Insurance Case Digest: Cha v. CA (1997)

G.R. No. 124520  August 18, 1997

Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)

Laws Applicable: Sec. 17, Sec. 18, Sec. 25 of the Insurance Code

FACTS:

• Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation entered a 1 year lease contract with a stipulation not to 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 and approval of the lessor.  But it insured against loss by fire their merchandise inside the leased premises for P500,000 with the United Insurance Co., Inc. without the written consent of CKS
• On the day the lease contract was to expire, fire broke out inside the leased premises and CKS learning that the spouses procured an insurance wrote to United to have the proceeds be paid directly to them. But United refused so CKS filed against Spouses Cha and United.
• RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to pay P50,000 as exemplary damages, P20,000 as attorney’s fees and costs of suit
• CA: deleted exemplary damages and attorney’s fees

ISSUE: W/N the CKS has insurable interest because the spouses Cha violated the stipulation

HELD: NO. CA set aside. Awarding the proceeds to spouses Cha.

• Sec. 18.  No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured
• A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity.  Insurable interest in the property insured must exist a t the time the insurance takes effect and at the time the loss occurs.  The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property.  In such a case, the contract of insurance is a mere wager which is void under Section 25 of the Insurance Code.
• SECTION 25.  Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void
• Section 17.  The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof
• The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy.  The proceeds of the fire insurance policy thus rightfully belong to the spouses.  The liability of the Cha spouses to CKS for violating their lease contract in that Cha spouses obtained a fire insurance policy over their own merchandise, without the consent of CKS, is a separate and distinct issue which we do not resolve in this case.

Insurance Case Digest: Garcia v. Hongkong Fire & Marine Insurance Co. (1923)

G.R. No. 20341           September 1, 1923

Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)

Laws Applicable:  

FACTS:

• August 30, 1919: Garcia executed a mortgage to the Philippine National Bank on the merchandise allegedly insured by Hongkong Fire & Marine Insurance Co. and with the consent of the latter endorsed the policy to PNB 
• PNB informed Hongkong Fire through exchange of letters.  Hongkong failed to notify PNB or Garcia that it was for the building and not the merchandise.
• February 6, 1920: Fire took place and destroyed the merchandise so Garcia filed a claim which was refused.
• RTC: favored Garcia

ISSUE: W/N 

HELD: the lower court is affirmed

• as a matter of fair dealing, it should have notified the Bank that the policy was on the building. It will be noted that the letters in question were all written several months before the fire.
• Under these circumstances it seems clear and manifest that the insured, as well as the manager of the National Bank at Legaspi, who was interested in the policy, because the same secured a loan of P6,000 made to Domingo Garcia, and the corporation of Wise & Co., Ltd., which represented the insurance company, have been in the belief that it was not the building but the merchandise that was insured, for the reason that none of them paid attention to the context of the policy.

Insurance Case Digest: Sharuff & Co. v. Baloise Fire Insurance Co. (1937)

G.R. No. 44119             March 30, 1937

Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)

Laws Applicable: 

FACTS:

• Salomon Sharruf and Elias Eskenazi were doing business under the firm name of Sharruf & Co.  They insured their stocks with aloise Fire Insurance Co., Sun Insurance Office Ltd., and Springfield Insurance Co. raising it to P40,000. Elias Eskenazi having paid the corresponding premiums
• Soon they changed the name of their partnership to Sharruf & Eskenazi
• September 22, 1933: A fire ensued at their building at Muelle de la Industria street where petroleum was spilt lasting 27 minutes
• Sharruf & Co. claimed 40 cases when only 10 or 11 partly burned and scorched cases were found
• RTC: ordered Baloise Fire Insurance Co., Sun Insurance Office Ltd., and Springfield Insurance Co., to pay the partners Salomon Sharruf and Elias Eskenazi  P40,000 plus 8% interest

ISSUE: W/N Sharruf & Eskenazi has juridical personality and insurable interest

HELD: YES. Reversd.  Insurance companies are absolved.

• It does not appear that in changing the title of the partnership they had the intention of defrauding the insurance companies
• fire which broke out in the building at Nos. 299-301 Muelle de la Industria, occupied by  Sharruf & Eskenazi but no evidence sufficient to warrant a finding that they are responsible for the fire
• So great is the difference between the amount of articles insured, which the plaintiffs claim to have been in the building before the fire, and the amount thereof shown by the vestige of the fire to have been therein, that the most liberal human judgment can not attribute such difference to a mere innocent error in estimate or counting but to a deliberate intent to demand of the insurance companies payment of an indemnity for goods not existing at the time of the fire, thereby constituting the so-called "fraudulent claim" which, by express agreement between the insurers and the insured, is a ground for exemption of the insurers from civil liability
• acted in bad faith in presenting a fraudulent claim, they are not entitled to the indemnity claimed
• when the partners of a general partnership doing business under the firm name of "Sharruf & Co." obtain insurance policies issued to said firm and the latter is afterwards changed to "Sharruf & Eskenazi", which are the names of the same and only partners of said firm "Sharruf & Co.", continuing the same business, the new firm acquires the rights of the former under the same policies;