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Rizal Surety Vs CA

Rizal Surety issued a fire insurance policy to Transworld Knitting Mills covering contents stored in Transworld's four-span building. A fire destroyed the middle portion of the four-span building and also a two-story building behind it. Rizal Surety argued it was not liable for loss of contents in the two-story building. Both lower courts found the two-story building was an integral part of the four-span building covered by the policy. The Supreme Court affirmed, noting the two-story building existed when the policy was issued but was not excluded. Any ambiguity in coverage must be interpreted against the insurer.

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474 views2 pages

Rizal Surety Vs CA

Rizal Surety issued a fire insurance policy to Transworld Knitting Mills covering contents stored in Transworld's four-span building. A fire destroyed the middle portion of the four-span building and also a two-story building behind it. Rizal Surety argued it was not liable for loss of contents in the two-story building. Both lower courts found the two-story building was an integral part of the four-span building covered by the policy. The Supreme Court affirmed, noting the two-story building existed when the policy was issued but was not excluded. Any ambiguity in coverage must be interpreted against the insurer.

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ksulaw2018
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Rizal Surety vs.

CA

on 11:25 PM in Case Digests, Commercial Law

0
336 SCRA 12 (2000)

 INSURANCE LAW: Interpretation of Insurance Contracts

FACTS:

Rizal Surety & Insurance Company issued a fire insurance policy in favor of
Transworld Knitting Mills, Inc. The subject policy stated that Rizal Surety is
“responsible in case of loss whilst contained and/or stored during the currency of
this Policy in the premises occupied by them forming part of the buildings situated
within own Compound xxx.” The policy also described therein the four-span
building covered by the same.

On Jan. 12, 1981, fire broke out in the compound, razing the middle portion of its
four-span building and partly gutting the left and right sections thereof. A two-
storey building (behind said four-span building) was also destroyed by the fire.

ISSUE:

 Whether or not Rizal Surety is liable for loss of the two-storey building
considering that the fire insurance policy sued upon covered only the
contents of the four-span building

HELD:

Both the trial court and the CA found that the so-called “annex” as not an annex
building but an integral and inseparable part of the four-span building described in
the policy and consequently, the machines and spare parts stored therein were
covered by the fire insurance in dispute.

So also, considering that the two-storey building aforementioned was already


existing when subject fire insurance policy contract was entered into on Jan. 12,
1981, having been constructed some time in 1978, petitioner should have
specifically excluded the said two-storey building from the coverage of the fire
insurance if minded to exclude the same but if did not, and instead, went on to
provide that such fire insurance policy covers the products, raw materials and
supplies stored within the premises of Transworld which was an integral part of the
four-span building occupied by Transworld, knowing fully well the existence of
such building adjoining and intercommunicating with the right section of the four-
span building.

Also, in case of doubt in the stipulation as to the coverage of the fire insurance
policy, under Art. 1377 of the New Civil Code, the doubt should be resolved
against the Rizal Surety, whose layer or managers drafted the fire insurance policy
contract under scrutiny.

In Landicho vs. Government Service Insurance System, the Court ruled that “the
terms in an insurance policy, which are ambiguous, equivocal or uncertain x x x
are to be construed strictly and most strongly against the insurer, and liberally in
favor of the insured so as to effect the dominant purpose of indemnity or payment
to the insured, especially where forfeiture is involved, and the reason for this is that
the insured usually has no voice in the selection or arrangement of the words
employed and that the language of the contract is selected with great care and
deliberation by experts and legal advisers employed by, and acting exclusively in
the interest of, the insurance company.”

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