Title
General Insurance and Surety Corp. vs. Ng Hua
Case
G.R. No. L-14373
Decision Date
Jan 30, 1960
Ng Hua's fire insurance claim denied due to undisclosed co-insurance policy, violating warranty clause; Supreme Court ruled in favor of insurer.

Case Digest (G.R. No. 193945)
Expanded Legal Reasoning Model

Facts:

  • Background of the Policy
    • On April 15, 1952, General Insurance & Surety Corporation (the defendant insurer) issued its Insurance Policy No. 471.
    • The policy was a one-year fire insurance contract covering the stock in trade of the Central Pomade Factory, owned by Ng Hua (the insured).
    • The face of the policy bore the annotation “Co-Insurance Declared NIL.”
  • Occurrence of the Loss and the Claim
    • On April 16, 1952, the day following the issuance of the policy, the Pomade Factory building caught fire, resulting in the destruction of the insured property.
    • Ng Hua filed a claim for indemnity under the policy.
    • Although the policy provided for damages up to P10,000.00, negotiations—prompted by the Manila Adjustment Company—led Ng Hua to reduce his claim to P5,000.00.
  • Defenses Raised by the Insurer
    • The insurer advanced several defenses against the claim:
      • The suit was not filed within the prescribed period (prescription defense).
      • There was a breach of warranty on the part of the insured.
      • The claim submitted by Ng Hua was fraudulent.
      • The insured had failed to pay the premium.
    • Central to the defense on breach of warranty was the policy stipulation printed on its back, which read:
“3. 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.”
  • It is undisputed that Ng Hua had obtained a separate fire insurance policy from General Indemnity Co. for P20,000.00 on the same property and for the same period.
  • Proceedings through the Courts
    • In the Manila trial court, the insurer’s defenses were considered, and judgment was rendered in favor of the insured.
    • The Court of Appeals affirmed the trial court’s ruling, primarily rejecting the breach of warranty defense on the ground that the annotation “Co-Insurance Declared NIL” was interpreted in a limited sense—suggesting co-insurance as merely a condition requiring the insured to absorb a ratable loss when the insured value exceeded the policy amount.
    • The case then went to the Supreme Court on revision on certiorari, with the insurer insisting on the defenses of prescription and breach of warranty.
  • Findings Regarding the Breach of Warranty
    • The Supreme Court analyzed the meaning of the policy annotation and held that it should be read as a warranty that no other insurance policy was in force for the insured property.
    • Acceptance of General Indemnity Co.’s separate insurance by Ng Hua without proper declaration constituted a misrepresentation of material fact.
    • The Court noted that even if the concept of co-insurance existed, the language used clearly imposed a duty on the insured to disclose any other insurance, a duty meant to protect the insurer’s position.
    • The Court further observed that there was no evidence that General Insurance had actual knowledge of the additional policy before issuing Policy No. 471 or before the occurrence of the fire.
  • Conclusion of Facts
    • The insured’s failure to declare the existence of the insurance with General Indemnity amounted to a breach of the policy’s warranty requirement.
    • This breach, coupled with the absence of actual knowledge on the part of the insurer regarding the other policy, meant that the insurer was entitled to avoid liability under the contract.

Issues:

  • Validity of the Defenses
    • Whether the insurer’s defenses of prescription and breach of warranty were properly raised and supported by the evidence.
    • Whether the late filing or prescription defense could stand independently of the warranty issue.
  • Interpretation of the Co-Insurance Annotation
    • Whether the annotation “Co-Insurance Declared NIL” was to be understood as merely indicating the absence of a dividing of loss (the traditional co-insurance concept) or as a strict warranty imposing a duty to disclose any additional insurance.
  • Impact of Misrepresentation and Non-Disclosure
    • Whether the insured’s failure to declare the existence of another policy constituted a material misrepresentation that justified the insurer’s avoidance of the policy under the breach of warranty clause.
    • Whether the absence of evidence that the insurer had actual knowledge of the additional insurance policy before the fire affected the applicability of the breach of warranty defense.
  • Consequences of Breach
    • Whether the breach of the warranty had a fatal effect on the benefits under the policy as stipulated by its provisions and the relevant insurance laws.

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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