Case Summary (G.R. No. L-1940-42)
Facts of the Case
Multi-Ware Manufacturing Corporation secured multiple fire insurance policies covering its machineries, equipment, tools, spare parts, and accessories located at various buildings within the PTA Compound in Valenzuela, Metro Manila. Specifically:
- December 14, 1999: Fire Policy Insurance No. 50-118320 from Western Guaranty Corporation for ₱10,000,000.00 covering items inside Buildings 1 and 2.
- February 20, 2000: Fire Insurance Policy No. 80-43032 from Cibeles Insurance Corporation for ₱7,000,000.00 covering items inside Building 1 excluding molds.
- Subsequent policies from Prudential Guarantee Corporation covering similar properties.
On April 21, 2000, a fire damaged these insured properties. Petitioner filed claims with Western Guaranty and Cibeles Insurance, but both insurers denied claims on the grounds of violation of Policy Condition No. 3 (non-disclosure of co-insurance), No. 15 (fraudulent claims), and No. 21 (arson).
Procedural History
Following denial of claims, Multi-Ware filed separate civil actions consolidated before the Regional Trial Court (RTC) of Manila, Branch 25. The RTC, by joint decision dated August 26, 2015, held that Multi-Ware violated Policy Condition No. 3 and consequently forfeited all benefits under the policies. Multi-Ware’s motion for reconsideration was denied.
Upon appeal, the Court of Appeals (CA) affirmed the RTC’s decision and denial of reconsideration. Thereafter, Multi-Ware filed the present Petition for Review on Certiorari to the Supreme Court.
Issue
Whether Multi-Ware violated Policy Condition No. 3 of the fire insurance contracts—specifically, the "other insurance" or "co-insurance" clause—by failing to disclose the existence of other fire insurance policies covering the same properties, thereby rendering the insurance policies void and the claims properly denied.
Applicable Law: Policy Condition No. 3 (Other Insurance Clause)
Policy Condition No. 3 requires the insured to notify the insurer of any pre-existing or subsequent insurance policies covering the same property or stocks in trade, goods in process, and/or inventories. Non-disclosure results in forfeiture of benefits under the applicable policies unless total insurance does not exceed ₱200,000.00. This clause exists to prevent over-insurance and the risk of insured persons committing fraud by collecting from multiple insurers in excess of the actual loss.
Legal Analysis on Violation
The Supreme Court upheld the factual findings and legal conclusions of the RTC and CA. The critical points include:
Scope of Disclosure: The term "property" in the insurance condition is broad and inclusive of machinery and equipment. Even if not explicitly enumerated, insurance on machinery and equipment falls within the ambit of property interests requiring disclosure.
Co-insurance or Other Insurance: Multi-Ware had policies from different insurers simultaneously covering the same machinery and equipment located in the same buildings within the PTA Compound. This constituted "other insurance" on the same subject matter, interest, and risk.
Failure to Notify: Multi-Ware did not disclose the existence of other insurance policies to Western Guaranty or Cibeles Insurance, contravening Policy Condition No. 3.
Consequences of Non-disclosure: The insurers had the right to deny claims based on this violation, resulting in forfeiture of benefits.
Examination of Evidence
Multi-Ware argued that the properties insured by various policies were distinct and that the insurers failed to prove coverage of the same subject matter. The Court rejected this contention, agreeing with the RTC that:
The machineries and equipment insured by the different policies were physically located within the same buildings or compound (Building 1, PTA Compound, No. 26 Isidro Francisco Street, Malinta, Valenzuela).
The similarity and overlap in location and insured items made the properties insured by the different policies substantially the same.
Multi-Ware did not provide adequate evidence to distinguish the insured property under each policy.
Jurisprudential Support
The Court cited established precedent affirming that the "other insurance clause" is a valid and commonly enforced insurance contract condition intended to prevent fraud and over-insurance. Failure to disclose existing co-insurers permits an insurer to avoid liability under the policy. Relevant cases include:
- American Home Assurance Company v. Chua (1999) – non-disclosure of other insurers justifies avoidance of the policy.
- Geagonia v. Court of Appeals (1995) –
Case Syllabus (G.R. No. L-1940-42)
Case Background and Parties Involved
- The petitioner, Multi-Ware Manufacturing Corporation (Multi-Ware), is a domestic corporation engaged in manufacturing various plastic products.
- Respondents are Cibeles Insurance Corporation, Western Guaranty Corporation, and Ernesto Sy doing business under "Pan Oceanic Insurance Services."
- Multi-Ware secured multiple fire insurance policies from respondent Western Guaranty (amounting to P10,000,000), respondent Cibeles Insurance (amounting to P7,000,000), and Prudential Guarantee Corp.
- The insured properties under these policies included machinery and equipment, tools, spare parts, accessories, stocks of manufactured goods, goods in process, raw materials, and supplies located at different buildings in the PTA Compound, Valenzuela, Metro Manila.
- On April 21, 2000, a fire broke out in the PTA Compound damaging petitioner’s insured properties and resultant insurance claims were filed by Multi-Ware to Cibeles Insurance and Western Guaranty.
- The claims were denied on the grounds of violation of Policy Conditions Nos. 3 (non-disclosure of co-insurance), 15 (fraudulent claims), and 21 (arson).
Procedural History
- Multi-Ware filed separate civil actions against the insurance companies for denial of claims, which were consolidated for trial before the Regional Trial Court (RTC) of Manila, Branch 25.
- RTC rendered a Joint Decision on August 26, 2015, dismissing Multi-Ware’s complaints for lack of merit due to violation of Policy Condition No. 3 regarding non-disclosure of co-insurance, resulting in forfeiture of benefits.
- The RTC also dismissed the defendants’ counter-claims and denied Multi-Ware’s motion for reconsideration on January 8, 2016.
- The Court of Appeals (CA), through its November 29, 2016 Decision, affirmed the RTC ruling, and likewise denied Multi-Ware’s motion for reconsideration in a Resolution dated March 9, 2017.
- Multi-Ware elevated the case to the Supreme Court via a Petition for Review on Certiorari.
Issues Presented
- Whether the petitioner violated Policy Condition No. 3—the "other insurance clause"—which requires disclosure of any other insurance covering the same property.
- Whether this Policy Condition No. 3 applies to petitioner’s machinery, equipment, and tools under the insurance policies.
Relevant Policy Condition No. 3: The "Other Insurance Clause"
- Stipulates that the insured must notify the insurance company of any other insurance policies alr