G.R. No.

L-4611 December 17, 1955

QUA CHEE GAN vs. LAW UNION AND ROCK INSURANCE CO., LTD.
REYES, J. B. L., J.:

Facts: Qua Chee Gan, a merchant of Albay, seeks to recover the proceeds of certain fire insurance policies totalling P370,000,
issued by the Law Union & Rock Insurance Co., Ltd., upon certain bodegas and merchandise of the insured that were burned
on June 21, 1940. The CFI rendered a decision in favor of the plaintiff. The defendant Insurance Company appealed directly
to this Court.

The record shows that before the last war, plaintiff-appellee owned four warehouses or bodegas (designated as Bodegas Nos.
1 to 4) in the municipality of Tabaco, Albay, used for the storage of stocks of copra and of hemp, baled and loose. They had
been, with their contents, insured with the defendant Company since 1937, and the lose made payable to the Philippine National
Bank as mortgage of the hemp and crops, to the extent of its interest.

Fire of undetermined origin that broke out in the early morning of July 21, 1940, and lasted almost one week, gutted and
completely destroyed Bodegas Nos. 1, 2 and 4, with the merchandise stored theren. The plaintiff having submitted the
corresponding fire claims, totalling P398,562.81 (but reduced to the full amount of the insurance, P370,000), the Insurance
Company resisted payment, claiming violation of warranties and conditions, filing of fraudulent claims, and that the fire had
been deliberately caused by the insured or by other persons in connivance with him.

Issue: Whether or not the insurance company is correct in refusing payment in favor of the appellees.

Ruling: In its first assignment of error, the insurance company alleges that the trial Court should have held that the policies
were avoided for breach of warranty. We are in agreement with the trial Court that the appellant 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 appellant neverthless issued the policies in question
subject to such warranty, and received the corresponding premiums. 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knowledge of facts entitling it to treat a policy as no longer in force, receives and accepts a premium on the policy, estopped to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." (29 Am.
Jur., 653, p. 657.)

Under the second assignment of error, appellant insurance company avers, that the insured violated the "Hemp Warranty"
provisions of Policy No. 2637165 (Exhibit JJ), against the storage of gasoline, since appellee admitted that there were 36 cans
(latas) of gasoline in the building designed as "Bodega No. 2" that was a separate structure not affected by the fire. It is well to
note that 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 (animal and/or vegetable and/or mineral and/or their liquid products having a flash
point below 300o Fahrenheit", and is decidedly ambiguous and uncertain; for in ordinary parlance, "Oils" mean "lubricants" and
not gasoline or kerosene. And how many insured, it may well be wondered, are in a position to understand or determine "flash
point below 003o Fahrenheit. Here, again, by reason of the exclusive control of the insurance company over the terms and
phraseology of the contract, the ambiguity must be held strictly against the insurer and liberally in favor of the insured, specially
to avoid a forfeiture (44 C. J. S., pp. 1166-1175; 29 Am. Jur. 180). Another point that is in favor of the insured is that 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 (t. s. n., pp. 1447-1448). "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."
Bachrach vs. British American Ass. Co., 17 Phil. 555, 560)

The next two defenses pleaded by the insurer, — that the insured connived at the loss and that the fraudulently inflated the
quantity of the insured stock in the burnt bodegas, — are closely related to each other. Both defenses are predicted on the
assumption that the insured was in financial difficulties and set the fire to defraud the insurance company, presumably in order
to pay off the Philippine National Bank, to which most of the insured hemp and copra was pledged. Both defenses are fatally
undermined by the established fact that, notwithstanding the insurer's refusal to pay the value of the policies, the extensive
resources of the insured enabled him to pay off the National Bank in a short time; and if he was able to do so, no motive appears
for attempt to defraud the insurer. While the acquittal of the insured in the arson case is not res judicata on the present civil
action, the insurer's evidence, to judge from the decision in the criminal case, is practically identical in both cases and must
lead to the same result, since the proof to establish the defense of connivance at the fire in order to defraud the insurer "cannot
be materially less convincing than that required in order to convict the insured of the crime of arson"(Bachrach vs. British
American Assurance Co., 17 Phil. 536).
Appellant insurance company also contends that the claims filed by the insured contained false and fraudulent statements that
avoided the insurance policy. But the trial Court found that the discrepancies were a result of the insured's erroneous
interpretation of the provisions of the insurance policies and claim forms, caused by his imperfect knowledge of English, and
that the misstatements were innocently made and without intent to defraud. Our review of the lengthy record fails to disclose
reasons for rejecting these conclusions of the Court below. For example, the occurrence of previous fires in the premises
insured in 1939, altho omitted in the claims, Exhibits EE and FF, were nevertheless revealed by the insured in his claims
Exhibits Q (filed simultaneously with them), KK and WW. Considering that all these claims were submitted to the smae agent,
and that this same agent had paid the loss caused by the 1939 fire, we find no error in the trial Court's acceptance of the
insured's explanation that the omission in Exhibits EE and FF was due to inadvertance, for the insured could hardly expect
under such circumstances, that the 1939 would pass unnoticed by the insurance agents.

G.R. No. L-21821-22 and L-21824-27 May 31, 1966

DIOSDADO C. TY vs. FILIPINAS WAS COMPAÑIA DE SEGUROS, et al.
BARRERA, J.:

Facts: Plaintiff-appellant was an employee of Broadway Cotton Factory at Grace Park, Caloocan City, working as mechanic
operator, with monthly salary of P185.00. In the latter part of 1953, he took Personal Accident Policies from several insurance
companies, (Filipinas Compañia de Seguros, People's Surety & Insurance Co., Inc., South Sea Surety & Insurance Co., Inc.,
The Philippine Guaranty Company, Inc., Universal Insurance & Indemnity Co., and Plaridel Surety & Insurance Co., Inc.) on
different dates, effective for 12 months. During the effectivity of these policies, or on December 24, 1953, a fire broke out in the
factory where plaintiff was working. As he was trying to put out said fire with the help of a fire extinguisher, a heavy object fell
upon his left hand. Plaintiff received treatment at the National Orthopedic Hospital from December 26, 1953 to February 8,
1954, for which injuries, the attending surgeon certified, would cause temporary total disability of appellant's left hand.

As the insurance companies refused to pay his claim for compensation under the policies by reason of the said disability of his
left hand, Ty filed motions in the Municipal Court of Manila, which rendered favorable decision. On appeal to the Court of First
Instance by the insurance companies, the cases were dismissed on the ground that under the uniform terms of the insurance
policies, partial disability of the insured caused by loss of either hand to be compensable, the loss must result in the amputation
of that hand. Hence, these appeals by the insured.

Appellant contends that to be entitled to indemnification under the foregoing provision, it is enough that the insured is disabled
to such an extent that he cannot substantially perform all acts or duties of the kind necessary in the prosecution of his business.
It is argued that what is compensable is the disability and not the amputation of the hand. The definition of what constitutes
loss of hand, placed in the contract, according to appellant, consequently, makes the provision ambiguous and calls for the
interpretation thereof by this Court.

Issue: Whether or not Ty can collect under his accident policies.

Ruling: While we sympathize with the plaintiff or his employer, for whose benefit the policies were issued, we can not go
beyond the clear and express conditions of the insurance policies, all of which definite partial disability as loss of either hand
by amputation through the bones of the wrist. There was no such amputation in the case at bar. All that was found by the trial
court, which is not disputed on appeal, was that the physical injuries "caused temporary total disability of plaintiff's left hand."
Note that the disability of plaintiff's hand was merely temporary, having been caused by fractures of the index, the middle and
the fourth fingers of the left hand.

We might add that the agreement contained in the insurance policies is the law between the parties. As the terms of the policies
are clear, express and specific that only amputation of the left hand should be considered as a loss thereof, an interpretation
that would include the mere fracture or other temporary disability not covered by the policies would certainly be unwarranted.

Plaintiff-appellant cannot come to the courts and claim that he was misled by the terms of the contract. The provision is clear
enough to inform the party entering into that contract that the loss to be considered a disability entitled to indemnity, must be
severance or amputation of that affected member from the body of the insured.

G.R. No. L-21380 May 20, 1966

MISAMIS LUMBER CORPORATION vs. CAPITAL INSURANCE and SURETY CO., INC.
REYES, J.B.L., J.:
Facts: Plaintiff-appellee Misamis Lumber Corporation, insured its Ford Falcon motor car for the amount of P14,000 with the
defendant-appellant, Capital Insurance & Surety Company, Inc.

The pertinent provisions of the policy provided, among others, that the insured may authorize the repair of the Motor Vehicle
necessitated by damage for which the Company may be liable under the policy provided that:
(a) the estimated cost of such repair does not exceed the authorized Repair Limit.
(b) a detailed estimate of the cost is forwarded to the Company without delay and providing also that the authorized repair limit
is P150.00.

At around eleven o'clock in the evening of 25 November 1961, the insured car, while traveling along in Aurora Boulevard in
front of the Pepsi-Cola plant in Quezon City, passed over a water hole which the driver did not see because an oncoming car
did not dim its light. The crankcase and flywheel housing of the car broke when it hit a hollow block lying alongside the water
hole. At the instance of the plaintiff-appellee, the car was towed and repaired by Morosi Motors at its shop at 1906 Taft Avenue
Extension at a total cost of P302.27.

On 29 November 1961, when the repairs on the car had already been made, the plaintiff-appellee made a report of the accident
to the defendant-appellant who refused to pay for the total cost of the wage and repairs. The defendant-appellant admits liability
in the amount of P150, but not for any excess thereof.

The lower court did not exonerate the said appellant for the excess because, according to it, the company's absolution would
render the insurance contract one-sided and that the said insurer had not shown that the cost of repairs in the sum of P302.27
is unreasonable, excessive or padded, nor had it shown that it could have undertaken the repairs itself at less expense.

Issue: Wether or not the lower court is correct in ruling against the insurance company.

Ruling: The above reasoning is beside the point, because the insurance policy stipulated in paragraph 4 that if the insured
authorizes the repair the liability of the insurer, per its sub-paragraph (a), is limited to P150.00. The literal meaning of this
stipulation must control, it being the actual contract, expressly and plainly provided for in the policy (Art. 1370, Civil Code;
Young vs. Midland Textile Ins. Co., 30 Phil. 617; Ty vs. First Nat. Surety & Assur. Co., Inc., L-16138-45, 29 April 1961).

The lower court's recourse to legal hermeneutics is not called for because paragraph 4 of the policy is clear and specific and
leaves no room for interpretation. The interpretation given is even unjustified because it opposes what was specifically
stipulated. The insurance contract may be rather onerous ("one-sided", as the lower court put it), but that in itself does not
justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law between the
contracting parties.

Finally, to require the insurer to prove that the cost of the repairs ordered by the insured is unreasonable, as the appealed
decision does, when the insurer was not given an opportunity to inspect and assess the damage before the repairs were made,
strikes Us as contrary to elementary justice and equity.

G.R. No. 75605 January 22, 1993

RAFAEL (REX) VERENDIA vs. COURT OF APPEALS and FIDELITY & SURETY CO. OF THE PHILIPPINES

G.R. No. 76399 January 22, 1993

FIDELITY & SURETY CO. OF THE PHILIPPINES, INC. vs. RAFAEL VERENDIA and THE COURT OF APPEALS

MELO, J.:

Facts: The two consolidated cases involved herein stemmed from the issuance by Fidelity and Surety Insurance Company of
the Philippines (Fidelity for short) of its Fire Insurance Policy No. F-18876 effective between June 23, 1980 and June 23, 1981
covering Rafael (Rex) Verendia's residential building located at Tulip Drive, Beverly Hills, Antipolo, Rizal in the amount of
P385,000.00. Designated as beneficiary was the Monte de Piedad & Savings Bank. Verendia also insured the same building
with two other companies, namely, The Country Bankers Insurance for P56,000.00 under Policy No. PDB-80-1913 expiring on
May 12, 1981, and The Development Insurance for P400,000.00 under Policy No. F-48867 expiring on June 30, 198l.
While the three fire insurance policies were in force, the insured property was completely destroyed by fire on the early morning
of December 28, 1980. Fidelity was accordingly informed of the loss and despite demands, refused payment under its policy.
Fidelity, among other things, averred that the policy was avoided by reason of over-insurance; that Verendia maliciously
represented that the building at the time of the fire was leased under a contract executed on June 25, 1980 to a certain Roberto
Garcia, when actually it was a Marcelo Garcia who was the lessee.

Issues: (a) whether or not the contract of lease submitted by Verendia to support his claim on the fire insurance policy
constitutes a false declaration which would forfeit his benefits under Section 13 of the policy and (b) whether or not, in submitting
the subrogation receipt in evidence, Fidelity had in effect agreed to settle Verendia's claim in the amount stated in said receipt.

Ruling: According to the investigation report prepared by Pat. Eleuterio M. Buenviaje of the Antipolo police, the building
appeared to have "no occupant" and that Mr. Roberto Garcia was "renting on the otherside (sic) portion of said compound".
Robert Garcia disappeared after the fire. It was only on October 9, 1981 that an adjuster was able to locate him. Robert Garcia
then executed an affidavit before the National Intelligence and Security Authority (NISA) to the effect that he was not the lessee
of Verendia's house and that his signature on the contract of lease was a complete forgery. Thus, on the strength of these facts,
the adjuster submitted a report dated December 4, 1981 recommending the denial of Verendia's claim.

Ironically, during the trial, Verendia admitted that it was not Robert Garcia who signed the lease contract. According to Verendia,
it was signed by Marcelo Garcia, cousin of Robert, who had been paying the rentals all the while. Verendia, however, failed to
explain why Marcelo had to sign his cousin's name when he in fact was paying for the rent and why he (Verendia) himself, the
lessor, allowed such a ruse. Fidelity's conclusions on these proven facts appear, therefore, to have sufficient bases; Verendia
concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee", inflated the value of the property
by the alleged monthly rental of P6,500 when in fact, the Provincial Assessor of Rizal had assessed the property's fair market
value to be only P40,300.00, insured the same property with two other insurance companies for a total coverage of around
P900,000, and created a dead-end for the adjuster by the disappearance of Robert Garcia.

Basically a contract of indemnity, an insurance contract is the law between the parties (Pacific Banking Corporation vs. Court
of Appeals 168 SCRA 1 [1988]). Its terms and conditions constitute the measure of the insurer's liability and compliance
therewith is a condition precedent to the insured's right to recovery from the insurer (Oriental Assurance Corporation vs. Court
of Appeals, 200 SCRA 459 [1991], citing Perla Compania de Seguros, Inc. vs. Court of Appeals, 185 SCRA 741 [1991]). As it
is also a contract of adhesion, an insurance contract should be liberally construed in favor of the insured and strictly against
the insurer company which usually prepares it (Western Guaranty Corporation vs. Court of Appeals, 187 SCRA 652 [1980]).
Considering, however, the foregoing discussion pointing to the fact that Verendia used a false lease contract to support his
claim under Fire Insurance Policy No. F-18876, the terms of the policy should be strictly construed against the insured. Verendia
failed to live by the terms of the policy, specifically Section 13 thereof which is expressed in terms that are clear and
unambiguous, that all benefits under the policy shall be forfeited "If the claim be in any respect fraudulent, or if any false
declaration be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or anyone acting
in his behalf to obtain any benefit under the policy". Verendia, having presented a false declaration to support his claim for
benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by virtue of Section 13 of the policy in the
absence of proof that Fidelity waived such provision (Pacific Banking Corporation vs. Court of Appeals, supra). Worse yet, by
presenting a false lease contract, Verendia, reprehensibly disregarded the principle that insurance contracts are uberrimae
fidae and demand the most abundant good faith (Velasco vs. Apostol, 173 SCRA 228 [1989]).

There is also no reason to conclude that by submitting the subrogation receipt as evidence in court, Fidelity bound itself to a
"mutual agreement" to settle Verendia's claims in consideration of the amount of P142,685.77. While the said receipt appears
to have been a filled-up form of Fidelity, no representative of Fidelity had signed it. It is even incomplete as the blank spaces
for a witness and his address are not filled up. More significantly, the same receipt states that Verendia had received the
aforesaid amount. However, that Verendia had not received the amount stated therein, is proven by the fact that Verendia
himself filed the complaint for the full amount of P385,000.00 stated in the policy. It might be that there had been efforts to settle
Verendia's claims, but surely, the subrogation receipt by itself does not prove that a settlement had been arrived at and
enforced. Thus, to interpret Fidelity's presentation of the subrogation receipt in evidence as indicative of its accession to its
"terms" is not only wanting in rational basis but would be substituting the will of the Court for that of the parties.