Sps. Nilo Cha and Stella Uy Cha vs.

Court of Appeals
G.R. No. 124520, August 18, 1997
Case Digest By: Kernell Sonny Salazar
Based on Sec. 17, Insurance Code
FACTS:
The Spouses Cha as lessees entered into a lease contract with CKS Development
Corporation. Under the lease contract, the lessee is prohibited from contracting fire
insurance policy to the merchandise inside the stall without written consent of the
lessor. Nonetheless, the Spouses insured the same for Php. 500,000.00 with the United
Insurance Co. Inc., without consent of CKS.
On the day that the lease contract was to expire, a fire occurred. When CKS find out
about the insurance, he demanded that the proceeds be paid directly to him based on
the lease contract in view of the fact that the insurance was contracted without his
consent.
RTC – decision: Ordering United to pay CKS of the insurance proceeds. amount of
335,063.11
CA – Affirmed RTC
ISSUE:
Whether or not CKS has insurable interest inside the leased premises.
HELD: 2 reporters here; limit my discussion in connection only with Sec. 17 The next
reporter, Ms. San Pedro will relate the case to Sec. 18.
None, CKS has no insurable interest in the goods and merchandise inside the leased
premises under the provisions of Section 17 of the Insurance Code which provide that,
“The measure of an insurable interest in property is the extent to which the insured
might be damnified by loss or injury thereof.”
Insurable interest is the actual, lawful, and substantial economic interest in the
preservation of the subject of insurance. In this case, the property insured is the goods
and merchandise inside the stall, Sps. Cha derives a benefit from the existence of this
MERCHANDISE and they also suffer loss from the destruction of this MERCHANDISE.
Hence, the measure of insurable interest (insurance proceeds) in this case is over the
said merchandise in the leased premises.

And that’s it po, the next reporter ms san pedro will continue discussing the ruling in
connection with sec 18..
This insurable interest over said merchandise remains with the insured, the Cha
spouses. The automatic assignment of the policy to CKS under the provision of the
lease contract is void for being contrary to law and/or public policy. The proceeds of the
fire insurance policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha
(herein co-petitioners). The insurer (United) cannot be compelled to pay the proceeds of
the fire insurance policy to a person (CKS) who has no insurable interest in the property
insured.
The liability of the Cha spouses to CKS for violating their lease contract in that Cha
spouses obtained a fire insurance policy over their own merchandise, without the
consent of CKS, is a separate and distinct issue which we do not resolve in this case.
“SEC. 18. No contract or policy of insurance on property shall be enforceable except for the
benefit of some person having an insurable interest in the property insured.
Measure of insurable interest in property (2000 Bar)
Under Sec. 17, the measure of insurable interest in property is the extent to which the insured might be damnified
by loss or injury thereof. Insurable interest in property does not necessarily imply a property interest in, or lien
upon, or possession of, the subject matter of the insurance, and neither title nor a beneficial interest is requisite to
the existence thereof. It is sufficient that the insured is so situated with reference to the property that he would be
liable to loss should it be injured or destroyed by the peril against which it is insured. Anyone has an insurable
interest in property who derives a benefit from its existence or would suffer loss from its destruction

- INSURABLE INTEREST – actual, lawful, and substantial economic interest in the

safety or preservation of the subject of the insurance free from loss, destruction,
or pecuniary damage or impairment,