New Life Enterprises and Julian Sy vs.

CA
G.R. No. 94071
Regalado, J.

Facts:
New Life Enterprises owned by Julian Sy and Jose Sy was engaged in the sale of
construction materials. Julian insured the business in three different agencies for Php
300K, 1M, and 200K. When the business was burned down, Julian Sy filed for insurance
claims. However the three insurance companies declined the claims for violation of policy
conditions (failure to disclose co-insurers).

Issue:
Whether or not conditions No. 3 and 27 of the insurance contracts were violated by the
Sy thus forfeiting the benefits?

Ruling:
The Court ruled that Sy did in fact violated the conditions. Under condition no. 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 or properties
consisting of stocks in trade, goods in process and/or inventories only hereby insured,
and unless such notice be given and the particulars of such insurance or insurances be
stated therein or endorsed on this policy pursuant to Section 50 of the Insurance Code,
by or on behalf of the Company before the occurrence of any loss or damage, all benefits
under this policy shall be deemed forfeited, provided however, that this condition shall
not apply when the total insurance or insurances in force at the time of loss or damage
not more than P200,000.00.
Sy averred that the insurers were sister companies and that each knew the existence of
the other insurance policies. However, the theory of imputed knowledge, that the
knowledge of the agent is presumed to be known by the principal, is not enough. The
conformity of the insured to the terms of the policy is implied with his failure to disagree
with the terms of the contract.
Since Sy, was a businessman, it was incumbent upon him to read the contracts.
As for condition no. 27, it stated that if a claim be made and rejected and an action or suit
be not commenced either in the Insurance Commission or any court of competent
jurisdiction of notice of such rejection, or in case of arbitration taking place as provided
herein, within twelve (12) months after due notice of the award made by the arbitrator or
arbitrators or umpire, then the claim shall for all purposes be deemed to have been
abandoned and shall not thereafter be recoverable hereunder.
This is regarding Sy’s claim for one of the companies. Recovery was filed in court by
petitioners only on January 31, 1984, or after more than one (1) year had elapsed from
petitioners' receipt of the insurers' letter of denial on November 29, 1982. This made it
void.

Rationale:
Violation of conditions in the insurance policy, where the same had been stipulated clearly
and unambiguously, must be complied with in good faith. Failure of the insured to do so
is a ground for the forfeiture of benefits or proceeds under the policy.