G.R. No. 20341 – 45 Phil. 122 – Mercantile Law – Insurance Law – Insurable Interest – Mistake in the issuance of an insurance policy
In March 1918, Domingo Garcia entered into an insurance contract with The Hong Kong Fire and Marine Insurance Co., Ltd. (HKFI). HKFI agreed to insure the merchandise of Garcia in the amount of P15,000.00. In 1919, Garcia entered into a loan agreement with the Philippine National Bank (PNB) for P6,000.00 and to secure the loan, Garcia mortgaged his merchandise which were housed in a building. Garcia also indorsed the insurance policy to PNB. In February 1920, while the insurance policy was still in force, a fire broke out which destroyed the merchandise as well as the building which housed said merchandise, the damage amounted to P20,000.00. When PNB filed an insurance claim, HKFI refused to pay the claim. Apparently, the insurance policy issued in 1918 covered the building which housed the merchandise and not the merchandise; that PNB is negligent for in the insurance policy indorsed by Garcia to them, it clearly stated that it was the building which was insured.
ISSUE: Whether or not HKFI should pay the insurance claim.
HELD: Yes. Garcia does not own or claim any interest in the building because he does not own the building which housed his merchandise. Further, in the letter sent by PNB to HKFI in August 1919, after the indorsement, they notified HKFI of the fact that what was mortgaged was the insured merchandise. Also, the fact that Garcia is a merchant, and the bank knew him as such, and that he does not own the building housing his merchandise indicates that there has been a mistake in the issuance of the policy. From the circumstances surrounding the case, the Supreme Court looked upon the intent of Garcia and that it was competently shown that Garcia wanted insurance on his merchandise and the reason why he wanted it.