Summary: Finman General Assurance Corporation vs. Court of Appeals (GR 138737, 12 July 2001)

Finman General Assurance Corporation vs. Court of Appeals
[GR 138737, 12 July 2001]
First Division, Kapunan (J): 4 concur

Facts: On 15 September 1981, Usiphil Incorporated obtained a fire insurance policy from Finman General Assurance Corporation (then doing business under the name Summa Insurance Corporation) covering certain properties, e.g., office, furniture, fixtures, shop machinery and other trade equipment. Under Policy F3100 issued to Usiphil, Finman undertook to indemnify Usiphil for any damage to or loss of said properties arising from fire. Sometime in 1982, Usiphil filed with Finman an insurance claim amounting to P987,126.11 for the loss of the insured properties due to fire. Acting thereon, Finman appointed Adjuster H.H. Bayne to undertake the valuation and adjustment of the loss. H.H. Bayne then required Usiphil to file a formal claim and submit proof of loss. In compliance therewith, Usiphil submitted its Sworn Statement of Loss and Formal Claim, dated 22 July 1982, signed by Reynaldo Cayetano, Usiphil's Manager. Usiphil likewise submitted Proof of Loss signed by its Accounting Manager Pedro Palallos and countersigned by H.H. Bayne's Adjuster F.C. Medina. Palallos personally followed-up Usiphil's claim with Finman's President Joaquin Ortega. During their meeting, Ortega instructed their Finance Manager, Rosauro Maghirang, to reconcile the records. Thereafter, Maghirang and Palallos signed a Statement/Agreement, dated 28 February 1985, which indicated that the amount due Usiphil was P842,683.40. Despite repeated demands by Usiphil, Finman refused to pay the insurance claim. Thus, Usiphil was constrained to file a complaint against Finman for the unpaid insurance claim. In its Answer, Finman maintained that the claim of Usiphil could not be allowed because it failed to comply with Policy Condition 13 regarding the submission of certain documents to prove the loss. Trial ensued. On 6 July 1994, the trial court rendered judgment in favor of Usiphil. It ordered Finman to pay Usiphil the sum of P842,683.40 and to pay 24% interest per annum from 28 February 1985 until fully paid; the sum equivalent to 10% of the principal obligation as and for attorney's fees, plus P1,500.00 per court appearance of counsel; the amount of P30,000.00 as exemplary damages in addition to the actual and compensatory damages awarded. The court also dismissed the claim of P30,000.00 for actual damages under par. 4 of the prayer, since the actual damages. has been awarded under par. 1 of the decision's dispositive portion; dismissed the claim of interest under par. 2 of the prayer, there being no agreement to such effect; dismissed the counter-claim for lack of merit; and ordered Finman to pay the cost of suit. On appeal, the CA substantially affirmed the decision of the trial court. The appellate court modified the decision by ordering Finman to pay Usiphil the sum of P842,683.40 and to pay 24% interest per annum from 3 May 1985 until fully paid. Finman filed the petition for review on certiorari.

Issue [1]: Whether Usiphil has complied with Policy Condition 13 in notifying Finman of the loss.

Held [1]: YES. Usiphil had substantially complied with Policy Condition 13 which reads "The insured shall give immediate written notice to the Company of any loss, protect the property from further damage, forthwith separate the damaged and undamaged personal property, put it in the best possible order, furnish a complete inventory of the destroyed, damaged, and undamaged property, showing in detail quantities, costs, actual cash value and the amount of loss claimed; AND WITHIN SIXTY DAYS AFTER THE LOSS, UNLESS SUCH TIME IS EXTENDED IN WRITING BY THE COMPANY, THE INSURED SHALL RENDER TO THE COMPANY A PROOF OF LOSS, signed and sworn to by the insured, stating the knowledge and belief of the insured as to the following: the time and origin of the loss, the interest of the insured and of all others in the property, the actual cash value of each item thereof and the amount of loss thereto, all encumbrances thereon, all other contracts of insurance, whether valid or not, covering any of said property, any changes in the title, use, occupation, location, possession or exposures of said property since the issuing of this policy by whom and for what purpose any buildings herein described and the several parts thereof were occupied at the time of loss and whether or not it then stood on leased ground, and shall furnish a copy of all the descriptions and schedules in all policies, and if required verified plans and specifications of any building, fixtures, or machinery destroyed or damaged. The insured, as often as may be reasonably required, shall exhibit to any person designated by the company all that remains of any property herein described, and submit to examination under oath by any person named by the Company, and subscribe the same; and, as often as may be reasonably required, shall produce for examination all books of account, bills, invoices, and other vouchers or certified copies thereof if originals be lost, at such reasonable time and place as may be designated by the Company or its representative and shall permit extracts and copies thereof to be made. No claim under this policy shall be payable unless the terms of this condition have been complied with." A perusal of the records shows that Usiphil, after the occurrence of the fire, immediately notified Finman thereof. Thereafter, Usiphil submitted the following documents: (1) Sworn Statement of Loss and Formal Claim and; (2) Proof of Loss. The submission of these documents constitutes substantial compliance with the above provision. Indeed, as regards the submission of documents to prove loss, substantial, not strict as urged by Finman, compliance with the requirements will always be deemed sufficient. In any case, Finman itself acknowledged its liability when through its Finance Manager, Rosauro Maghirang, it signed the document indicating that the amount due Usiphil is P842,683.40.

Issue [2]: Whether the payment of 24% interest per annum is authorized by Sections 243 and 244 of the Insurance Code.

Held [2]: YES. Anent the payment of 24% interest per annum computed from 3 May 1985 until fully paid, the same is authorized by Sections 243 and 244 of the Insurance Code. Notably, under Section 244, a prima facie evidence of unreasonable delay in payment of the claim is created by the failure of the insurer to pay the claim within the time fixed in both Sections 243 and 244. Further, Section 29 of the policy itself provides for the payment of such interest: "Settlement of claim clause. The amount of any .loss or damage for which the company may be liable, under this policy shall be paid within thirty days after proof of loss is received by the company and ascertainment of the loss or damage is made either in an agreement between the insured and the company or by arbitration; but if such ascertainment is not had or made within sixty days after such receipt by the company of the proof of loss, then the loss or damage shall be paid within ninety days after such receipt. Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board. unless such failure or refusal to pay is based on the grounds (sic) that the claim is fraudulent." The policy itself obliges Finman to pay the insurance claim within 30 days after proof of loss and ascertainment of the loss made in an agreement between Usiphil and Finman. Finman and Usiphil signed the agreement indicating that the amount due Usiphil was P842,683.40 on 2 April 1985. Finman thus had until 2 May 1985 to pay Usiphil's insurance. For its failure to do so, the Court of Appeals and the trial court rightfully directed Finman to pay, inter alia, 24% interest per annum in accordance with the above quoted provisions.

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