Saura Import Export Co. v. Philippine International Surety - Cancellation of Policy

118 PHIL 150

Facts:

>  On Dec. 26, 1952, Saura mortgaged to PNB its registered parcel of land in Davao to secure the payment of a promissory note of P27T.

>  A building of strong materials which was also owned by Saura, was erected on the parcel of land and the building  had always been covered by insurance even before the execution of the mortgage contract.

>  Pursuant to the mortgage agreement which required Saura to insure the building and its contents, it obtained a fire insurance for P29T from PISC for a period of 1 year starting Oct. 2, 1954.

>  The mortgage also required Saura to endorse the insurance policy to PNB.  The memo stated: Loss if any, payable to PNG as their interest may appear, subject to the terms, conditions and warranties of this policy.

>  The policy was delivered to PNB by Saura.

>  On Oct. 15, 1954, barely 13 days after the issuance of the fire insurance, PISC canceled the same, effective as of the date of issue.  Notice of the cancellation was sent to PNB in writing and was received by the bank on Nov. 8, 1954.

>  On Apr. 6, 1955, the building and its contents worth P4,685 were burned.  On April 11, 1985, Saura filed a claim with PISC and mortgagee bank.

>  Upon presentation of notice of loss with PNB, Saura learned for the first time that the policy had been previously canceled by PISC, when Saura’s folder in the bank’s file was opened and the notice of the cancellation by PISC was found.

Issue:

Whether or not there was proper cancellation of the policy?

Held:

NO.

The policy in question does NOT provide for the notice of cancellation, its form or period.  The Insurance Law does not likewise provide for such notice.  This being the case, it devolves upon the Court to apply the generally accepted principles of insurance, regarding cancellation of the insurance policy by the insurer.

Actual notice of cancellation in a clear and unequivocal manner, preferably in writing should be given by the insurer to the insured so that the latter might be given an opportunity to obtain other insurance for his own protection.  The notice should be personal to the insurer and not to and/or through any unauthorized person by the policy.  Both the PSIC and the PNB failed, wittingly or unwittingly to notify Saura of the cancellation made.

The insurer contends that it gave notice to PNB as mortgagee of the property and that was already substantial compliance with its duty to notify the insured of the cancellation of the policy.  But notice to the bank, as far as Saura herein is concerned, is not effective notice.  PISC is then ordered to pay Saura P29T, the amount involved in the policy subject matter of this case.