn from the mere fact that Yap Kam Chuan
was an agent for both companies which also had the same insurance claims adjuster
o Availment of the services of the same agents and adjusters by different
companies is a common practice in the Insurance business and such
facts do not warrant the speculative conclusion of the trial court.
o Meaning: An agent can work as an insurance agent for different insurance
companies at the same time, BUT that doesn’t automatically mean that the
insurance companies the agent works for are already “sister companies”.
 The conformity of the insured to the terms of the policy is implied from his failure to
express any disagreement with what is provided for. 
 It may be true that the majority rule, as cited by petitioners, is that insured persons may accept
policies without reading them, and that this is not negligence per se. BUT, this is not without
any exception. It is and was incumbent upon Julian to read the insurance contracts, and
this can be reasonably expected of him considering that he has been a businessman since
1965. 
 A clear and vital misrepresentation  where the insured had been asked to reveal
but did not, constitutes deception and is guilty of fraud.
 Total absence of such notice nullifies the policy.

2. Normally, SC may relax the period depending on the circumstances of the case but not
in this case.

 Insofar as the liability of respondent Reliance is concerned, it is not denied that the complaint
for recovery was filed in court only on January 31, 1984, or after more than one (1) year had
elapsed from receipt of the insurer’s letter of denial on November 29, 1982.
 There was a considerable lapse of time from their receipt of the insurer's clarificatory letter
(rejecting Julian’s claim) dated March 30, 1983, up to the time the complaint was filed in court
on January 31, 1984. 
 The one-year prescriptive period was yet to expire on November 29, 1983, or about eight
(8) months from the receipt of the clarificatory letter, but petitioners let the period lapse
without bringing their action in court.
Disposition
Petition dismissed. CA affirmed.

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