Malayan v. PAP Co

When the insured violated a condition of a fire insurance factory.
factory. The Court has combed the records and found

policy providing for the non-transfer of the property insured nothing that would show that Malayan was duly notified of
without the insurer’s consent, the violation thereof which the transfer of the insured properties.
results into an increase of risk, entitles the insurer to rescind
the contract. The transfer from the Sanyo Factory to the PACE
Factory increased the risk.
FACTS: With regards to the exposure of the risk under the old
location, this was occupied as factory of
Malayan issued a fire insurance policy over PAP’s automotive/computer parts by the assured, and factory of
machineries and equipment, located in the Sanyo Factory in zinc & aluminum die cast, plastic gear for copy machine by
PEZA, effective for 1 year and was thereafter renewed for Sanyo Precision Phils., Inc. with a rate of 0.449% under
another year. 6.1.2 A. But under Pace Pacific Mfg. Corporation this was
occupied as factory that repacks silicone sealant to plastic
During the subsistence of the renewed policy, the insured cylinders with a rate of 0.657% under 6.1.2 A. Hence, there
machineries and equipment were totally lost by fire and PAP was an increase in the hazard as indicated by the increase in
filed a claim. rate The Court agrees with Malayan that the transfer to the
Pace Factory exposed the properties to a hazardous
Malayan denied the claim on the ground that, at the time environment and negatively affected the fire rating stated in
of the loss, the insured properties were transferred by the renewal policy. The increase in tariff rate from 0.449%
PAP to a location different from that indicated in the to 0.657% put the subject properties at a greater risk of loss.
policy (Pace Factory still in PEZA). Such increase in risk would necessarily entail an increase in
the premium payment on the fire policy.
PAP argued that Malayan cannot escape liability as it was
informed of the transfer by RCBC, the party duty-bound to Considering that the original policy was renewed on an "as
relay such information. is basis," it follows that the renewal policy carried with it the
same stipulations and limitations. The terms and conditions
RTC: Malayan is liable to pay PAP under the insurance in the renewal policy provided, among others, that the
policy because although there was a change in the condition location of the risk insured against is at the Sanyo factory in
of the thing insured as a result of the transfer to another PEZA. The subject insured properties, however, were totally
location, the insurance company failed to show proof that burned at the Pace Factory. Although it was also located in
such transfer resulted in the increase of the risk insured PEZA, Pace Factory was not the location stipulated in the
against. renewal policy. There being an unconsented removal, the
CA: Affirmed RTC decision transfer was at PAP’s own risk. Consequently, it must suffer
the consequences of the fire.
Issue:
Whether or not PAP Co. can claim the proceeds of the fire Hence, Malayan is entitled to rescind the insurance contract
insurance
Whether or not the transfer from the Sanyo Factory to the Under Section 168 of the Insurance Code, the insurer is
PACE Factory increased the risk entitled to rescind the insurance contract in case of an
alteration in the use or condition of the thing insured. Section
Ruling: NO. 168 of the Insurance Code provides, as follows: aD
 Condition No. 9(c) of the renewal policy provides:
9. Under any of the following circumstances the insurance Section 68. An alteration in the use or condition of a thing
ceases to attach as regards the property affected unless the insured from that to which it is limited by the policy made
insured, before the occurrence of any loss or damage, obtains without the consent of the insurer, by means within the
the sanction of the company signified by endorsement upon control of the insured, and increasing the risks, entitles an
the policy, by or on behalf of the Company: insurer to rescind a contract of fire insurance.
xxx xxx xxx
(c) If property insured be removed to any building or place Accordingly, an insurer can exercise its right to rescind an
other than in that which is herein stated to be insured. insurance contract when the following conditions are
present, to wit:
Evidently, by the clear and express condition in the renewal 1) the policy limits the use or condition of the
policy, the removal of the insured property to any building thing insured;   2) there is an alteration in said
or place required the consent of Malayan. Any transfer
use or condition;
effected by the insured, without the insurer’s consent, would
free the latter from any liability.   3) the alteration is without the consent of the
insurer;
In this case, the respondent failed to notify, and to obtain the   4) the alteration is made by means within the
consent of, Malayan regarding the removal
insured's control; and
The records are bereft of any convincing and concrete
evidence that Malayan was notified of the transfer of the   5) the alteration increases the risk of loss.
insured properties from the Sanyo factory to the Pace
In the case at bench, all these circumstances are present. It
was clearly established that the renewal policy stipulated that
the insured properties were located at the Sanyo factory; that
PAP removed the properties without the consent of Malayan;
and that the alteration of the location increased the risk of
loss.
Petition was granted

Malayan v. PAP Co

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Malayan v. PAP Co

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When the insured violated a condition of a fire insurance factory.

factory. The Court has combed the records and found

Petition was granted

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