insular life assurance vs Feliciano

Evaristo Feliciano was issued an insurance policy by Insular Life. In September 1935, he died. His heirs filed an insurance claim but Insular Life denied the application as it averred that Felicianos application was attended by fraud. It was later found in court that the insurance agent and the medical examiner of Insular Life who assisted Feliciano in signing the application knew that Feliciano was already suffering from tuberculosis; that they were aware of the true medical condition of Feliciano yet they still made it appear that he was healthy in the insurance application form; that Feliciano signed the application in blank and the agent filled the information for him. ISSUE: Whether or not Insular Life can avoid the insurance policy by reason of the fact that its agent knowingly and intentionally wrote down the answers in the application differing from those made by Feliciano hence instead of serving the interests of his principal, acts in his own or anothers interest and adversely to that of his principal, the said principal is not bound by said acts of the agent. HELD: No. Insular Life must pay the insurance policy. The weight of authority is that if an agent of the insurer, after obtaining from an applicant for insurance a correct and truthful answer to interrogatories contained in the application for insurance, without knowledge of the applicant fills in false answers, either fraudulently or otherwise, the insurer cannot assert the falsity of such answers as a defense to liability on the policy, and this is true generally without regard to the subject matter of the answers or the nature of the agents duties or limitations on his authority, at least if not brought to the attention of the applicant. The fact that the insured did not read the application which he signed, is not indicative of bad faith. It has been held that it is not negligence for the insured to sign an application without first reading it if the insurer by its conduct in appointing the agent influenced the insured to place trust and confidence in the agent.

12 Sunlife Assurance Company of Canada vs. Court of Appeals [GR 105135, 22 June 1995] Facts: On 15 April 1986, Robert John B. Bacani procured a life insurance contract for himself from Sunlife Assurance Company of Canada. He was issued Policy 3-903-766-X valued P100,000.00, with double indemnity in case of accidental death. The designated beneficiary was his mother, Bernarda Bacani. On 26 June 1987, the insured died in a plane crash. Bernarda Bacani filed a claim with Sunlife, seeking the benefits of the insurance policy taken by her son. Sunlife conducted an investigation and its findings prompted it to reject the claim. In its letter, Sunlife informed Bacani, that the insured did not disclosed material facts relevant to the issuance of the policy, thus rendering the contract of insurance voidable. A check representing the total premiums paid in the amount of P10,172.00 was attached to said letter. Sunlife claimed that the insured gave false statements in his application when he answered the following questions: "5. Within the past 5 years have you: a) consulted any doctor or other health practitioner? b) submitted to: ECG? X-rays? blood tests? Other tests? c) attended or been admitted to any hospital or other medical facility? 6. Have you ever had or sought advice for: xxx b) urine, kidney or bladder disorder?" The deceased answered questions No. 5(a) in the affirmative but limited his answer to a consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on February 1986, for cough and

flu complications. The other questions were answered in the negative. Sunlife discovered that two weeks prior to his application for insurance, the insured was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his confinement, the deceased was subjected to urinalysis, ultra-sonography and hematology tests. On 17 November 1988, Bernarda Bacani and her husband, respondent Rolando Bacani, filed an action for specific performance against Sunlife with the Regional Trial Court, Branch 191, Valenzuela, Metro Manila. Sunlife filed its answer with counterclaim and a list off exhibits consisting of medical records furnished by the Lung Center of the Philippines. On 14 January 1990, Bacani filed a "Proposed Stipulation with Prayer for Summary Judgment" where they manifested that they "have no evidence to refute the documentary evidence of concealment/misrepresentation by the decedent of his health condition." Sunlife filed its Request for Admissions relative to the authenticity and due execution of several documents as well as allegations regarding the health of the insured. The Bacanis failed to oppose said request or reply thereto, thereby rendering an admission of the matters alleged. Sunlife then moved for a summary judgment and the trial court decided in favor of the Bacanis, ordering Sunlife to pay the former the amount of P100,000.00 the face value of insured's Insurance Policy 3903766, and the Accidental Death Benefit in the amount of P100,000.00 and further sum of P5,000.00 in the concept of reasonable attorney's fees and the costs of the suit. Sunlife's counterclaim was dismissed. Sunlife appealed to the Court of Appeals, which affirmed the decision of the trial court. Sunlife's motion for reconsideration was denied, hence, Sunlife filed the petition for review on certiorari. Issue [1]: Whether good faith is a defense in concealment. Held [1]: NO. Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. Said Section provides that "a neglect to communicate that which a party knows and ought to communicate, is called concealment." Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health. The information which the insured failed to disclose were material and relevant to the approval and the issuance of the insurance policy. The matters concealed would have definitely affected Bacani's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by Sunlife in order for it to reasonably assess the risk involved in accepting the application. In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), the Court held that materiality of the information withheld does not depend on the state of mind of the insured. Neither does it depend on the actual or physical events which ensue. Thus, "good faith" is no defense in concealment. The insured's failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about his bonafides. It appears that such concealment was deliberate on his part. Issue [2]: Whether Sunlife's waiver of the medical examination of the insured debunks the materiality of the facts concealed. Held [2]: NO. The argument, that Sunlife's waiver of the medical examination of the insured debunks the materiality of the facts concealed, is untenable. In Saturnino v. Philippine American Life Insurance Company, 7 SCRA 316 (1963), the Court held that "the waiver of a medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the

insurer takes into consideration in deciding whether to issue the policy or not." Moreover, such argument would make Section 27 of the Insurance Code, which allows the injured party to rescind a contract of insurance where there is concealment, ineffective. Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries. 14 Vda. de Canilang vs. Court of Appeals [GR 92492, 17 June 1993] Third Division, Feliciano (J): 4 concur Facts: On 18 June 1982, Jaime Canilang consulted Dr. Wilfredo B. Claudio and was diagnosed as suffering from "sinus tachycardia." The doctor prescribed the following for him: Trazepam, a tranquilizer; and Aptin, a beta-blocker drug. Mr. Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis." On the next day, 4 August 1982, Jaime Canilang applied for a "non-medical" insurance policy with Great Pacific Life Assurance Company (Grepalife) naming his wife, Thelma Canilang, as his beneficiary. Jaime Canilang was issued ordinary life insurance Policy 345163, with the face value of P19,700, effective as of 9 August 1982. On 5 August 1983, Jaime Canilang died of "congestive heart failure," "anemia," and "chronic anemia." Vda. de Canilang, widow and beneficiary of the insured, filed a claim with Grepalife which the insurer denied on 5 December 1983 upon the ground that the insured had concealed material information from it. Vda. de Canilang then filed a complaint against Grepalife with the Insurance Commission for recovery of the insurance proceeds. During the hearing called by the Insurance Commissioner, Vda. de Canilang testified that she was not aware of any serious illness suffered by her late husband and that, as far as she knew, her husband had died because of a kidney disorder. A deposition given by Dr. Wilfredo Claudio was presented by Vda. deCanilang. There Dr. Claudio stated that he was the family physician of the deceased Jaime Canilang and that he had previously treated him for "sinus tachycardia" and "acute bronchitis." Grepalife for its part presented Dr. Esperanza Quismorio, a physician and a medical underwriter working for Grepalife. She testified that the deceased's insurance application had been approved on the basis of his medical declaration. She explained that as a rule, medical examinations are required only in cases where the applicant has indicated in his application for insurance coverage that he has previously undergone medical consultation and hospitalization. In a decision dated 5 November 1985, Insurance Commissioner Armando Ansaldo ordered Grepalife to pay P19,700.00 plus legal interest and P2,000.00 as attorney's fees. On appeal by Grepalife, the Court of Appeals reversed and set aside the decision of the Insurance Commissioner and dismissed Thelma Canilang's complaint and Grepalife's counterclaim. The Court of Appeals found that the use of the word "intentionally" by the Insurance Commissioner in defining and resolving the issue agreed upon by the parties at pre-trial before the Insurance Commissioner was not supported by the evidence; that the issue agreed upon by the parties had been whether the deceased insured, Jaime Canilang, made a material concealment as to the state of his health at the time of the filing of insurance application, justifying Grepalife's denial of the claim. Vda. De Canilang Thelma Canilang filed the petition for review on certiorari. Issue [1]: Whether the information Canilang failed to disclose was material to the ability of Grepalife to estimate the probable risk he presented as a subject of life insurance. Held [1]: YES. The information which Jaime Canilang failed to disclose was material to the ability of Grepalife to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Grepalife would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage. The materiality of the information

withheld by Grepalife did not depend upon the state of mind of Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that "probable and reasonable influence of the facts" concealed must, of course, be determined objectively, by the judge ultimately. Issue [2]: Whether Grepalife had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the questions in the insurance application. Held [2]: NO. The insurance applied for was a "non-medical" insurance policy. In Saturnino v. Philippine- American Life Insurance Company, the Court held that "if anything, the waiver of medical examination [in a non-medical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not." It cannot be excused that that the failure of Canilang to convey certain information to the insurer was not intentional in nature. Section 27 of the Insurance Code of 1978 is properly read as referring to "any concealment" without regard to whether such concealment is intentional or unintentional. The phrase "whether intentional or unintentional" was in fact superfluous. The deletion of the phrase "whether intentional or unintentional" could not have had the effect of imposing an affirmative requirement that a concealment must be intentional if it is to entitle the injured party to rescind a contract of insurance. The restoration in 1985 by BP 874 of the phrase "whether intentional or unintentional" merely underscored the fact that all throughout (from 1914 to 1985), the statute did not require proof that concealment must be "intentional" in order to authorize rescission by the injured party. In any case, herein, the nature of the facts not conveyed to the insurer was such that the failure to communicate must have been intentional rather than merely inadvertent. For Jaime Canilang could not have been unaware that this heart beat would at times rise to high and alarming levels and that he had consulted a doctor twice in the 2 months before applying for non-medical insurance. Indeed, the last medical consultation took place just the day before the insurance application was filed. In all probability, Jaime Canilang went to visit his doctor precisely because of the discomfort and concern brought about by his experiencing "sinus tachycardia." Grepalife had not waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the questions in the insurance application. Such failure precisely constituted concealment on the part of Canilang. Vda. de Canilang's argument, if accepted, would obviously erase Section 27 from the Insurance Code of 1978.

25 Bonifacio Brothers Inc. vs. Mora [GR L-20853, 29 May 1967] En Banc, Castro (J): 9 concur Facts: Enrique Mora is the owner of an Oldsmobile sedan model 1956, bearing plate QC 8088. He mortgaged the same to the H.S. Reyes, Inc., with the condition that the former would insure the automobile, with the latter as beneficiary. The automobile was thereafter insured on 23 June 1959 with the State Bonding & Insurance Co. Inc., and motor car insurance policy A-0615 was issued to Mora. During the effectivity of an insurance contract, the car met with an accident. The insurance company then assigned the accident to the H.H. Bayne Adjustment Co. for investigation and appraisal of the damage. Mora, without the knowledge and consent of the H.S. Reyes, Inc., authorized the Bonifacio Bros. Inc. to furnish the labor and materials, some of which were supplied by the Ayala Auto Parts Co. For the cost of labor and materials, Mora was billed at P2,102.73 through the H. H. Bayne Adjustment Co. The insurance company, after claiming a franchise in the amount of P100, drew a check in the amount of P2,002.73, as proceeds of the insurance policy, payable to the order of Mora or H.S. Reyes, Inc., and entrusted the check to the H.H. Bayne Adjustment Co. for disposition and delivery to the proper party. In the meantime, the car was delivered to Mora without the consent of the H.S. Reyes, Inc., and without payment to the Bonifacio Bros. Inc. and Ayala Auto Parts Co. of the cost of repairs and materials. Upon the theory that the insurance proceeds should be paid directly to them, the Bonifacio Bros. Inc. and the Ayala Auto Parts Co. filed on 8 May 1961 a complaint with the Municipal Court of Manila against Mora and the State Bonding & Insurance Co. Inc. for the collection of the sum of P2,002.73. The insurance company filed its answer with a counterclaim for interpleader, requiring the Bonifacio Bros. Inc. and the H.S. Reyes, Inc. to interplead in order to determine who has a better right to the insurance proceeds in question. Mora was declared in default for failure to appear at the hearing, and evidence against him was received ex parte. However, the counsel for the Bonifacio Bros. Inc., Ayala Auto Parts Co. and State Bonding & Insurance Co. Inc. submitted a stipulation of facts, on the basis of which the Municipal Court rendered a decision declaring the H.S. Reyes, Inc. as having a better right to the disputed amount, and ordering the State Bonding & Insurance Co. Inc. to pay to the H.S Reyes, Inc. the said sum of P2,002.73. From this decision, Bonifacio Bros. Inc. et al. elevated the case to the Court of First Instance of Manila before which the stipulation of facts was reproduced. On 19 October 1962 the latter court rendered a decision, affirming the decision of the Municipal Court. The Bonifacio Bros. Inc. and the Ayala Auto Parts Co. moved for reconsideration of the decision, but the trial court denied the motion. Bonifacio Bros. Inc. et al. appealed. Issue: Whether Bonifacio Bros. has any cause of action to claim indemnity from the insurance contract entered by State Bonding & Insurance Co. and Mora. Held: The insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or material men in case of repair of the car in question. The parties to the insurance contract omitted such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "loss payable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S. Reyes, Inc. which they intended to benefit. It is likewise observed from the brief of the State Bonding & Insurance Company that it has vehemently opposed the assertion or

pretension of Bonifacio Bros. that they are privy to the contract. If it were the intention of the Insurance Company to make itself liable to the repair shop or material men, it could have easily inserted in the contract a stipulation to that effect. To hold now that the original parties to the insurance contract intended to confer upon Bonifacio Bros. the benefit claimed by them would require as to ignore the indispensable requisite that a stipulation pour autrui must be clearly expressed by the parties, which the Court cannot do. As regards paragraph 4 of the insurance contract, a perusal thereof would show that instead of establishing privity between Bonifacio Bros. and the insurance company, such stipulation merely establishes the procedure that the insured has to follow in order to be entitled to indemnity for repair. This paragraph therefore should not be construed as bringing into existence in favor of Bonifacio Bros. a right of action against the insurance company as such intention can never be inferred therefrom. Another cogent reason for not recognizing a right of action by Bonifacio Bros. against the insurance company is that "a policy of insurance is a distinct and independent contract between the insured and insurer, and third persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust, expressed or implied, by the insured and third person." Herein, no contract of trust, expressed or implied exists. Thus, no cause of action exists in favor of BonifacioBros. in so far as the proceeds of insurance are concerned. Bonifacio Bros.' claim, if at all, is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with the Bonifacio Bros Inc. This conclusion is deducible not only from the principle governing the operation and effect of insurance contracts in general, but is clearly covered by the express provisions of section 50 of the Insurance Act which read that "the insurance shall be applied exclusively to the proper interest of the person in whose name it is made unless otherwise specified in the policy." First Integrated Bonding vs. Hernando Facts: Silverio Blanco was the owner of a passenger jeepney which he insured against liabilities for death and injuries to third persons with First Integrated Bonding and Insurance Company, Inc. for P30,000. The said jeepneydriven by Blanco himself bumped a five-year old child, Deogracias Advincula, causing the latter's death. The boys parents filed a complaint for damages against Blanco and First Insurance, which was granted by the lower court. FirstInsurance filed a petition for certiorari contending that the victims parents have no cause of action against it because they are not parties to the insurance contract and that they may only proceed against the driver based on the provisions of the New Civil Code. Issue: W/N an injured party for whom the contract of insurance is intended can sue directly the insurer Held: YES Doctrine: Where the insurance contract provides for indemnity against liability to a third party, such third party candirectly sue the insurer. The liability of the insurer to such third person is based on contract while the liability of theinsured to the third party is based on tort. It cannot evade its liability as insurer by hiding under the cloak of theinsured. Its liability is primary and not dependent on the recovery of judgment from the insured.

What is the purpose of motor vehicle liability insurance?

To give immediate financial assistance to victims of motor vehicle accidents and/or their dependents, especially if they are poor regardless of financial capability of motor vehicle owners of operators responsible for the accident sustained. (First Integrated Bonding Insurance Co., Inc. v. Hernando, G.R. No. L-51221, July 31, 1991)

SHERMAN SHAFER VS HON. JUDGE OF RTC-OLONGAPO CITY FACTS: On 2 January 1985, petitioner Sherman Shafer obtained a private car policy, GA No. 0889, 2 over his Ford Laser car with Plate No. CFN-361 from Makati Insurance Company, Inc., for third party liability (TPL). During the effectivity of the policy, the car hit a Volkswagen owned by Felino Ilino Y Legazpi, and causing physical injuries to its passenger named Jovencio Poblete Sr. Shafer filed a third party complaint against Makati Insurance Company but the latter moved to dismiss the same and the. The RTC granted said motion, hence, this petition. It is the contention of herein petitioner that the dismissal of the third party complaint amounts to a denial or curtailment of his right to defend himself in the civil aspect of the case. Petitioner further raises the legal question of whether the accused in a criminal action for reckless imprudence, where the civil action is jointly prosecuted, can legally implead the insurance company as third party defendant under its private car insurance policy, as one of his modes of defense in the civil aspect of said proceedings. On the other hand, the insurance company submits that a third party complaint is, under the rules, available only if the defendant has a right to demand contribution, indemnity, subrogation or any other relief in respect of plaintiff's claim, to minimize the number of lawsuits and avoid the necessity of bringing two (2) or more suits involving the same subject matter. The insurance company further contends that the contract of motor vehicle insurance, the damages and attorney's fees claimed by accused/third party plaintiff are matters entirely different from his criminal liability in the reckless imprudence case, and that petitioner has no cause of action against the insurer until petitioner's liability shall have been determined by final judgment, as stipulated in the contract of insurance. ISSUE: whether or not the insured can file a third party complaint in the criminal case filed against him. DECISION: Yes. A third party complaint is a device allowed by the rules of procedure by which the defendant can bring into the original suit a party against whom he will have a claim for indemnity or remuneration as a result of a liability established against him in the original suit. The injured party did not reserve his right to file a separate civil action, thus, the same was deemed instituted with the criminal action. Petitioner may thus raise all defenses available to him insofar as the criminal and civil aspects of the case are concerned. The injured for whom the contract of insurance is intended can sue directly the insurer. In the event that the injured fails or refuses to include the insurer as party defendant in his claim for indemnity against the insured, the latter is not prevented by law to avail of the

procedural rules intended to avoid multiplicity of suits. Not even a "no action" clause under the policy-which requires that a final judgment be first obtained against the insured and that only thereafter can the person insured recover on the policy can prevail over the Rules of Court provisions aimed at avoiding multiplicity of suits.

15 Tan vs. Court of Appeals [GR 48049, 29 June 1989] Third Division, Gutierrez Jr. (J): 3 concur, 1 took no part Facts: On 23 September 1973, Tan Lee Siong, father of Emilio, Juanito, Alberto, and Arturo Tan, applied for life insurance in the amount of P80,000.00 with the Philippine American Life Insurance Company (Philamlife). Said application was approved and Policy 1082467 was issued effective 6 November 1973, with Emilio Tan, et al. as beneficiaries. On 26 April 1975, Tan Lee Siong died of hepatoma. Emilio Tan, et al. then filed with Philamlife their claim for the proceeds of the life insurance policy. However, in a letter dated 11 September 1975, Philamlife denied Emilio Tan et al.'s claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Siong in his application for insurance. The premiums paid on the policy were thereupon refunded. Alleging that Philamlife's refusal to pay them the proceeds of the policy was unjustified and unreasonable, Emilio Tan et al. filed on 27 November 1975, a complaint against the former with the Office of the Insurance Commissioner (I.C. Case 218). After hearing the evidence of both parties, the Insurance Commissioner rendered judgment on 3 August 3, 1977, dismissing the complaint. The Court of Appeals dismissed their appeal from the Insurance Commissioner's decision for lack of merit. Emilio Tan et al. filed the petition for review on certiorari. Issue: Whether Philamlife no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action. Held: NO. Section 48 of the Insurance Code provides that "Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. "After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent." Herein, the policy was issued on 6 November 1973 and the insured died on 26 April 1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, Philamlife is not, therefore, barred from proving that the policy is void ab initio by reason of the insured's fraudulent concealment or misrepresentation. Moreover, Philamlife rescinded the contract of insurance and refunded the premiums paid on 11 September 1975, previous to the commencement of this action on 27 November 1975. Under the "incontestability clause," the insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives within such period. After two years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no longer lie. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. The interpretation of Emilio Tan et al. to said provision -- that the Insurance Law was amended and the second paragraph of Section 48 added to prevent the

insurance company from exercising a right to rescind after the death of the insured; that the so-called "incontestability clause" precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has beenin force for at least two years during the insured's lifetime; and that the phrase "during the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is "for a period of two years" -- would give rise to the incongruous situation where the beneficiaries of an insured who dies right after taking out and paying for a life insurance policy, would be allowed to collect on the policy even if the insured fraudulently concealed material facts.

Development Insurance v IAC G.R. No. 71360 July 16, 1986 Facts: A fire occurred in the building of Philippine Union. It sued for recovery of damages from the petitioner on the basis of an insurance contract between them. The petitioner failed to answer on time despite the numerous extensions it asked for. It was declared in default by the trial court. A judgment of default was subsequently rendered on the strength of the evidence given by the private respondent, which was allowed damages. The petitioner moved to lift the order of default. Its motion was denied. It went to the appellate court, which affirmed the decision of the trial court. Hence this appeal. Issue: Was Philippine Union required to jointly indemnify the building? Held: No. Petition dismissed. Ratio: The policy insured the private respondent's building against fire for P2,500,000.00. The petitioner argued that the respondent must share the difference between that amount and the face value of the policy and the loss sustained for 5.8 million under Condition 17 of the policy. The building was insured at P2,500,000.00 by agreement of the insurer and the insured. The agreement is known as an open policy and is subject to the express condition that: In the event of loss, whether total or partial, it is understood that the amount of the loss shall be subject to appraisal and the liability of the company, if established, shall be limited to the actual loss, subject to the applicable terms, conditions, warranties and clauses of this Policy, and in no case shall exceed the amount of the policy. Section 60 of the Insurance Code defines an open policy is one in which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss." This means that the actual loss, as determined, will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not exceed the face value of the policy. The actual loss has been ascertained in this case. Hence, applying the open policy clause as expressly agreed upon, the private respondent is entitled to indemnity in the total amount of P508,867.00. The refusal of its vice-president to receive the private respondent's complaint was the first indication of the petitioner's intention to prolong this case and postpone the discharge of its obligation to the private respondent under this agreement. They still evaded payment for 5 years.