Verendia v. CA - Insurance Policy

217 SCRA 1993


>  Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance Policy No. F-18876 effective between June 23, 1980 and June 23, 1981 covering Rafael (Rex) Verendia's residential in the amount of P385,000.00. Designated as beneficiary was the Monte de Piedad & Savings Bank.

>  Verendia also insured the same building with two other companies, namely, The Country Bankers Insurance for P56,000.00 and The Development Insurance for P400,000.00.

>  While the three fire insurance policies were in force, the insured property was completely destroyed by fire.

>  Fidelity appraised the damage amounting to 385,000 when it was accordingly informed of the loss. Despite demands, Fidelity refused payment under its policy, thus prompting Verendia to file a complaint for the recovery of 385,000

>  Fidelity, averred that the policy was avoided by reason of over-insurance, that Verendia maliciously represented that the building at the time of the fire was leased under a contract executed on June 25, 1980 to a certain Roberto Garcia, when actually it was a Marcelo Garcia who was the lessee.


Whether or not Verendia can claim on the insurance despite the misrepresentation as to the lessee and the overinsurance.



The contract of lease upon which Verendia relies to support his claim for insurance benefits, was entered into between him and one Robert Garcia, a couple of days after the effectivity of the insurance policy. When the rented residential building was razed to the ground, it appears that Robert Garcia was still within the premises. However, according to the investigation by the police, the building appeared to have "no occupants" and that Mr. Roberto Garcia was "renting on the otherside of said compound" These pieces of evidence belie Verendia's uncorroborated testimony that Marcelo Garcia whom he considered as the real lessee, was occupying the building when it was burned.

Ironically, during the trial, Verendia admitted that it was not Robert Garcia who signed the lease contract but it was Marcelo Garcia cousin of Robert, who had also been paying the rentals all the while. Verendia, however, failed to explain why Marcelo had to sign his cousin's name when he in fact he was paying for the rent and why he (Verendia) himself, the lessor, allowed such a ruse. Fidelity's conclusions on these proven facts appear, therefore, to have sufficient bases: Verendia concocted the lease contract to deflect responsibility for the fire towards an alleged "lessee", inflated the value of the property by the alleged monthly rental of P6,500) when in fact, the Provincial Assessor of Rizal had assessed the property's fair market value to be only P40,300.00, insured the same property with two other insurance companies for a total coverage of around P900,000, and created a dead-end for the adjuster by the disappearance of Robert Garcia.

Basically a contract of indemnity, an insurance contract is the law between the parties. Its terms and conditions constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right to recovery from the. As it is also a contract of adhesion, an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it


Considering, however, the foregoing discussion pointing to the fact that Verendia used a false lease contract to support his claim under Fire Insurance Policy, the terms of the policy should be strictly construed against the insured. Verendia failed to live by the terms of the policy, specifically Section 13 thereof which is expressed in terms that are clear and unambiguous, that all benefits under the policy shall be forfeited "if the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy". Verendia, having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision

There is also no reason to conclude that by submitting the subrogation receipt as evidence in court, Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the amount of P142,685.77. While the said receipt appears to have been a filled-up form of Fidelity, no representative of Fidelity had signed it. It is even incomplete as the blank spaces for a witness and his address are not filled up. More significantly, the same receipt states that Verendia had received the aforesaid amount. However, that Verendia had not received the amount stated therein, is proven by the fact that Verendia himself filed the complaint for the full amount of P385,000.00 stated in the policy. It might be that there had been efforts to settle Verendia's claims, but surely, the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced. Thus, to interpret Fidelity's presentation of the subrogation receipt in evidence as indicative of its accession to its "terms" is not only wanting in rational basis but would be substituting the will of the Court for that of the parties