G.R. No. L-36232, 19 December 1974, 61 SCRA 426

FACTS:

Respondent Oliva Yap was the owner of a store in a two-storey building where she sold shopping bags and footwear.
On April 19, 1962, respondent Yap took out Fire Insurance Policy No. 4216 from petitioner Pioneer Insurance & Surety Corporation with a face value of P25,000.00 covering her stocks, office furniture, fixtures and fittings of every kind and description. Among the conditions in the policy executed by the parties are the following:
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. (emphasis supplied)
It is understood that, except as may be stated on the face of this policy there is no other insurance on the property hereby covered and no other insurance is allowed except by the consent of the Company endorsed hereon. Any false declaration or breach or this condition will render this policy null and void.
At the time of the insurance on April 19, 1962 of Policy No. 4219 in favor of respondent Yap, an insurance policy for P20,000.00 issued by the Great American Insurance Company covering the same properties was noted on said policy as co-insurance (Annex “1-E”). Later, on August 29, 1962, the parties executed Exhibit “1-K”, as an endorsement on Policy No. 4219, stating:
It is hereby declared and agreed that the co-insurance existing at present under this policy is as follows: P20,000.00 — Northwest Ins., and not as originally stated. (emphasis supplied)
Except as varied by this endorsement, all other terms and conditions remain unchanged.
On September 26, 1962, respondent Yap took out another fire insurance policy for P20,000.00 covering the same properties, this time from the Federal Insurance Company, Inc., which new policy was, however, procured without notice to and the written consent of petitioner Pioneer Insurance & Surety Corporation and, therefore, was not noted as a co-insurance in Policy No. 4219.
At dawn on December 19, 1962, a fire broke out in the building housing respondent Yap’s above-mentioned store, and the said store was burned. Respondent Yap filed an insurance claim, but the same was denied in petitioner’s letter of May 17, 1963 (Exhibit “G”), on the ground of “breach and/or violation of any and/or all terms and conditions” of Policy No. 4219.
Yap filed with the Court of First Instance of Manila a complaint, asking, among others, for payment of the face value of her fire insurance policy. In its answer, petitioner alleged that no property belonging to plaintiff Yap and covered by the insurance policy was destroyed by the fire; that Yap’s claim was filed out of time; and that Yap took out an insurance policy from another insurance company without petitioner’s knowledge and/or endorsement, in violation of the express stipulations in Policy No. 4219, hence, all benefits accruing from the policy were deemed forfeited.
The trial court decided for plaintiff Oliva Yap; and its judgment was affirmed in full by the Court of Appeals.

ISSUE:

Whether or not petitioner should be absolved from liability on Fire Insurance Policy No. 4219 on account of any violation by respondent Yap of the co-insurance clause therein

RULING:

Yes. Petitioner insurance company is absolved from liability.
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.
The validity of a clause in a fire insurance policy to the effect that the procurement of additional insurance without the consent of the insurer renders ipso facto the policy void is well-settled:
In Milwaukee Mechanids’ Lumber Co., vs. Gibson, 199 Ark. 542, 134 S. W. 2d 521, 522, a substantially identical clause was sustained and enforced, the court saying: “The rule in this state and practically all of the states is to the effect that 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. The earlier cases of Planters Mutual Insurance Co., vs. Green, 72 Ark. 305, 80 S.W. 92, are to the same effect.” And see Vance, Insurance, 2nd Ed., 725. (Reach vs. Arkansas Farmers Mut. Fire Ins. Co., [Ark. Nov. 14, 1949] 224 S. W. 2d 48, 49.)
2. Where a policy contains a clause providing that the policy shall be void if insured has or shall procure any other insurance on the property, the procurement of additional insurance without the consent of the insurer avoids the policy.” (Planters’ Mut. Ins. Ass’n vs. Green [Supreme Court of Arkansas, March 19, 1904] 80 S.W. 151.)
3. The policy provided that it should be void in case of other insurance “without notice and consent of this company. …” It also authorized the company to terminate the contract at any time, at its option, by giving notice and refunding a ratable proportion of the premium. Held, that additional insurance, unless consented to, or unless a waiver was shown, ipso facto avoided the contract, and the fact that the company had not, after notice of such insurance, cancelled the policy, did not justify the legal conclusion that it had elected to allow it to continue in force.” (Johnson vs. American Fire Ins., Co., [Supreme Court of Minnesota, Aug. 12, 1889] 43 N.W., 59)
The aforecited principles have been applied in this jurisdiction in General Insurance & Surety Corporation vs. Ng Hua . There, the policy issued by the General Insurance & Surety Corporation in favor of respondent Ng Hua contained a provision identical with the provisions in Policy No. 4219 quoted above. This Court, speaking thru Justice Cesar P. Bengson, in reversing the judgment of the Court of Appeals and absolving the insurer from liability under the policy, held:
… And considering the terms of the policy which required the insured to declare other insurances, the statement in question must be deemed to be a statement (warranty) binding on both insurer and insured, that there were no other insurance on the property. …
The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitled the insurer to rescind. (Sec. 69, Insurance Act.) Such misrepresentation is fatal in the light of our views in Santa Ana vs. Commercial Union Assurance Company, Ltd., 55 Phil. 329. The materiality of non-disclosure of other insurance policies is not open to doubt.
Furthermore, even if the annotations were overlooked the defendant insurer would still be free from liability because there is no question that the policy issued by General Indemnity has not been stated in nor endorsed on Policy No. 471 of defendant. And as stipulated in the above-quoted provisions of such policy “all benefit under this policy shall be forfeited. (Emphasis supplied)
The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus avert the perpetration of fraud.

*Case digest by Karishina Viado, LLB-IV, Andres Bonifacio College Law School, SY 2018-2019