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DEVELOPMENT INSURANCE CORPORATION v. IAC

This case involves an insurance dispute between Development Insurance Corporation and Philippine Union Realty Development Corporation regarding fire damage to a building under construction. The insurance company failed to respond on time and was found in default. It argued that only the building, not elevators, were covered, but the court disagreed since elevators are required. The insurer also claimed the building was worth more than the policy limit, but there was no evidence of this. The court upheld the lower court's ruling that the insured was entitled to the full policy amount of $508,867 to cover damages based on the open policy clause in the contract.

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Abegail Galedo
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134 views2 pages

DEVELOPMENT INSURANCE CORPORATION v. IAC

This case involves an insurance dispute between Development Insurance Corporation and Philippine Union Realty Development Corporation regarding fire damage to a building under construction. The insurance company failed to respond on time and was found in default. It argued that only the building, not elevators, were covered, but the court disagreed since elevators are required. The insurer also claimed the building was worth more than the policy limit, but there was no evidence of this. The court upheld the lower court's ruling that the insured was entitled to the full policy amount of $508,867 to cover damages based on the open policy clause in the contract.

Uploaded by

Abegail Galedo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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DEVELOPMENT INSURANCE CORPORATION, petitioner, 

vs.
INTERMEDIATE APPELLATE COURT, and PHILIPPINE UNION REALTY
DEVELOPMENT CORPORATION, respondent

G.R. No. 71360 July 16, 1986

Facts:
 A fire occurred in the building of private respondent Philippine Union Realty Dev
and it sued for recovery of damages from petitioner on the basis of insurance
contract between them
 Petitioner failed to file an answer on time and was thereafter declared in default.
 A judgment on default was rendered in favor of private respondent.
 Petitioner moved to lift judgment order of default alleging excusable neglect
(Setting aside procedural technicalities and considering the merits of the case)
Petitioner’s contention:
1. Only building and not the elevators is covered by the insurance.
2. The elevators were insured after the occurrence of the fire.
Held:
1. Petitioner’s argument is ridiculous. The building is seven storey-high and
having elevators is a requirement known to petitioner as an insurance
company.
2. The heat and moisture caused by the fire damaged although they did not
actually burn the elevators.
Amount of Indemnity due to private respondent:
 The policy of private respondent shows that the building was insured against fire
for Php2,500,000.
 Petitioner argues that since at the time of the fire, the building insured was worth
Php5,800,000, 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.
 Therefore, PR is entitled to indemnity of only Php67,629.31 and the rest to be
shouldered by it alone.
 Petitioner based this contention on Condition 17 of the policy:

If the property hereby insured shall, at the breaking out of any fire,
be collectively of greater value than 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.

 However, there is no evidence on record that the building was worth


P5,800,000.00 at the time of the loss; only the petitioner says so.

 The building was insured at P2,500,000.00, 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.
HELD:
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 P508,867.00.
The subject policy in this case is an open policy wherein the actual loss, as determined,
will represent the total indemnity due the insured from the insurer except only that the
total indemnity shall not exceed the face value of the policy.
Even if there is no evidence that the building was indeed worth Php5,800,000 at the
time of the loss, the Court will respect such factual determination of the lower court. The
refusal of the vice-president of petitioner to receive PR’s complaint was considered as
indication that petitioner intends to prolong this case and considering as well its
inaction for more than five years from filing of the claim, petitioner must no longer
avoid its responsibility.

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