Zenith Insurance Corporation v. The Insurance Commission- Insurable Interest

87 OG 6249


>  Zenith entered into an insurance contract, denominated as Equipment Floater Policy covering a Kato Bachoe including its accessories and appurtenances thereof, from loss of damage.  Complainant paid the stipulated premiums therefore.

>  Within the period of effectivity of the policy, the two pieces of hydraulic wheel gear pumps, which are considered appurtenances and/or parts attached to and/or installed in the Kato BAchoe were lost, stolen and/or illegally detached by unknown thieves or malefactors

>  Despite repeated assurances by Zenith’s soliciting agent, it refused and failed to settle and pay complainant’s insurance claim.

>  Complainant seeks not only the payment of said insurance claim of 70T plus legal interest, atty’s fees, and litigation expenses, but also the revocation or cancellation of the license of Zenith to do insurance business.

>  Zenith on the other hand contends that:

o    Complainant is not the real party in interest since the policy carries with it a designated loss payee, the BA Finance Corp

o    The policy insures against loss or damage caused by fire and lightning, etc, while theft or robbery is NOT insured against in the policy, it not having been expressly mentioned

o    Loss nevertheless is excluded under the exception of “infidelity exclusion” by the operator who left it unguarded, unattended and deserted while entrusted to him, and for failure to give timely notice of loss

o    Complainant and/or BA Finance is guilty of concealment and misrepresentation at the time they secured the policy, because at the time it became operative, the complainant was NOT yet the owner of the property insured, the property still hot having been delivered to him, and BA finance had no insurable interest yet, henceforth, the contract of insurance was VOID AB INITIO for lack of insurable interest at the time the insurance took effect.

Issues and Resolutions:

(1) Whether or not the loss through theft or robbery claimed is within the coverage of the policy.

The Insurance Commissioner, as reiterated by the SC, found for the complainant in this wise:  While the policy enumerated the risks covered, it does NOT, however, in its express terms, limit compensability to that stated in the enumeration.  The enumerated risks excluded did not include theft or robbery committed or perpetrated by an unidentified culprit, hence the complainant’s claim for damages is compensable.

The foregoing policy is supported by the long time honored doctrine of “contra proferentem: which provides that: “any ambiguity in the policy shall be resolved in favor of the insured and against the insurer”.  This is true because insurance contracts are essentially contracts of adhesion and applicants for insurance have no choice but to accept the terms and conditions in the policy even if they are not in full accord therewith.

(2) Whether or not the complainant was with insurable interest therein when the said policy contract was procured.

The complainant has insurable interest in the insured property at the time of the procurement of the insurance policy.  As the CC provides, “the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price,” and Sec. 15 of the IC allows the insurance of a mere contingent or expectant interest in anything if the same is founded on an actual right to the thing, or upon any valid contract.

As this is the case, mere possession of an equitable title, like that pertaining to the buyer, gives rise to insurable interest in the property in which such title inheres.  Furthermore, considering that Zenith’s agent had been fully apprised of the circumstances prior to the actual issuance of the policy and the endorsement, it cannot now allege that complainant has no insurable interest on the property insured.  Zenith is now precluded by the equitable principle of estoppel from impugning and dishonoring the very insurance policy contract it issued and the endorsement and increase in the coverage made through its duly authorized agent.