FIRE INSURANCE
last cited."
1. Bachrach vs. British American Assurance Co., 17 Phil. 55 (1910)
Johnson, J.
Facts: E.M. Bachrach and British American entered in an insurance
contract where Bachrach insured the goods belonging to a general
furniture store (selling brass bedsteads, toilet tables, chairs, ice
boxes, etc.) which are stored in the ground floor and first story of a
dwelling house (built at ground floor with stone and brick; first story of
hardwood and roofed with galvanized iron) at Calle Martinez, Manila.
It was valued at P10,000. The building was burned. British American
Assurance refused to pay Bachrach’s claim. Bachrach sued British
American. The latter answered that it cannot be held liable because
Bachrach maintained a paint and varnish shop in the said building
where the goods which were insured were stored, and that he stored
several gallons of gasoline therein, thereby increasing the risk of fire.
The trial court ruled that British American is liable to Bachrach. Thus,
British American appealed before the Supreme Court alleging that
the lower court erred in failing to hold that the use of the building, No.
16 Calle Martinez, as a paint and varnish shop annulled the policy of
insurance.
Issue: Should the policy be forfeited by Bachrach’s use of the
building as a paint and varnish shop?
Held: 1. NO. The Supreme Court adopted the trial court’s ruling:
“xxx The property insured consisted mainly of household furniture
kept for the purpose of sale. The preservation of the furniture in a
salable condition by retouching or otherwise was incidental to the
business. The evidence offered by Bachrach is to the effect that
alcohol was used in preparing varnish for the purpose of retouching,
though he also says that the alcohol was kept in the store and not in
the bodega where the furniture was. 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. Thus,
where a furniture factory keeps benzine for the purposes of
operation, the insurer can not on that ground avoid payment of a
loss, though the keeping of the benzine on the premises is expressly
prohibited. These authorities also appear sufficient to answer the
objection that the insured automobile contained gasoline and that the
plaintiff on one occasion was seen in the bodega with a lighted lamp.
The first was incidental to the use of the insured article and the
second being a single instance falls within the doctrine of the case
It may be added that there was no provision in the policy prohibiting
the keeping of paints and varnishes upon the premises where the
insured property was stored. If the company intended to rely upon a
condition of that character, it ought to have been plainly expressed in
the policy.
2. Young vs. Midland Textile, Inc. 50 Phil. 617 (1927)
Facts:
The plaintiff occupied a building as a residence and bodega (storehouse). On
May 29, 1912, the defendant, in consideration of the payment of a premium
of P60, entered into a contract of insurance with the plaintiff promising to pay
to the plaintiff the sum of P3,000, in case said residence and bodega and
contents should be destroyed by fire.
One of the conditions of said contract was that no hazardous goods be
stored or kept in the building. On the 4th or 5th of February, 1913, the plaintiff
placed in said residence and bodega three boxes which belonged to him and
which were filled with fireworks for the celebration of the Chinese new year.
On the 18th day of March, 1913, said residence and bodega and the
contents thereof were partially destroyed. Fireworks were found in a part of
the building not destroyed by the fire; that they in no way contributed to the
fire, or to the loss occasioned thereby.
Issue: Whether or not the placing of said fireworks in the building insured,
under the conditions above enumerated, they being “hazardous goods,” is a
violation of the terms of the contract of insurance.
Ruling: Yes. The word “stored” has been defined to be a deposit in a store or
warehouse for preservation or safe keeping; to put away for future use,
especially for future consumption; to place in a warehouse or other place of
deposit for safe keeping. Said definition does not include a deposit in a store,
in small quantities, for daily use. “Daily use” precludes the idea of deposit for
preservation or safe keeping, as well as a deposit for future consumption or
safe keeping.
A violation of the terms of a contract of insurance, by either party, will
constitute the basis for a termination of the contractual relations, at the
election of the other. The right to terminate the contractual relations exists
even though the violation was not the direct cause of the loss. In the present
case, the deposit of the “hazardous goods,” in the building insured, was a
violation of the terms of the contract. Although the hazardous goods did not
contribute to the loss, the insurer, at his election, was relieved from liability
Said deposit created a new risk, not included in the terms of the contract. The
insurer had neither been paid, nor had he entered into a contract, to cover
the increased risk.
3. The East Furniture Inc vs. Globe & Rutgers Fire Insurance Co. of
New York, No. L-35848, 22 November 1932.
Facts: Plaintiff is a duly registered partnership engaged in the sale of
furniture; that the defendant is a company engaged in the insurance
business. Plaintiff insured against fire the articles existing in its
establishment. On March 2, 1929, a fire broke out in plaintiff's establishment,
as a result of which the insured articles therein found were destroyed by the
fire. Defendants defenses are:(1) that the fire in question was of intentional
origin; (2) that the claims of loss presented by the plaintiff were false and
fraudulent; (3) that the furniture in question had been mortgaged by the
plaintiff to the Manila Finance and Discount Corporation, so that at the time of
the fire the plaintiff was not the only party interested therein, contrary to the
representations made in its claims of loss; and (4) that the plaintiff violated
one of the conditions of the policies by refusing to furnish the defendants with
a physical inventory of the contents of its store at the time of the fire. By
agreement of the parties the three cases were tried jointly who after the trial
found that the claims presented by the plaintiff were notoriously fraudulent,
and, accordingly, sustained defendant's second special defense and
dismissed the complaint in each of the three cases. Hence, this petition.
Issue: W/N fire was of intentional origin W/N the claim of loss were fraudulent
Ruling: Fire of Intentional Origin We are thus led to the conclusion that
defendants' first special defense is well founded — that the fire in question
was of intentional origin and was caused with the connivance of the plaintiff.
Neither the interest of the justice nor public policy would be promoted by an
omission of the courts to expose and condemn incendiarism once the same
is established by competent evidence. It would tend to encourage rather than
suppress that great public menace if the courts do not expose the crime to
public condemnation when the evidence in a case like the present shows that
it has really been committed. Fraudulent claim of loss We may also consider
the damage caused by the fire in relation with defendant's second special
defense that plaintiff's claims of loss were false and fraudulent. To each of the
proofs of loss which the plaintiff presented to the respective insurance
companies four days after the fire was attached an inventory of the furniture
claimed to have been in the building at the time of the fire. This inventory
contains 506 pieces of furniture and 3,700 board feet of lumber of the alleged
total value of P52,061.99. This amount was the total loss claimed to have
been suffered by the plaintiff, although we note that in its complaints in these
cases amended it is conceded that some furniture of the value of about
P5,000 was saved. Regardless of any difference of opinion as to the value of
the insured furniture and the extent of the damage caused thereto by the fire
in question, the fact that the insured only had approximately 202 pieces of
furniture in the building at the time of the fire and sought to compel the
insurance companies to pay for 506 pieces conclusively shows that its claim
was not honestly conceived. The trial court's conclusion that said claim is
notoriously fraudulent, is correct. Condition 12 of each of the insurance
policies sued upon provides that "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 devices are used by the Insured or anyone acting on his
behalf to obtain any benefit under this policy; or, if the loss or damage be
occasioned by the wilful act, or with the connivance of the Insured, — all
benefit under this policy shall be forfeited."
4. Malayan Insurance Co., Inc. vs. Arnaldo, G.R. No. L-67835, 12
October 1987
Facts: On June 7, 1981, the petitioner (hereinafter called (MICO) issued to
the private respondent, Coronacion Pinca, Fire Insurance Policy No. F-001-
17212 on her property for the amount ofP100,000.00, effective July 22, 1981,
until July 22, 1982. 2 On October 15, 1981, MICO allegedly cancelled the
policy for non-payment, of the premium and sent the corresponding notice to
Pinca. 3 On December 24, 1981, payment of the premium for Pinca was
received by Domingo Adora, agent of MICO. 4 On January 15, 1982, Adora
remitted this payment to MICO, together with other payments. 5 On January
18, 1982, Pinca’s property was completely burned. 6 On February 5, 1982,
Pinca’s payment was returned by MICO to Adora on the ground that her
policy had been cancelled earlier. But Adora refused to accept it. 7 IC ruled in
favor of Arnaldo.
Issue: W/N there was no valid insurance contract at the time of the loss.
Ruling: Under Section 416 of the Insurance Code, the period for appeal is
thirty days from notice of the decision of the Insurance Commission. The
petitioner filed its motion for reconsideration on April25, 1981, or fifteen days
from such notice, and the reglementary period began to run again after June
13, 1981, date of its receipt of notice of the denial of the said motion for
reconsideration. As the herein petition was filed on July 2, 1981, or nineteen
days later, there is no question that it is tardy by four days. SEC. 77. An
insurer is entitled to payment of the premium as soon as the thing is exposed
to the peril insured against. Notwithstanding any agreement to the contrary,
no policy or contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid, except in
the case of a life or an industrial life policy whenever the grace period
provision applies." The above provision is not applicable because payment of
the premium was in fact eventually made in this case. Notably, the premium
invoice issued to Pinca at the time of the delivery of the policy on June 7,
1981 was stamped "Payment Received" of the amount of P930.60 on "12-24-
81" by Domingo Adora. 14 This is important because it suggests an
understanding between MICO and the insured that such payment could be
made later, as agent Adora had assured Pinca. In any event, it is not denied
that this payment was actually made by Pinca to Adora, who remitted the
same to MICO. The payment was made on December 24, 1981, and the fire
occurred on January 18, 1982. One wonders: suppose the payment had
been made and accepted in, say, August 1981, would the commencement
date of the policy have been changed to the date of the payment, or would
the payment have retroacted to July 22, 1981? If MICO accepted the
payment in December 1981and the insured property had not been burned,
would that policy not have expired just the same on July 22, 1982, pursuant
to its original terms, and not on December 24, 1982? MICO’s
acknowledgment of Adora as its agent defeats its contention that he was not
authorizedto receive the premium payment on its behalf. It is clearly provided
in Section 306 of theInsurance Code that "SEC. 396. . . ."Any insurance
company which delivers to an insurance agent or insurance broker a policy
orcontract of insurance shall be deemed to have authorized such agent or
broker to receive on itsbehalf payment of any premium which is due on such
policy or contract of insurance at the timeof its issuance or delivery or which
becomes due thereon."And it is a well-known principle under the law of
agency that: "Payment to an agent having authority to receive or collect
payment is equivalent to payment tothe principal himself; such payment is
complete when the money delivered is into the agent’shands and is a
discharge of the indebtedness owing to the principal."
5. Philippine Home Assurance Corporation vs. Court of Appeals,
257 SCRA 468 (1996)
Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in
Kobe, Japan, the following shipment for carriage to Manila and Cebu, freight
pre-paid and in good order and condition. While the vessel was off Okinawa,
Japan, a small flame was detected on the acetylene cylinder located in the
accommodation area near the engine room on the main deck level. As the
crew was trying to extinguish the fire, the acetylene cylinder suddenly
exploded sending a flash of flame throughout the accommodation area, thus
causing death and severe injuries to the crew and instantly setting fire to the
whole superstructure of the vessel. The incident forced the master and the
crew to abandon the ship. Thereafter, SS Eastern Explorer was found to be a
constructive total loss and its voyage was declared abandoned. Several
hours later, a tugboat under the control of Fukuda Salvage Co. arrived near
the vessel and commenced to tow the vessel for the port of Naha, Japan.
Fire fighting operations were again conducted at the said port. After the fire
was extinguished, the cargoes which were saved were loaded to another
vessel for delivery to their original ports of destination. ESLI charged the
consignees several amounts corresponding to additional freight and salvage
charges. The charges were all paid by Philippine Home Assurance
Corporation (PHAC) under protest for and in behalf of the consignees.
PHAC, as subrogee of the consignees, thereafter filed a complaint before the
Regional Trial Court of Manila, Branch 39, against ESLI to recover the sum
paid under protest on the ground that the same were actually damages
directly brought about by the fault, negligence, illegal act and/or breach of
contract of ESLI. In its answer, ESLI contended that it exercised the diligence
required by law in the handling, custody and carriage of the shipment; that
the fire was caused by an unforeseen event; that the additional freight
charges are due and demandable pursuant to the Bill of Lading; 1 and that
salvage charges are properly collectible under Act No. 2616, known as the
Salvage Law. RTC in favor of ESLI. CA affirmed RTC.
Issue: Whether or not Phil assurance is entitled for reimbursement.
Ruling: In absolving respondent carrier of any liability, respondent Court of
Appeals sustained the trial court's finding that the fire that gutted the ship
was a natural disaster or calamity. Petitioner takes exception to this
conclusion and we agree. In our jurisprudence, fire may not be considered a
natural disaster or calamity since it almost always arises from some act of
man or by human means. It cannot be an act of God unless caused by
lightning or a natural disaster or casualty not attributable to human agency. 6
In the case at bar, it is not disputed that a small flame was detected on the
acetylene cylinder and that by reason thereof, the same exploded despite
efforts to extinguish the fire. Neither is there any doubt that the acetylene
cylinder, obviously fully loaded, was stored in the accommodation area near
the engine room and not in a storage area considerably far, and in a safe
distance, from the engine room. Moreover, there was no showing, and none
was alleged by the parties, that the fire was caused by a natural disaster or
calamity not attributable to human agency. On the contrary, there is strong
evidence indicating that the acetylene cylinder caught fire because of the
fault and negligence of respondent ESLI, its captain and its crew. Verily, there
is no merit in the finding of the trial court to which respondent court
erroneously agreed that the fire was not the fault or negligence of respondent
but a natural disaster or calamity. The records are simply wanting in this
regard. Based from the foregoing premises, it indubitably follows that the
cargo consignees cannot be made liable to respondent carrier for additional
freight and salvage charges. Consequently, respondent carrier must refund to
herein petitioner the amount it paid under protest for additional freight and
salvage charges in behalf of the consignees.