K. S. YOUNG V.

THE MIDLAND TEXTILE INSURANCE COMPANY

March 31, 1915 | Johnson, J.
Rescission of Insurance Contracts > Warranties
AKGL
DOCTRINE: The compliance of the insured with the terms of the contract is a condition precedent to the right of
recovery.
CASE SUMMARY: Young obtained an insurance from Midland for the bodega and its contents. They agreed that no
hazardous goods will be stored in the bodega. But, after a fire razed a portion of the property, it was discovered that
Young placed fireworks therein.
FACTS:
 KS Young operated a candy and fruit store in Escolta, Manila. Young and Midland Textile Insurance Co.
entered into an insurance contract, wherein Young paid a premium of P60 in exchange for the indemnity of
P30T in case the residence and bodega and contents should be destroyed by fire.
 The contracts agreed to Warranty B, which provides:
o “It is hereby declared and agreed that during the pendency of this policy no hazardous goods be
stored or kept for sale, and no hazardous trade or process be carried on, in the building to which
this insurance applies, or in any building connected therewith.”
 During the effectivity of the policy, Young placed 3 boxes of fireworks in the bodega. The fireworks were
intended to be used during the Chinese New Year celebration, but such use was prohibited by authorities.
 A fire razed a portion of the insured property. However, the fireworks were placed in an area not affected by
the fire. The fireworks also did not contribute to the fire. Both of the parties agree that said fireworks come
within the phrase "hazardous goods," mentioned in said "warranty B" of the policy.
 Young filed for claim against the Midland, but the Midland refused to honor due to the violation of Warranty
B.

ISSUE: W/N the placing of said fireworks in the building insured, they being "hazardous goods," is a violation of
Warrany B, which will render the policy ineffective? YES, regardless if the fireworks contributed to the fire or not.

RULING:
 The Court took account the definition of the word “stored.” (See notes for a brief discussion.)
 Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The
parties have a right to impose such reasonable conditions at the time of the making of the contract as they
may deem wise and necessary. The rate of premium is measured by the character of the risk assumed.
 If the insured cannot bring- himself within the conditions of the policy, he is not entitled to recover
for the loss. The terms of the policy constitute the measure of the insurer's liability, and in order to
recover the insured must show himself within those terms; and if it appears that the contract has been
terminated by a violation, on the part of the insured, of its conditions, then there can be no right of recovery.
 The compliance of the insured with the terms of the contract is a condition precedent to the right of
recovery. If the insured has violated or failed to perform the conditions of the contract, and such a violation
or want of performance has not been waived by the insurer, then the insured cannot recover.
 Contracts of insurance are construed most favorably to the insured, yet contracts of insurance, like other
contracts, are to be construed according to the sense and meaning of the terms which the parties
themselves have used.
 Young’s argument that the fireworks did not contribute to the fire is beside the question, if the "storing" was a
violation of the terms of the contract. The violation of the terms of the contract, by virtue of the provisions of
the policy itself, terminated, at the election of either party, the contractual relations.
 The plaintiff had not paid a premium based upon the increased risk, neither had the defendant issued a
policy upon the theory of a different risk.

DISPOSITION: The judgment of the lower court is hereby revoked and the defendant (Midland) is hereby relieved
from any responsibility under said complaint, and, without any finding as to costs, it is so ordered.

NOTES:
 “Store" - a deposit for preservation or safe keeping; to put away for future use, future consumption, safe
keeping. It does not include a deposit for daily use. In this case, no claim is made that the "hazardous
goods" were placed in the bodega for present or daily use. It is admitted that they were placed in the bodega
"for future use," or for future consumption, or for safe keeping.