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1.) In a civil suit, the Court ordered Benjie to pay Nat P500,000. To execute the judgment, the sheriff levied upon Benjie’s registered property (a parcel of land and the building thereon), and sold the same at public auction to Nat, the highest bidder. The latter, on March 18, 1992, registered with the Register of Deeds the certificate of sale issued to him by the sheriff. Meanwhile, on January 27, 1993, Benjie insured with Garapal Insurance for P1M the same building that was sold at public auction to Nat. Benjie failed to redeem the property by March 18, 1993. On March 19, 1993, a fire razed the building to the ground. Garapal Insurance refused to make good its obligation to Benjie under the insurance contract. a. Is Garapal Insurance legally justified in refusing payment to Benjie? b. Is Nat entitled to collect on the insurance policy?
a. YES. At the time of the loss, Benjie was no longer the owner of the property insured as he failed to redeem the property. The law requires in property insurance that a person can recover the proceeds of the policy if he has insurable interest at the time of the issuance of the policy and also at the time when the loss occurs. At the time of fire, Benjie no longer had insurable interest in the property insured.
b. NO. While at the time of the loss he has insurable interest in the building, as he was the owner thereof, Nat did not have any interest in the policy. There was no automatic transfer clause in the policy that would give him such interest in the policy.
2.) A piece of machinery was shipped to Mr. Pablo on the basis of C&F, Manila. Mr. Pablo insured said machinery with the Talaga Merchants Insurance Corp. (TAMIC) for loss or damage during the voyage. The vessel sank en route to Manila. Mr. Pablo then filed a claim with TAMIC which was denied for the reason that prior to delivery, Mr. Pablo had no insurable interest. Decide the case.
Mr. Pablo had an existing insurable interest on the piece of machinery he bought. The purchase of goods under a perfected contract of sale already vested equitable interest on the property in favor of the buyer even while it is pending delivery.
3.) On February 3, 1987, while Jose Palacio was in the hospital preparatory to a heart surgery, he called his only son, Boy Palacio, and showed the latter a will naming the son as sole heir to all the father’s estate including the family mansion in Forbes Park. The following day, Boy Palacio took out a fire insurance policy on the Forbes Park mansion. One week later, the father died. After his father’s death, Boy Palacio moved his wife and children to the family mansion which he inherited. On March 30, 1987, a fire occurred razing the mansion to the ground. Boy Palacio then proceeded to collect on the fire insurance he took earlier on the house. Should the insurance company pay? Reasons.
NO. In property insurance, insurable interest must exist both at the time of the taking of the insurance and at the time the risk insured against occurs. The insurable interest must be an existing interest. The fact alone that Boy Palacio was the expected sole heir of his father’s estate does not give the prospective heir any existing interest prior to the death of the decedent.
4.) IS, is an elderly bachelor with no known relatives, obtained life insurance coverage for P250,000 from Starbrite Insurance Corporation, an entity licensed to engage in the insurable business under the Insurance Code of the Philippines. He also insured his residential house for twice that amount with the same corporation. He immediately assigned all his rights to the insurance proceeds to BX, a friend-companion living with him. 3 years later, IS died in a fire that gutted his insured house 2 days after he had sold it. There is no evidence of suicide or arson or involvement of BX in these events. BX demanded payment of the insurance proceeds from the 2 policies, the premiums for which IS had been faithfully paying during all the time he was alive. Starbrite, refused payment, contending that BX had no insurable interest and therefore was not entitled to receive the proceeds from IS’ insurance coverage on his life and also on his property. Is Starbrite’s contention valid? Explain.
Starbrite is correct with respect to the insurance coverage on the property of IS. The beneficiary in the property insurance policy or the assignee thereof must have insurable interest in the property insured. BX, a mere friend-companion of IS, has no insurable interest in the residential house of IS. BX is not entitled to receive the proceeds from IS’ insurance on his property. As to the insurance coverage on the life of IS, BX is entitled to receive the proceeds. There is no requirement that BX should have insurable interest in the life of IS. It was IS himself who took the insurance on his own life.
5.) JQ, owner of a condominium unit, insured the same against fire with XYZ Insurance Co., and made the loss payable to his brother, MLQ. In case of loss by fire of the said condominium unit, who may recover on the fire insurance policy?
JQ can recover on the fire insurance policy for the loss of the said condominium unit. He has the insurable interest as owner-insured. As beneficiary in the fire insurance policy, MLQ cannot recover on the fire insurance policy. For the beneficiary to recover on the fire or property insurance policy, it is required that he must have insurable interest in the property insured. In this case, MLQ does not have insurable interest in the condominium unit.
6.) Ciriaco leased a commercial apartment from SBC. One of the provisions of the 1- year lease contract states: “18. x x x The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent of the LESSOR. If the LESSEE obtains five insurance coverage without the consent of the LESSOR, the insurance policy is deemed assigned and transferred to the LESSOR for the latter’s benefit.” Notwithstanding the stipulation in the contract, without the consent of SBC, Ciriaco insured the merchandise inside the premises against loss by fire in the amount of P500,000 with FUIC. A day before the lease contract expired, fire broke out inside the leased premises, damaging Ciriaco’s merchandise. Having learned of the insurance earlier procured by Ciriaco, SBC demanded from FUIC that the proceeds of the insurance policy be paid directly to it, as provided in the lease contract. Who is legally entitled to receive the insurance proceeds? Explain.
Ciriaco is entitled to receive the proceeds of the insurance policy. The stipulation that the policy is deemed assigned and transferred to SBC is void, because SBC has no insurable interest in the merchandise of Ciriaco.
7.) Novette entered into a contract for the purchase of certain office supplies. The goods were shipped. While in transit, the goods were insured by Novette. Does she have an insurable interest over the goods even before delivery of the same to her? Explain.
YES, Novette has an insurable interest in the goods. The contract of sale was already perfected and Novette acquired interest thereon although the goods have yet to be delivered.
8.) Distinguish co-insurance from re- insurance?
Co-insurance is the percentage in the value of the insured property which the insured himself assumes or undertakes to act as insurer to the extent of the deficiency in the insurance of the insured property.
Reinsurance is where the insurer procures a third party, called the reinsurer, to insure him against liability by reason of such original insurance. Basically, a reinsurance is an insurance against liability which the original insurer may incur in favor of the original insured.
9.) M/V Pearly Shells, passenger and cargo vessel, was insured for P40,000,000.00 against “constructive total loss.” Due to a typhoon, it sank near Palawan. Luckily, there was no casualties, only injured passengers. The shipowner sent a notice of abandonment of his interest over the vessel to the insurance company which then hired professionals to afloat the vessel for P900,000.00. When re-floated, the vessel needed repairs estimated at P2,000,000.00. The insurance company refused to pay the claim of the shipowner, stating that there was “no constructive total loss.” a. Was there “constructive total loss” to entitle the shipowner to recover from the insurance company? Explain. b. Was it proper for the shipowner to send a notice of abandonment to the insurance company? Explain. c. When does double insurance exist? d. What is the nature of liability of the several insurers in double insurance?
a. NO. A constructive total loss is one which gives the insured the right to abandon (Sec. 131, ICP). Abandonment of the thing insured may be availed of if the loss is more than three-fourths of its value or the expense to recover it from peril (Sec 139, ICP). In this case, the constructive loss claimed by the shipowner pertains to the vessel. The expenses for refloating and estimated repairs did not amount to three-fourths of the value of the vessel, hence, there is no constructive total loss to speak of.
b. NO. The case did not qualify as one for total constructive loss. Deduced from the facts of the case, the loss incurred during the peril did not amount to three-fourths of its value. As provided in Sec. 139, abandonment may be availed of if the loss is more than three-fourths of its value or the expense to recover it from peril.
c. Sec. 93 of the Insurance Code provides that double insurance exists where the same person is insured by several insurers separately, in respect to the same subject and interest.
d. In double insurance, the insurers are considered as co-insurers. Each one is bound to contribute ratably to the loss in proportion to the amount for which he is liable under his contract. This is known as the “principle of contribution” or “contribution clause.” [Sec. 94 (e)]
10.) Terrazas de Patio Verde, a condominium building has a value of P50 Million. The owner insured the building against fire with three (3) insurance companies for the following amounts: Northern Insurance Corp. – P20 Million Southern Insurance Corp. – P30 Million Eastern Insurance Corp. – P50 Million a. Is the owner’s taking of insurance for the building with three (3) insurers valid? Discuss. b. The building as totally razed by fire. If the owner decides to claim from the Eastern Insurance Corp. only P50 Million, will the claim prosper?
a. YES. When there is double insurance and over insurance results, the insured can claim in case of loss only up to the agreed valuation or up to the full insurable value from any, some or all insurers, without prejudice to the insurers ratably apportioning the payments. The insured can also recover before or after the loss from both insurers the excess premium he has paid (Sec 94, ICP).
What is prohibited is over insurance wherein there is only one insurer, where the insured takes insurance beyond the value of his insurable interest. In this case, there is no over insurance because the insurable interest in each insurance policy availed of by the owner did not exceed the value of the property. Double insurance resulting to over insurance is allowed provided that the beneficiary can claim only up to the full insurable value from any, some or all insurers, as in the case at bar.
b. YES. The owner may demand indemnity from Eastern Insurance alone since the valued policy covers the total amount of the loss incurred by the property insured. Sec. 94 clearly provides that in case of double insurance, the owner may recover from any, two or all of the insurers provided that the total amount that he will recover does not exceed his loss.