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AMERICAN HOME ASSURANCE COMPANY v. TANTUCO ENTERPRISES

FACTS:

Respondent Tantuco Enterprises, Inc. owns two oil mills, one of which is referred to as the "new oil mill." Both oil mills are separately covered by fire insurance policies issued by petitioner American Home Assurance Co., Philippine Branch. A fire broke out on September 30, 1991, which consumed the new oil mill. Respondent filed a claim for insurance proceeds, but petitioner rejected the claim on the ground that the burned oil mill was not covered by any policy. Respondent filed a complaint for specific performance and damages, and the trial court ordered petitioner to pay damages for loss by fire of the insured property. The Court of Appeals affirmed the trial court's decision, leading petitioner to file a Petition for Review on Certiorari before the Supreme Court.

ISSUES:

  1. Whether the non-payment of a partial amount of the insurance premium invalidates the policy.

  2. Whether the insurance policy described and covered the new oil mill that was gutted by fire.

  3. Whether the respondent breached the "Fire Extinguishing Appliances Warranty" of the insurance policy.

RULING:

  1. The issue of non-payment of the premium was not raised at the trial court and cannot be raised for the first time on appeal. Even if considered, the evidence showed implicit acknowledgment of a valid policy by the petitioner's agent.

  2. Despite the inaccurate boundary description, the Court found that the insurance policy intended to cover the new oil mill, emphasizing liberality in interpreting insurance contracts to give effect to the parties' manifest intent.

  3. The respondent did not breach the "Fire Extinguishing Appliances Warranty" since it maintained efficient fire-fighting equipment within the premises. The warranty does not necessitate the installation of all listed appliances, nor restrict them to those mentioned.

PRINCIPLES:

  1. Parole Evidence Rule Exception: Evidence outside the written document may be admitted to show the true intent of the parties when the contract fails to reflect their agreement correctly.

  2. Liberal Construction of Insurance Policies: Courts tend to interpret insurance policies liberally to effectuate the intent of the parties and give effect to the insurance coverage, even if there are inaccuracies in descriptions.

  3. Strict Construction Against Insurer: Warranties and terms in insurance policies are strictly construed against the insurer and must be reasonally interpreted based on the actual conditions and the factual context.

  4. Estoppel in Insurance: An insurer can be estopped from denying coverage if its agents provide assurances that lead the insured to believe the insurance is valid despite any inaccuracies.

  5. Non-Payment of Premium: Issues regarding the non-payment of premiums must be explicitly raised at trial and cannot be introduced for the first time on appeal.