Finman General Assurance Corporation vs. Court of Appeals

Substantial, not strict, compliance with the documentary requirements for proof of loss suffices to sustain a fire insurance claim, and failure to pay within the periods fixed in Sections 243 and 244 of the Insurance Code entitles the insured to interest at twice the ceiling prescribed by the Monetary Board. The reconciliation signed by the insurer's finance manager acknowledged liability, and the continued nonpayment after ascertainment of loss supported the 24% per annum award.

Finman General Assurance Corporation, then doing business as Summa Insurance Corporation, is a fire insurer that issued Policy No. F3100 to Usiphil Incorporated covering office, furniture, fixtures, shop machinery and other trade equipment against fire loss. The policy contained Condition No. 13 on notice, inventory and proof of loss within sixty days, and Clause 29 on settlement of claims mirroring Sections 243 and 244 of the Insurance Code. Adjustment of large fire losses through an independent adjuster and subsequent reconciliation of records between the insurer and insured formed the commercial context for the dispute.

On September 15, 1981, Usiphil Incorporated obtained a fire insurance policy from Finman General Assurance Corporation, then Summa Insurance Corporation, covering office, furniture, fixtures, shop machinery and other trade equipment. Under Policy No. F3100, the insurer undertook to indemnify the insured for damage to or loss of said properties arising from fire.

Sometime in 1982, following a fire noted as having occurred on May 27, 1982, Usiphil filed an insurance claim amounting to P987,126.11 for loss of the insured properties. Acting thereon, the insurer appointed Adjuster H.H. Bayne to undertake valuation and adjustment of the loss. H.H. Bayne required Usiphil to file a formal claim and submit proof of loss. In compliance, Usiphil submitted its Sworn Statement of Loss and Formal Claim dated July 22, 1982 signed by its Manager Reynaldo Cayetano, together with Proof of Loss signed by its Accounting Manager Pedro Palallos and countersigned by H.H. Bayne's Adjuster F.C. Medina.

Palallos personally followed up the claim with petitioner's President Joaquin Ortega. During their meeting, Ortega instructed Finance Manager Rosauro Maghirang to reconcile the records. Thereafter, Maghirang and Palallos signed a Statement/Agreement dated February 28, 1985 indicating the amount due respondent was P842,683.40. Despite repeated demands, petitioner refused to pay, constraining Usiphil to file a complaint for the unpaid claim. In its Answer, petitioner maintained the claim could not be allowed for failure to comply with Policy Condition No. 13 on submission of documents to prove loss.

The trial court found that Usiphil had notified the insurer, submitted the sworn statement and proof of loss, and secured a reconciliation fixing the net due, and accordingly awarded P842,683.40 with interest and damages. The Court of Appeals similarly found sufficient compliance with Section 13, treated the signing of Exhibit E as acknowledgment of liability, and sustained the principal award while reckoning 24% interest from May 3, 1985.

• Non-compliance with Policy Condition No. 13: Petitioner argued that disallowance of the claim was justified because private respondent failed to submit the documents required under Policy Condition No. 13 as communicated in H.H. Bayne's two letters detailing requirements for furniture, fixtures, machineries/equipment claims and for stock claims.
• Insufficiency of Evidence and Lack of Authority: Petitioner maintained that there was insufficient evidence to justify the lower court's decision and alleged that Maghirang was without authority to sign Exhibit E and therefore without authority to bind petitioner corporation.
• Impropriety of 24% Interest: Petitioner argued that the 24% per annum award was improper absent an express finding that payment was unreasonably denied or withheld, opining that only the 12% legal interest rate for delay should apply.

• Compliance with Policy Condition No. 13: Whether private respondent's submission of notice, sworn statement of loss, formal claim and proof of loss constituted sufficient compliance with Policy Condition No. 13 to sustain the insurance claim.
• Acknowledgment of Liability and Apparent Authority: Whether petitioner acknowledged liability through the reconciliation Statement/Agreement signed by its Finance Manager, binding petitioner notwithstanding the claim of lack of authority.
• Interest for Delayed Payment: Whether petitioner is liable to pay 24% interest per annum on the P842,683.40 claim from May 3, 1985 until fully paid.

• Compliance with Policy Condition No. 13: Yes. Substantial compliance sufficed, the insured having given immediate notice and submitted the sworn statement of loss, formal claim and proof of loss required by Condition No. 13.
• Acknowledgment of Liability and Apparent Authority: Yes. Liability was acknowledged through Exhibit E reconciling the amount due at P842,683.40, signed by the finance manager summoned by petitioner's president to settle the claim, binding petitioner by apparent authority.
• Interest for Delayed Payment: Yes. Failure to pay within thirty days after proof of loss and ascertainment by agreement, or within ninety days after receipt of proof of loss, entitled the insured to interest at twice the Monetary Board ceiling, computed at 24% per annum from May 3, 1985.

• Compliance with Policy Condition No. 13: Condition No. 13 required immediate written notice, protection and inventory of property, and within sixty days a signed and sworn proof of loss stating time and origin, interests, values, encumbrances, other insurance and related particulars, plus exhibition of remaining property and production of books, bills and vouchers as reasonably required. The record showed immediate notification of the fire and submission of the Sworn Statement of Loss and Formal Claim and the Proof of Loss countersigned by the adjuster's representative. Because the rule requires substantial rather than strict compliance with documentary proof of loss, those submissions satisfied the condition despite non-submission of every item listed in the adjuster's letters.
• Acknowledgment of Liability and Apparent Authority: Even assuming certain documents were lacking, the violation was waived when petitioner, through Finance Manager Maghirang, signed Exhibit E breaking down the amount due as of February 1985. Antecedent thereto, President Ortega summoned Maghirang during a conference with Palallos to reconcile the claim without questioning the documentary submission, resulting in the agreed net sum. One clothing another with apparent authority and holding him out as agent cannot later deny that authority against a third person who dealt in good faith, and the contrary testimony of witness Luis Manapat was discredited as he was not yet with Summa Corporation during the negotiations.
• Interest for Delayed Payment: Sections 243 and 244 of the Insurance Code and Clause 29 of the policy required payment within thirty days after receipt of proof of loss and ascertainment by agreement or arbitration, and in any event within ninety days after receipt if no ascertainment was made within sixty days, with refusal or failure entitling the assured to interest at twice the Monetary Board ceiling unless the claim was fraudulent. Failure to pay within the fixed periods created prima facie evidence of unreasonable delay and triggered the duty to assess attorney's fees, expenses and doubled-ceiling interest. Here ascertainment by agreement fixing P842,683.40 was made, leaving petitioner until May 2, 1985 to pay; nonpayment thereafter justified 24% interest per annum from May 3, 1985 until full satisfaction.

• Substantial compliance with proof of loss — As regards submission of documents to prove loss under a fire policy, substantial rather than strict compliance with the requirements is deemed sufficient. Applied to hold that immediate notice plus the sworn statement of loss, formal claim and countersigned proof of loss satisfied Policy Condition No. 13 despite omission of other items enumerated in the adjuster's letters.
• Respect for concurrent factual findings — Factual findings and conclusions of the trial court and the Court of Appeals are entitled to great weight and respect and will not be disturbed on appeal absent a clear showing that facts or circumstances substantially affecting disposition were overlooked. Applied to decline deviation where both courts concurred that compliance was shown and liability was acknowledged.
• Apparent authority and estoppel of principal — One who clothes another with apparent authority as agent and holds him out to the public as such cannot later deny that authority against a third person who contracted in good faith and honest belief in the agency. Applied to bind petitioner to Exhibit E signed by its finance manager at the direction of its president to reconcile the claim.
• Prima facie unreasonable delay in insurance payment — Under Sections 243 and 244 of the Insurance Code, failure to pay loss or damage within thirty days after proof of loss and ascertainment, or within ninety days after receipt of proof of loss if no ascertainment occurs within sixty days, entitles the assured to interest at twice the Monetary Board ceiling and constitutes prima facie evidence of unreasonable delay. Applied to sustain 24% interest from the day after the payment deadline until full satisfaction.

• "Indeed, as regards the submission of documents to prove loss, substantial, not strict as urged by petitioner, compliance with the requirements will always be deemed sufficient." — States the controlling standard for Policy Condition No. 13 and supplies the ratio for sustaining the claim despite missing adjuster-requested documents.
• "One who clothes another with apparent authority as his agent and holds him to the public as such, cannot later be allowed to deny the authority of such person to act as his agent when such third person entered into the contract in good faith and in an honest belief that he is such agent." — Defines the agency estoppel applied to bind petitioner to the reconciliation signed by its finance manager.
• "Refusal or failure to pay the loss or damage within the time prescribed herein will entitle the assured to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling prescribed by the Monetary Board, unless such failure or refusal to pay is based on the ground that the claim is fraudulent." — Quotes the statutory and contractual basis for imposing doubled-ceiling interest for delayed payment of a non-life claim.
• "Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of reasonable delay in payment." — States the evidentiary consequence of nonpayment within Sections 243 and 244 that justified the finding of unreasonable withholding and the interest award.

• American Home Assurance Company vs. Chua, 309 SCRA 250, 260 (1999) — Cited as authority for the rule that factual findings of the trial court and Court of Appeals command great weight and will not be disturbed absent overlooked material facts.
• Noda vs. Cruz-Arnaldo, 151 SCRA 227, 231 (1987) — Cited, through Vance on insurance law, for the proposition that substantial rather than strict compliance with proof-of-loss documentary requirements suffices.
• Cathay Insurance Co., Inc. vs. Court of Appeals, 174 SCRA 11, 18 (1989) — Cited as authority that failure to pay within the time fixed in Sections 243 and 244 creates prima facie evidence of unreasonable delay supporting doubled-ceiling interest.

• Policy Condition No. 13, Fire Policy — Required immediate written notice, inventory, and sworn proof of loss within sixty days with specified particulars, plus exhibition of salvage and production of books and vouchers; non-compliance was invoked to defeat the claim but was held satisfied by substantial compliance.
• Clause 29, Settlement of Claim Clause, Fire Policy — Required payment within thirty days after proof of loss and ascertainment by agreement or arbitration, or within ninety days after receipt if no ascertainment within sixty days, with doubled Monetary Board interest for delay except for fraudulent claims; applied to reckon petitioner's deadline as May 2, 1985.
• Section 243, Insurance Code — Fixed the same thirty/sixty/ninety-day payment periods for non-life losses and authorized interest at twice the Monetary Board ceiling for refusal or failure to pay except on fraud grounds; applied to entitle Usiphil to interest for the duration of delay.
• Section 244, Insurance Code — Imposed the duty to determine unreasonable denial or withholding in insurance enforcement litigation and to award attorney's fees, expenses and doubled-ceiling interest from the day after the Section 242 or 243 deadline, with timely nonpayment as prima facie evidence of delay; applied to sustain attorney's fees and 24% interest.

Davide, Jr., C.J., Puno, Pardo, Ynares-Santiago, JJ., concur.