Insurance•Law School Notes

Development Insurance vs. IAC, 143 SCRA 62 (1986)

June 17, 2023 by RedTint No Comments

Kinds of Policy; Open, Sec 60.

FACTS

“SEC. 60. An open policy is one in which the value of the thing insured is not agreed upon, and the amount of the insurance merely represents the insurer’s maximum liability. The value of such thing insured shall be ascertained at the time of the loss.

This case will require an examination of Policy No. RY/F-082, as renewed by virtue of which the petitioner Development Insurance insured Philippine Union Realty Development Corporation’s building against fire for ₱2,500,000.00.

The petitioner claims that the insurance covered only the building but not the elevators. The petitioner also argues that since at the time of the fire the building insured was worth ₱5,800,000.00, the private respondent should be considered its own insurer for the difference between the amount and the face value of the policy and should share pro rata in the loss sustained. Accordingly, the respondent is entitled to an indemnity of only ₱67,629.31, the rest of the loss to be shouldered by it alone. In support of this contention, the petitioner cites Condition 17 of the policy, which provides:

“If the property hereby insured shall, at the breaking out of any fire, be collectively of greater value that the sum insured thereon then the insured shall be considered as being his own insurer for the difference, and shall bear a ratable proportion of the loss accordingly. Every item, if more than one, of the policy shall be separately subject to this condition”

ISSUE

Booking.com

Whether the claim of the insurance company that insurance of building does not cover the elevator is incorrect.

RULING

Yes. The petitioner’s claim that the insurance covered only the building and not the elevator is absurd, to say the least. No less preposterous is the petitioner’s claim that the elevators were insured after the occurrence of the fire, a case of shutting the barn door after the horse had escaped, so to speak. Equally undeserving of serious is its submission that the elevators were not damaged by the fire, against the report of arson investigators of the INP and indeed, its own expressed admission in its answer where it affirmed that the fire “damaged or destroyed a portion of the 7th floor of the insured building and more particularly a Hitachi elevator control panel.”

The petitioner argues that since at the time of the fire the building insured was worth ₱5,800,000.00, the private respondent should be considered its own insurer for the difference between that amount and the face value of the policy and should share pro rata in the loss sustained. Accordingly, the private respondent is entitled to an indemnity of only ₱67,629.31, the rest of the loss to be shouldered by it alone. In support of this contention, the petitioner cites Condition 17 of the policy, which provides: xxx. However, there is no evidence on record that the building was worth ₱5,800,000.00 at the time of the loss; only the petitioner says so and it does not back up its self-serving estimate with any independent corroboration. On the contrary, the building was insured at ₱2,500,000.00, and this must be considered, by agreement of the insurer and the insured, the actual value of the property insured on the day the fire occurred. This valuation becomes even more believable if it is remembered that at the time the building was burned it was still under construction and not yet completed.

As defined in the aforestated provision, which is not Section 60 of the Insurance Code,” and open policy is one which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss.” This means that the actual loss, as determined will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not be exceed the face value of the policy.

The actual loss has been ascertained in this case and, to repeat, this Court will respect such factual determination in the absence of proof that it was arrived at arbitrarily. There is no such showing. Hence, applying the open policy clause as expressly agreed upon by the parties in their contract we hold that the private respondent is entitled to the payment of indemnity under the said contract in the total amount of ₱508,867.00.

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Development Insurance vs. IAC, 143 SCRA 62 (1986)

FACTS

ISSUE

RULING

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