Multi-Ware Manufacturing v. Cibeles Insurance
REITERATIONFacts
The Antecedents: Petitioner Multi-Ware Manufacturing Corporation (Multi-Ware) obtained fire insurance policies from respondent Western Guaranty Corporation and respondent Cibeles Insurance Corporation, covering its machinery and equipment. Subsequently, Multi-Ware also obtained similar policies from Prudential Guarantee Corp. covering the same machinery and equipment located in the same building. A fire broke out, causing damage to the insured properties. Multi-Ware filed insurance claims, which were denied by Cibeles Insurance and Western Guaranty on grounds of violation of Policy Condition Nos. 3 (non-disclosure of co-insurance), 15 (fraudulent claims), and 21 (arson). Procedural History: Multi-Ware filed separate civil actions against Cibeles Insurance and Western Guaranty, which were consolidated. The Regional Trial Court (RTC) dismissed the complaints, finding that Multi-Ware violated Policy Condition No. 3, leading to the forfeiture of benefits. The Court of Appeals (CA) affirmed the RTC's decision. Multi-Ware's motion for reconsideration was denied by both the RTC and the CA. The Petition: Multi-Ware filed a Petition for Review on Certiorari before the Supreme Court, assailing the CA's decision, primarily arguing that the CA erred in holding that it violated Policy Condition No. 3, and that the condition does not apply to machinery and equipment.
Issue(s)
Whether the Honorable Court of Appeals seriously erred in holding that Petitioner violated Policy Condition No. 3, despite utter lack of competent evidence to support Respondents' stance. Whether the Honorable Court of Appeals seriously erred in holding that Policy Condition No. 3 applies to machineries, equipment and tools. Whether petitioner violated Policy Condition No. 3, or the "other insurance clause" uniformly contained in the subject insurance contracts resulting to avoidance of the said policies.
Ruling
The petition is denied for lack of merit. The November 29, 2016 Decision and March 9, 2017 Resolution of the Court of Appeals in CA-G.R. CV No. 106334 are affirmed.
Ratio Decidendi
On the issue of whether petitioner violated Policy Condition No. 3: The Court held that Policy Condition No. 3, the "other insurance clause," obligates the insured to notify the insurer of any insurance already effected or subsequently effected covering "any of the property or properties consisting of stocks in trade, goods in process and/or inventories." The non-disclosure of other insurance policies covering these items would result in the forfeiture of benefits. The Court found that the petitioner obtained fire insurance policies from Cibeles Insurance, Western Guaranty, and Prudential Guarantee covering the same matter and the same risk, specifically petitioner's machinery and equipment. Although Policy Condition No. 3 does not explicitly mention "machinery and equipment," the term "property" is generic and can include machinery and equipment, which are insurable assets. Therefore, petitioner was obligated to disclose these other policies. The failure to do so constituted a violation of Policy Condition No. 3. On the issue of whether Policy Condition No. 3 applies to machineries, equipment and tools: The Court ruled in the affirmative. While Policy Condition No. 3 specifically enumerates "stocks in trade, goods in process and/or inventories," the Court interpreted the term "property" in the same condition as a generic term that encompasses "machinery and equipment." The rationale behind the "other insurance" clause, as explained in Geagonia v. Court of Appeals, is to prevent over-insurance and fraud by deterring the insured from intentionally destroying the property for profit. This rationale applies equally to machinery and equipment as it does to stocks in trade. The Court found that the RTC correctly determined, based on the evidence presented, that the machinery and equipment covered by the policies from the different insurers were one and the same properties, all located in Building 1 within the PTA Compound. The petitioner failed to present adequate proof to show otherwise, thus failing to disprove the RTC's conclusion. On the issue of whether the findings of the courts below were supported by competent evidence: The Court reiterated the well-established rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties, absent any exceptional circumstances. The Court found no such exceptional circumstances in this case. The RTC's conclusion that the properties insured under the policies obtained by petitioner from different insurers were identical was based on an examination of the policies and the location of the insured properties. The petitioner's contention that these findings were unsubstantiated by evidence and grounded on surmises or conjectures was rejected. The Court emphasized that the petitioner failed to adduce adequate proof to show that the buildings and/or warehouses referred to in each policy pertained to distinct structures. Therefore, the insurers were justified in denying the insurance claim for violation of Policy Condition No. 3.
Main Doctrine
Failure to disclose existing insurance policies covering the same property, even if the policy condition specifically mentions 'stocks in trade, goods in process and/or inventories,' constitutes a violation of the 'other insurance clause' if the term 'property' in the condition is interpreted to include machinery and equipment, thereby entitling the insurer to deny the claim and avoid the policy.