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American Home Assurance v. Tantuco
(2
G.R. No. 138941, 8 Oct. 2001
INSURANCE LAW: Liberality is the rule of construction in insurance contracts.
FACTS:
Tantuco Enterprises, Inc. is a coconut oil milling and refining company. It owned two mills (the
first oil mill and a new one), both located at its factory compound at Iyam, Lucena City. The two
oil mills are separately covered by fire insurance policies issued by American Home Assurance
Co.
On Sept. 30, 1991, a fire broke out and gutted and consumed the new oil mill. American Home
rejected the claim for the insurance proceeds on the ground that no policy was issued by it
covering the burned oil mill. It stated that the new oil mill was under Building No. 15 while the
insurance coverage extended only to the oil mill under Building No. 5.
ISSUE:
Whether or not the new oil mill is covered by the fire insurance policy
HELD:
In construing the words used descriptive of a building insured, the greatest liberality is shown
by the courts in giving effect to the insurance. In view of the custom of insurance agents to
examine buildings before writing policies upon them, and since a mistake as to the identity and
character of the building is extremely unlikely, the courts are inclined to consider the policy of
insurance covers any building which the parties manifestly intended to insure, however
inaccurate the description may be.
Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind,
that what the parties manifestly intended to insure was the new oil mill.
If the parties really intended to protect the first oil mill, then there is no need to specify it as
new. Indeed, it would be absurd to assume that the respondent would protect its first oil mill
for different amounts and leave uncovered its second one.
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Tomorrow
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December 1, 2008 at 10:11 PM
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