1. Uy Hu v Prudential Assurance claims 60 cases of salmon of the value of P630.

There is no salmon at all in Exhibit

G.R. No. 27778 8. Plaintiff claims 30 cases of condensed milk of the value of P523, and on Exhibit 8,
16 December 1927 there is no condensed milk.).
Richie Rich ● Such is a fair comparison between the two statements as to the articles destroyed
Topic: Fire Insurance by the fire, from which it is very apparent that either plaintiff's claim or the
Petitioners: UY HU & CO. (plaintiff/insured) inventory made after the fire is false and fraudulent
Respondents: THE PRUDENTIAL ASSURANCE CO., LTD. (defendant/insurer) ● It further appears that immediately after the fire, four different photographs were
taken of the merchandise as it appeared after the fire, all of which corroborate the
FACTS inventory known as Exhibit 8 as to the amount, kind and quality of the merchandise
● Uy Hu & Co. is a general mercantile partnership engaged in the sale of in the bodegas at the time of the fire, and are conclusive proof that plaintiff's claim
merchandise. Prudential insured Uy Hu against loss and damage by fire the for P30,000 is both false and fraudulent
property, goods, wares and merchandise of the plaintiff for the sum of P30,000,- ● Photography is an exact science. Witnesses pro and con may testify falsely, but a
● while the policy was in full force and effect, the property therein described was photograph of a scene is not a false witness, and is conclusive evidence of the
destroyed by re without the fault or negligence of the plaintiff. actual facts appearing on the photograph. (lol not in 2019. This is a 1927 case)
● Uy Hu filed a claim with Prudential and submitted evidence to substantiate the ● Although much latitude should be given to the insured in presenting his proof of
claim. The evidence comprised of Chinese books, supposed translations of those claim as to the value of his loss, in particular as to the price, kind and quality of
books, the secret service report, and the alleged invoices of the insured also the property destroyed, yet where the proof is conclusive, as in this case, that the
translated from Chinese. insured made a claim for a large amount of property which was never in the
● Prudential refused to indemnify on the ground that said claim was false and bodegas at the time of the fire and for a much larger amount of property than
fraudulent, in that it was therein represented that the value of merchandise at the was actually in the bodegas, it makes the whole claim false and fraudulent, the
time of the fire was P32,523.30, whereas in truth and in fact a large part of the legal effect of which is to bar plaintiff from the recovery of the amount of its
merchandise claimed and represented in plaintiff's proof of loss was not in the actual loss
building at the time of the fire, and that the value of the merchandise which was The judgment of the lower court is reversed and the complaint dismissed, with costs. So
actually consumed or damaged by the fire was a very small part of the claim made ordered
by the plaintiff. Thus, accdg to Prudential, all of Uy Hu’s benefits were forfeited as
per paragraph 13 of the policy.
● The trial court ruled in favor of the insured.
● It is vigorously contended by the defendant that this proof of loss and the
"Particulars of the Claim" are false and fraudulent, and that they were made with
the intent to mislead and deceive as to the amount and value of the goods in the
building at the time of the fire, and that by reason thereof, under the terms and
conditions of the policy, the plaintiff is not entitled to recover anything.
●
ISSUE: W/N Uy Hu’s evidence was fraudulent - YES
● The evidence shows that the fire was an ordinary one, and that it did not start in
plaintiff's bodegas but in other buildings. Plaintiff's bodegas were constructed
mostly of stone, and the roof was of iron and strong materials, to which very little
damage was done. In truth and in fact, plaintiff was damaged much more by water
than by fire.
● The merchandise in the store was not damaged either by re or water, and all of it
was turned over to, and accepted by, the plaintiff, with an estimated value of
P1,453.13
● The adjuster found that the merchandise and effects in plaintiff's bodegas after the
fire was of the value of P4,823.20 (accompanied by a list of merch found in the
bodega, with corresponding value for each article), as opposed to the P32, 523.30
claimed by Uy Hu.
● The evidence shows that the value of lost goods was much less than what Uy Hu
claimed. Uy Hu claimed indemnity also for merchandise it did not have (ex. Plaintiff

2.) Malayan Insurance Co., Inc. v PAP Co., LTD.
GR 200784;
Aug 7 2013
By: Pax
Topic: Fire Insurance
Petitioner: Malayan Insurance Company, Inc.
Respondent: PAP Co., LTD (PHL. Branch)
Ponente: Mendoza, J.
Doctrine: Alteration in the use or condition of the insured property by the insured, which
increases the risk insured against, without the consent of the insurer, right for the insurer to
rescind the policy
Facts:
- Malayan issued a Fire Insurance Policy to PAP Co. covering machineries and equipment
located at Sanyo Bldg. Coverage was Php 15m and effective for a period of 1 year.
- The Fire Insurance Policy was procured by PAP Co for RCBC who was the mortgagee of the
properties covered by the Insurance Policy
- The insurance policy was renewed prior to its expiration on an “as is basis”; New period:
May 13 1997 to May 13 1998
- On Oct 12 1997, the subject properties were totally lost by fire – PAP Co filed its fire
insurance claim with Malayan
- Malayan denied the claim because the subject properties were actually removed from
Sanyo Bldg. and transferred to Pace Pacific Bldg
a. Pace Pacific Bldg was not the location indicated in the Policy
b. Later found out that the subject properties were exposed to greater risk
- PAP Co. filed a case vs. Malayan before the RTC – RTC ruled in favor of PAP Co., ordered
Malayan to indemnify PAP CO. for the loss under the Fire Insurance Policy because:
(1) failed to show proof that the transfer resulted to an increase in the risk insured
against
(2) found that PAP Co., was able to notify Malayan of the transfer when it notified
RCBC of the same
- Malayan appealed to the CA but the CA also ruled in favor of PAP Co because:
(1) Malayan failed to show that transfer was prohibited by the Insurance Policy
(2) Failed to show that consent was required prior to carrying out of transfer
(3) Malayan should have been aware of the transfer since this was carried out during
the renewed policy
(4) failed to show increase in the risk insured against
Issue: Whether the subject machineries and equipment should still be covered by the Fire
Insurance Policy? NO
Held:
- The subject machineries and equipment are no longer covered by the Fire Insurance Policy.
- Fire Insurance Policy did not allow the removal of the subject properties from the place
indicated in the Policy
- The policy’s Condition No. 9 (c) did not allow for the removal of the insured machineries
and equipment from the place which was indicated in the Insurance Policy
a. A removal or transfer of the subject properties without the consent of the
insurer, would free the insurer from any liability
- There was no notice to Malayan of the transfer. PAP Co, only notified RCBC not Malayan
- Admin assistant of Malayan (PAP Co’s witness) even testified that it was him who procured
the renewal policy, not RCBC
b. No written agreement between RCBC and Malayan
c. Denied that PAP Co notified Malayan
d. PAP Co knew that the Fire Insurance Policy would be renewed on an “as is
basis”
The transfer from Sanyo Bldg to Pace Pacific Bldg increased the risk insured against
Old location (Sanyo Bldg) New location (Pace Pacific Bldg)
Factory of automotive/computer parts of Factory that repack silicone sealant to
PAP Co and factory of zinc and aluminum plastic cylinders
die cast, plastic gear for copy machine by
Sanyo
Tariff rate of 0.449% Tariff rate of 0.657%
- The increase in the tariff rate put the subject properties at a greater risk of the loss
- Would have entailed an increase in the premium payment on the Fire Insurance Policy
- Malayan is entitled to rescind
- Policy was renewed on an “as is basis” – should have the same limitations and stipulations
- BUT in this case, the subject properties were no longer in the place indicated in the Policy
a. It was in a place of greater risk
b. Thus, is was now at PAP Co’s own risk – no longer covered by the Policy
- Sec 27 in relation to Sec 26 of the Insurance Code gives insurer right to rescind when there
is concealment
- Sec 168 (now Sec 170 under Title 2: Fire Insurance) likewise gives the insurer the right to
rescind:
SECTION 170. An alteration in the use or condition of a thing insured from that to which it
is limited by the policy made without the consent of the insurer, by means within the
control of the insured, and increasing the risks, entitles an insurer to rescind a contract of
fire insurance.
Notes:
An insurer can exercise right to rescind an insurance contract when:
1. Policy limits the use or condition of the thing insured
2. There is an alteration in said use or condition
3. Alteration is without the consent of the insurer
4. Alteration is made by means within the insured’s control
5. Alteration increases the risk of loss
WHEREFORE, the October 27, 2011 Decision of the Court of Appeals is hereby REVERSED and
SET ASIDE. Petitioner Malayan Insurance Company, Inc. is hereby declared NOT liable for the
loss of the insured machineries and equipment suffered by PAP Co., Ltd.

3. UNITED MERCHANTS V COUNTRY BANKERS
G.R. No. 198588 ; July 11, 2012
By: Nico Nunez
Topic: FIRE INSURANCE
Petitioners: UNITED MERCHANTS CORPORATION
Respondents: COUNTRY BANKERS INSURANCE CORPORATION
Ponente: CARPIO, J..
DOCTRINE: Thus, in fire insurance policies, which contain provisions such as Condition No. 15
of the Insurance Policy, a fraudulent discrepancy between the actual loss and that claimed in
the proof of loss voids the insurance policy. Mere filing of such a claim will exonerate the
insurer.
FACTS:
● Petitioner (UMC) is engaged in buying, selling, and manufacturing Christmas lights.
UMC leased a warehouse where it assembled and stored its products. UMC’s General
Manager Alfredo Tan insured UMC’s stocks in trade of Christmas lights against fire with
defendant Country Bankers Insurance Corporation (CBIC) for ₱15M. The policy stated,
“PROPERTY INSURED: On stocks in trade only, consisting of Christmas Lights, the
properties of the Assured or held by them in trust, on commissions, or on joint account
with others and/or for which they are responsible in the event of loss and/or damage
during the currency of this policy, whilst contained in the building of one lofty storey in
height, constructed of concrete and/or hollow blocks with portion of galvanized iron
sheets, under galvanized iron rood, occupied as Christmas lights storage.” UMC and
CBIC also executed Endorsement which provides that UMC’s stocks in trade were
insured against additional perils, to wit: "typhoon, flood, ext. cover, and full
earthquake."
● A fire gutted the warehouse rented by UMC. CBIC designated CRM Adjustment
Corporation (CRM) to investigate and evaluate UMC’s loss by reason of the fire. CBIC’s
reinsurer, Central Surety, likewise requested the National Bureau of Investigation (NBI)
to conduct a parallel investigation. UMC, through CRM, submitted to CBIC its Sworn
Statement of Formal Claim, with proofs of its loss. UMC demanded for at least 50%
payment of its claim from CBIC. However, CBIC rejected UMC’s claim due to breach of
Condition No. 15 of the Insurance Policy. Condition No. 15 states:
If the claim be in any respect fraudulent, or if any false declaration be made or used in
support thereof, or if any fraudulent means or devices are used by the Insured or
anyone acting in his behalf to obtain any benefit under this Policy; or if the loss or
damage be occasioned by the willful act, or with the connivance of the Insured, all the
benefits under this Policy shall be forfeited.
● UMC sued CBIC. To support its claim, UMC procured sworn statements and
certifications from the Bureau of Fire Protection. The documents showed that the
estimated amount of damage was at ₱55M. The certification also stated that no
evidence shows that the fire was willfully and intentionally created; that the
investigation of the fire incident is already closed being accidental in nature. CBIC
countered, averring: that the complaint states no cause of action; that the claim
already prescribed; that the claim is tainted with fraud. CBIC alleged that UMC’s claim
was fraudulent because UMC’s Statement of Inventory showed that it had no stocks in
trade, and that UMC’s suspicious purchases for the year did not even amount to ₱25M.
UMC’s GIS and Financial Reports further revealed that it had insufficient capital, which
meant UMC could not afford the alleged ₱50M worth of stocks in trade. Both parties
presented evidence in the form of receipts, records, and testimonies to bolster their
respective stances as to the issue of fraud.
● RTC ruled in favor of UMC, elaborating that “Fraud is never presumed but must be
proved by clear and convincing evidence. Defendant failed to establish by clear and
convincing evidence that the documents submitted to the SEC and BIR were true. It is
common business practice for corporations to have 2 sets of reports/statements for tax
purposes. The stipulated documents of plaintiff may not have been accurate.” CA
reversed the RTC’s ruling, finding that the fire was intentional in origin, considering the
array of evidence submitted by CBIC, particularly the pictures taken and the reports of
Cabrera and Lazaro, as opposed to UMC’s failure to explain the details of the alleged
fire accident. In addition, it found that UMC’s claim was overvalued through fraudulent
transactions.
● In this present case, UMC contends that because it had already established a prima
facie case against CBIC which failed to prove its defense, UMC is entitled to claim the
full coverage under the Insurance Policy. On the other hand, CBIC contends that
because arson and fraud attended the claim, UMC is not entitled to recover under
Condition No. 15 of the Insurance Policy. UMC also contends that CBIC failed to prove
that arson was committed; therefore the allegations of fraud must be dropped.
ISSUE(1): W/N the failure to prove arson equates to the failure to prove fraud - NO
ISSUE(2): W/N UMC’s claim is tainted with fraud and, thus, should not be honored. – YES
● Burden of proof is the duty of any party to present evidence to establish his claim or
defense by the amount of evidence required by law, which is preponderance of
evidence in civil cases. The party, whether plaintiff or defendant, who asserts the
affirmative of the issue has the burden of proof to obtain a favorable judgment. In
insurance cases, once an insured makes out a prima facie case in its favor, the burden
of evidence shifts to the insurer to controvert the insured’s prima facie case.
● In the present case, UMC established a prima facie case against CBIC. CBIC does not
dispute that UMC’s stocks in trade were insured against fire under the Insurance Policy
and that the warehouse, where UMC’s stocks in trade were stored, was gutted by fire
within the duration of the fire insurance. However, since CBIC alleged an excepted risk,
then the burden of evidence shifted to CBIC to prove such exception.
● In prosecutions for arson, proof of the crime charged is complete where the evidence
establishes: (1) the corpus delicti, that is, a fire caused by a criminal act; and (2) the
 identity of the defendants as the one responsible for the crime. Corpus delicti means
the substance of the crime, the fact that a crime has actually been committed. This is
satisfied by proof of the bare occurrence of the fire and of its having been intentionally
caused. Ultimately, CBIC was not successful in proving that arson was committed.
● However, the failure to prove arson does not mean CBIC also failed to prove fraud. In
Qua Chee Gan, the Court dismissed the allegation of fraud based on the dismissal of the
arson case against the insured, because the evidence was identical in both cases. In the
present case, arson and fraud are two separate grounds based on two different sets of
evidence, either of which can void the insurance claim of UMC. The absence of one
does not necessarily result in the absence of the other. Thus, on the allegation of fraud,
we affirm the findings of the Court of Appeals.
● The invoices presented by UMC cannot be taken as genuine. The invoices reveal that
the stocks in trade purchased for 1996 amounts to ₱20M which were purchased in one
month. Thus, UMC needs to prove purchases amounting to ₱30M worth of stocks in
trade for 1995 and prior years. However, in the Statement of Inventory it submitted to
the BIR, which is considered an entry in official records, UMC stated that it had no
stocks in trade as of 31 December 1995. In its defense, UMC alleged that it did not
include as stocks in trade the raw materials to be assembled as Christmas lights, which
it had on 31 December 1995. However, as proof of its loss, UMC submitted invoices for
raw materials, knowing that the insurance covers only stocks in trade. Equally
important, the invoices from Fuze Industries Manufacturer Phils. were suspicious. The
purchases, based on the invoices and without any supporting contract, amounted to
₱19,550,400.00 worth of Christmas lights from 20 January 1996 to 23 February 1996.
An uncontroverted testimony revealed that there was no Fuze Industries Manufacturer
Phils. located at "55 Mahinhin St., Teacher’s Village, Quezon City," the business address
appearing in the invoices and the records of the Department of Trade & Industry.
● Moreover, UMC declared in its financial statement assets amounting to ₱1,050,862.71
and liabilities amounting to ₱167,058.47. In the present case, it appears that the claim
UMC seeks to enforce is 25 times the actual claim proved. It has long been settled that
a false and material statement made with an intent to deceive or defraud voids an
insurance policy. The most liberal human judgment cannot attribute such difference to
mere innocent error in estimating or counting but to a deliberate intent to demand
from insurance companies payment for indemnity of goods not existing at the time of
the fire. This constitutes the so-called "fraudulent claim" which, by express agreement
between the insurers and the insured, is a ground for the exemption of insurers from
civil liability.
● UMC admitted the discrepancies when it stated that "discrepancies in its statements
were not covered by the warranty such that any discrepancy in the declaration in other
instruments or documents as to matters that may have some relation to the insurance
coverage voids the policy."
● On UMC’s allegation that it did not breach any warranty, it may be argued that the
discrepancies do not, by themselves, amount to a breach of warranty. However, the
Insurance Code provides that "a policy may declare that a violation of specified
provisions thereof shall avoid it." Thus, in fire insurance policies, which contain
provisions such as Condition No. 15 of the Insurance Policy, a fraudulent discrepancy
between the actual loss and that claimed in the proof of loss voids the insurance policy.
Mere filing of such a claim will exonerate the insurer.
● Considering that all the circumstances point to the inevitable conclusion that UMC
padded its claim and was guilty of fraud, UMC violated Condition No. 15 of the
Insurance Policy. Thus, UMC forfeited whatever benefits it may be entitled under the
Insurance Policy, including its insurance claim.
Dispositive Portion: WHEREFORE, we DENY the petition. We AFFIRM the 16 June 2011
Decision and the 8 September 2011 Resolution of the Court of Appeals in CA-G.R. CV No.
85777.
4. MALAYAN V. CA, VALLEJOS, ET AL
GR L-36413 / SEPT 26 1988
By: Claire
Topic: CASUALTY INSURANCE
Petitioners: MALAYAN INSURANCE CO., INC
Respondents: THE HON. COURT OF APPEALS (THIRD DIVISION) MARTIN C. VALLEJOS, SIO
CHOY, SAN LEON RICE MILL, INC. and PANGASINAN TRANSPORTATION CO., INC.
Ponente: PADILLA
FACTS:
▪ Malayan issued in favor of Sio Choy a Private Car Comprehensive Policy covering a
Willys jeep.
o The coverage was for own damage not to exceed P600 and third-party
liability for P20k
▪ During the effectivity of said policy, the insured jeep, while being driven by Juan
Campollo, an employee of San Leon Rice Mill, collided with a passenger bus
belonging to Pangasinan Transportation (PANTRANCO) at the national highway in
Rosales, Pangasinan, causing damage to the insured vehicle and injuries to the
driver Campollo and Martin Vallejos who was riding the jeep.
▪ Vallejos filed an action for damages against Sio Choy, Malayan, and PANTRACO. He
prayed that defendants be ordered to pay him for medical and hospital expenses,
lost income, actual, moral, and compensatory damages, and atty’s fees
▪ PANTRANCO claimed that the jeep of Sio Choy was then operated at an excessive
speed and bumped the PANTRANCO bus which had moved to, and stopped at the
shoulder of the highway in order to avoid the jeep; and that it had observed the
diligence of a good father of a family to prevent damage, especially in the selection
and supervision of its employees and in the maintenance of its motor vehicles. It
prayed that it be absolved from any and all liability
▪ Sio Choy and Malayan also denied liability to Vallejos, claiming that the fault in the
accident was solely imputable to PANTRANCO
▪ Sio Choy later filed a separate answer wherein he alleged that he paid Vallejos for
hospitalization and other expenses
o And in his cross-claim against Malayan, he alleged that Malayan issued a
policy wherein it obligated itself to indemnify Sio Choy for the damage to
his motor vehicle, as well as any liability to 3 rd persons arising out of any
 accident during the effectivity of the policy. He prayed that he be
reimbursed by Malayan for the amount that he may be ordered to pay
▪ Also later, Malayan sought and was granted leave to file a 3 rd party complaint
against San Leon Rice Mill for the reason that the person driving the jeep of Sio
Choy was an employee of San Leon performing his duties w/in the scope of his task,
and that as employer, San Leon should be liable for the acts of its employees under
Art 2180 of Civil Code. Malayan prayed that judgment be rendered against San
Leon, making it liable for the amounts claimed by Vallejos, and ordering San Leon
to reimburse and imdemnify Malayan for any sum that it may pay to Vallejos
▪ RTC: in favor of Vallejos, against Sio Choy, Malayan, and San Leon.
▪ CA affirmed. Held that the 3 are jointly and severally liable for the damages
awarded to Vallejos. However, San Leon has no obligation to indemnify/reimburse
Malayan as it was not a privy to the contract of insurance between Sio Choy and
Malayan.
ISSUE: WON San Leon should reimburse Malayan – YES
HELD:
▪ Sio Choy and San Leon are the only ones solidarily liable to Vallejos for damages.
o Sio Choy was made liable pursuant to Art. 2184 of the Civil Code
o San Leon’s liability is based on Art. 2180 of the Civil Code
o These two are the principal tortfeasors liable to Vallejos
▪ While it is true that where the insurance contract provides for indemnity against
liability to third persons, such third persons can directly sue the insurer, 6 however,
the direct liability of the insurer under indemnity contracts against third party
liability does not mean that the insurer can be held solidarily liable with the insured
and/or the other parties found at fault. The liability of the insurer is based on
contract; that of the insured is based on tort.
▪ In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Vallejos,
but it cannot, as incorrectly held by the trial court, be made "solidarily" liable with
the two principal tortfeasors, namely respondents Sio Choy and San Leon Rice Mill,
Inc. For if petitioner-insurer were solidarily liable with said two (2) respondents by
reason of the indemnity contract against third party liability — under which an
insurer can be directly sued by a third party — this will result in a violation of the
principles underlying solidary obligation and insurance contracts.
▪ In the case at bar, the trial court held petitioner together with respondents Sio
Choy and San Leon Rice Mills Inc. solidarily liable to respondent Vallejos for a total
amount of P29,103.00, with the qualification that petitioner's liability is only up to
P20,000.00. In the context of a solidary obligation, petitioner may be compelled by
respondent Vallejos to pay the entire obligation of P29,013.00, notwithstanding the
qualification made by the trial court. Moreover, the qualification made in the
decision of the trial court to the effect that petitioner is sentenced to pay up to
P20,000.00 only when the obligation to pay P29,103.00 is made solidary, is an
evident breach of the concept of a solidary obligation. Thus, We hold that the trial
court, as upheld by the Court of Appeals, erred in holding petitioner, solidarily
liable with respondents Sio Choy and San Leon Rice Mill, Inc. to respondent
Vallejos.
▪ Malayan, upon paying respondent Vallejos the amount of not exceeding
P20,000.00, shall become the subrogee of the insured, the respondent Sio Choy; as
such, it is subrogated to whatever rights the latter has against respondent San Leon
Rice Mill, Inc. Article 1217 of the Civil Code gives to a solidary debtor who has paid
the entire obligation the right to be reimbursed by his co-debtors for the share
which corresponds to each. Upon payment to Villegas, Malayan becomes the
subrogee of solidary debtor Sio Choy, and is entitled to reimbursement from San
Leon.
▪ San Leon must reimburse Malayan P14,551.50 (half of the 29k)
WHEREFORE, the petition is GRANTED. The decision of the trial court, as affirmed by the
Court of Appeals, is hereby AFFIRMED, with the modification above-mentioned. Without
pronouncement as to costs. SO ORDERED.
5. COQUIA v FIELDMEN’S INSURANCE
G.R. No. L-23276 November 29, 1968
By: Jon (Carlo’s original digest since this is basically the entire case)
PLAINTIFFS-APPELLEES: MELECIO COQUIA, MARIA ESPANUEVA and MANILA YELLOW
TAXICAB CO., INC.
DEFENDANT-APPELLANT: FIELDMEN'S INSURANCE CO., INC.
CONCEPCION, C.J.:
FACTS: On December 1, 1961, appellant Fieldmen's Insurance Company, Inc. issued, in favor
of the Manila Yellow Taxicab Co., Inc. a common carrier accident insurance policy, covering
the period from December 1, 1961 to December 1, 1962. It was stipulated in said policy that:
The Company will, subject to the Limits of Liability and under the Terms of this Policy,
indemnify the Insured in the event of accident caused by or arising out of the use of Motor
Vehicle against all sums which the Insured will become legally liable to pay in respect of:
Death or bodily injury to any fare-paying passenger including the Driver, Conductor and/or
Inspector who is riding in the Motor Vehicle insured at the time of accident or injury.
While the policy was in force, or on February 10, 1962, a taxicab of the Insured, driven by
Carlito Coquia, met a vehicular accident in consequence of which Carlito died. The Insured
filed therefor a claim for P5,000.00 to which the Company replied with an offer to pay
P2,000.00, by way of compromise. The Insured rejected the same and made a counter-offer
for P4,000.00, but the Company did not accept it.
The Insured and Carlito's parents filed a complaint against the Company to collect the
proceeds of the aforementioned policy. In its answer, the Company admitted the existence
thereof, but pleaded lack of cause of action on the part of the plaintiffs.
TRIAL COURT: Company to pay to the plaintiffs the sum of P4,000.00 and the costs.
Hence, this appeal by the Company
ISSUE: plaintiffs have no cause of action because:
1) the Coquias have no contractual relation with the Company;
2) the Insured has not complied with the provisions of the policy concerning arbitration.
HELD:
FIRST ISSUE: In general, only parties to a contract may bring an action based thereon, this
rule is subject to exceptions, one of which is found in the second paragraph of Article 1311 of
the Civil Code of the Philippines, reading:
If a contract should contain some stipulation in favor of a third person, he may
demand its fulfillment provided he communicated his acceptance to the obligor
before its revocation. A mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly and deliberately conferred a
favor upon a third person.
This is but the restatement of a well-known principle concerning contracts pour autrui, the
enforcement of which may be demanded by a third party for whose benefit it was made,
although not a party to the contract, before the stipulation in his favor has been revoked by
the contracting parties.
Does the policy in question belong to such class of contracts pour autrui?
In this connection, said policy provides, inter alia:
Section I — Liability to Passengers. 1. The Company will indemnify the Insured in
the event of accident caused by or arising out of the use of Motor Vehicle against
all sums which the Insured will become legally liable to pay in respect of: Death or
bodily injury to any fare-paying passenger including the Driver ... who is riding in
the Motor Vehicle insured at the time of accident or injury.
Section II — Liability to the Public
xxx xxx xxx
3. ...the Company will indemnify any authorized Driver who is driving the Motor
Vehicle....
Conditions
xxx xxx xxx
7. In the event of death of any person entitled to indemnity under this Policy, the
Company will, in respect of the liability incurred by such person, indemnify his
personal representatives in terms of and subject to the limitations of this Policy,
provided, that such representatives shall, as though they were the Insured,
observe, fulfill and be subject to the Terms of this Policy insofar as they can apply.
8. The Company may, at its option, make indemnity payable directly to the
claimants or heirs of claimants, with or without securing the consent of or prior
notification to the Insured, it being the true intention of this Policy to protect, to
the extent herein specified and subject always to the Terms Of this Policy, the
liabilities of the Insured towards the passengers of the Motor Vehicle and the
Public.
Pursuant to these stipulations, the Company "will indemnify any authorized Driver who is
driving the Motor Vehicle" of the Insured and, in the event of death of said driver, the
Company shall, likewise, "indemnify his personal representatives." In fact, the Company
"may, at its option, make indemnity payable directly to the claimants or heirs of claimants ...
it being the true intention of this Policy to protect ... the liabilities of the Insured towards the
passengers of the Motor Vehicle and the Public" — in other words, third parties.
Thus, the policy under consideration is typical of contracts pour autrui, this character being
made more manifest by the fact that the deceased driver paid fifty percent (50%) of the
corresponding premiums, which were deducted from his weekly commissions.
Under these conditions, it is clear that the Coquias — who, admittedly, are the sole heirs of
the deceased — have a direct cause of action against the Company, and, since they could
have maintained this action by themselves, without the assistance of the Insured, it goes
without saying that they could and did properly join the latter in filing the complaint herein.
SECOND ISSUE:
If any difference or dispute shall arise with respect to the amount of the Company's
liability under this Policy, the same shall be referred to the decision of a single
arbitrator to be agreed upon by both parties or failing such agreement of a single
arbitrator, to the decision of two arbitrators, one to be appointed in writing by each
of the parties within one calendar month after having been required in writing so to
do by either of the parties and in case of disagreement between the arbitrators, to
the decision of an umpire who shall have been appointed in writing by the
arbitrators before entering on the reference and the costs of and incident to the
reference shall be dealt with in the Award. And it is hereby expressly stipulated and
declared that it shall be a condition precedent to any right of action or suit upon
this Policy that the award by such arbitrator, arbitrators or umpire of the amount of
the Company's liability hereunder if disputed shall be first obtained.
The record shows, however, that none of the parties to the contract invoked this section, or
made any reference to arbitration, during the negotiations preceding the institution of the
present case.
In fact, counsel for both parties stipulated, in the trial court, that none of them had, at any
time during said negotiations, even suggested the settlement of the issue between them by
arbitration, as provided in said section. Their aforementioned acts or omissions had the
effect of a waiver of their respective right to demand an arbitration.
It will be observed that the obligation to procure or demand an arbitration is not, by this
clause, in terms imposed on either party. Each party is entitled to demand a reference, but
neither can compel it, and neither has the right to insist that the other shall first demand it,
and shall forfeit any right by not doing so. If the company demands it, and the insured
refuses to arbitrate, his right of action is suspended until he consents to an arbitration; and if
the insured demands an arbitration, and the company refuses to accede to the demand, the
insured may maintain a suit on the policy.
Where neither party demands an arbitration, both parties thereby waive it.
Any conduct of the parties inconsistent with the notion that they treated the arbitration
provision as in effect, or any conduct which might be reasonably construed as showing that
they did not intend to avail themselves of such provision, may amount to a waiver thereof
and estop the party charged with such conduct from claiming its benefits.
The decisive facts here are that both parties from the inception of their dispute proceeded in
entire disregard of the provisions of the contract relating to arbitration and that neither at
 any stage of such dispute, either before or after commencement of the action, demanded
arbitration, either by oral or written demand, pleading, or otherwise.
Their conduct was as effective a rejection of the right to arbitrate as if they had said, "We do
not choose to arbitrate". As arbitration was chosen by neither, a waiver by both of the right
to arbitration followed as a matter of law.
WHEREFORE, the decision appealed from should be as it is hereby affirmed in toto, with costs
against the herein defendant-appellant, Fieldmen's Insurance Co., Inc. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando and Capistrano, JJ.,
concur.
6. GSIS v. CA
[G.R. No. 101439. June 21, 1999.]
CB
TOPIC: CASUALTY INSURANCE
PETITIONER: GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS)
RESPONDENT: COURT OF APPEALS (former Tenth Division), VICTORIA JAIME VDA. DE KHO,
for herself and minor ROY ROLAND, GLORIA KHO VDA. DE CALABIA for herself and minors
MARY GRACE, WILLIE, JR., VOLTAIRE, GLENN, and MAY, all surnamed CALABIA, DANIEL KHO,
JOSEFINA KHO, EMERITA KHO APEGO, ANTONIO KHO and TERESITA KHO
PONENTE: QUISUMBING, J
FACTS:
● National Food Authority (NFA) was the owner of a Chevrolet truck which was insured
against liabilities for death of and injuries to third persons with the GSIS.
● On May 9, 1979, at about 7:00 in the evening at Tabon-Tabon, Butuan City, the said truck
driven by Guillermo Corbeta collided with a public utility vehicle, a Toyota Tamaraw. The
Toyota Tamaraw was owned and operated by Victor Uy, under the name and style of
"Victory Line." The Tamaraw was a total wreck.
● All the collision victims were passengers of the Toyota Tamaraw. Five (5) passengers died
4 while ten (10) others sustained bodily injuries. Among those injured were private
respondents, Victoria Jaime Vda. de Kho and Gloria Kho Vda. de Calabia. Among the dead
were Maxima Ugmad Vda. de Kho, Roland Kho and Willie Calabia, Sr.
● Three (3) cases were filed with the Court of First Instance of Agusan del Norte and
Butuan City.
o The first, Civil Case No. 2196 for quasi-delict, damages and attorney’s fees, was
commenced by Uy on June 5, 1979 against NFA and Corbeta. On August 27, 1979, the
second, Civil Case No. 2225 for damages, was filed by an injured passenger, Librado
Taer, against Uy, the operator of the public utility vehicle, and insurer, Mabuhay
Insurance and Guaranty Co. (MIGC).
o In turn, Uy filed a cross-claim against MIGC and a third-party complaint against
Corbeta and NFA.
o The third, Civil Case No. 2256, was instituted by herein private respondents on
November 26, 1979 against the following: NFA and Corbeta for damages due to
quasi-delict; GSIS as insurer of the truck; Uy for breach of contract of carriage; and
MIGC as insurer of the Toyota Tamaraw.
● RTC rendered its decision 5 holding that Corbeta’s negligence was the proximate cause of
the collision. The findings of the trial court stated that the truck which crossed over to
the other lane was speeding because after the collision, its left front wheel was detached
and the truck traveled for about fifty (50) meters and fell into a ravine. 6 Likewise, the
court concluded that if both vehicles had traveled in their respective lanes, the incident
would not have occurred. However, the Chevy cargo truck had crossed over to the other
lane which, under traffic rules, was the lane of the Toyota Tamaraw.
● In Civil Case No. 2225, said court dismissed the case against Uy and ordered MIGC,
Corbeta and NFA to pay plaintiff Taer, jointly and severally, the total amount of forty
thousand five hundred fifty-nine pesos and ninety four centavos (P40,559.94) for actual,
compensatory, and moral damages plus attorney’s fees. Damages were likewise awarded
to the herein private respondents in Civil Case No. 2256, as earlier mentioned.
● CA affirmed
CONTENTION: Petitioner denies solidary liability with the NFA or the negligent operator of
the cargo truck because it claims that they are liable under different obligations.
It asserts that the NFA’s liability is based on quasi-delict, while petitioner’s liability is based
on the contract of insurance. Citing articles 1207 11 and 1208 12 of the Civil Code of the
Philippines, petitioner states that when there are two or more debtors or two or more
creditors, the obligation as a general rule is joint. It claims that the only exceptions are: (1)
when there is a stipulation for solidary obligation; (2) when the nature of the obligation
requires solidary liability; and (3) when the law declares the obligation to be solidary.
However, since neither the provision of the contract nor the insurance law provides for
solidary liability, petitioner asserts that the presumption is that its obligation arising from a
contract of insurance is joint.
ISSUE:
ISSUE STATED IN THE CASE: Whether the respondent court erred in holding GSIS solidarily
liable with the negligent insured/owner-operator of the Chevrolet truck for damages
awarded to private respondents which are beyond the limitations of the insurance policy and
the Insurance Memorandum Circular No. 5-78. no
ISSUE FOR RECIT: WON the injured or the heirs of a deceased victim of a vehicular accident
may sue directly the insurer of the vehicle. yes
HELD:
● Petitioner’s position insofar as joint liability is concerned is not tenable.
● It is now established that the injured or the heirs of a deceased victim of a vehicular
accident may sue directly the insurer of the vehicle.
● Common carriers are required to secure Compulsory Motor Vehicle Liability Insurance
[CMVLI] coverage as provided under Sec. 374 of the Insurance Code, precisely for the
benefit of victims of vehicular accidents and to extend them immediate relief.
● Shafer v. Judge:
o "Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is
primarily intended to provide compensation for the death or bodily injuries suffered
by innocent third parties or passengers as a result of a negligent operation and use of
motor vehicles. The victims and/or their defendants are assured of immediate
financial assistance, regardless of the financial capacity of motor vehicle owners.
 x          x           x
The injured for whom the contract of insurance is intended can sue directly the
insurer. The general purpose of statutes enabling an injured person to proceed
directly against the insurer is to protect injured persons against the insolvency of the
insured who causes such injury, and to give such injured person a certain beneficial
interest in the proceeds of the policy, and statutes are to be liberally construed so
that their intended purpose may be accomplished. It has even been held that such a
provision creates a contractual relation which inures to the benefit of any and every
person who may be negligently injured by the named insured as if such injured
person were specifically named in the policy.
● However, although the victim may proceed directly against the insurer for indemnity,
the third party liability is only up to the extent of the insurance policy and those
required by law. While it is true that where the insurance contract provides for
indemnity against liability to third persons, and such third persons can directly sue the
insurer, the direct liability of the insurer under indemnity contracts against third party
liability does not mean that the insurer can be held liable in solidum with the insured
and/or the other parties found at fault.
● For the liability of the insurer is based on contract; that of the insured carrier or vehicle
owner is based on tort. The liability of GSIS based on the insurance contract is direct, but
not solidary with that of the NFA. The latter’s liability is based separately on Article 2180
of the Civil Code.
● Obviously, the insurer could be held liable only up to the extent of what was provided for
by the contract of insurance, in accordance with CMVLI law.
● Consequently, heirs of the victims who died in the May 9, 1979 vehicular incident, could
proceed (1) against GSIS for the indemnity of P12,000 for each dead victim, and against
NFA and Guillermo Corbeta for any other damages or expenses claimed; or (2) against
NFA and Corbeta to pay them all their claims in full.
● It follows also that injured victims, Gloria Kho Vda. de Calabia and Victoria Kho, could
claim their medical expenses for eight thousand nine hundred thirty-five pesos and six
centavos (P8,935.06) and eight hundred thirty-two (P832.00) pesos, from any of the
following: GSIS, NFA, or Corbeta. As to the other damages, only NFA or Corbeta may be
held liable therefor.
● Computation of hospital charges and fees for the services rendered to the injured victims
was conclusively established by the trial court. The petitioner failed to object to the
evidence thereon, when presented by the private respondents during the trial. Thus,
these factual bases for the award of damages may no longer be attacked.
UNNECESSARY ISSUE:
● Petitioner contends that it cannot be held liable without proof nor allegation that the
private respondents filed before its office a notice of claim within six (6) months from the
date of the accident.
● Although merely factual, we need to emphasize that the alleged delay in reporting the
loss by the insured and/or by the beneficiaries must be promptly raised by the insurer in
objecting to the claims. When the insured presented proof of loss before the trial court,
the insurer failed to object to said presentation. The petitioner should have promptly
interposed the defense of delay, or belated compliance, concerning the notice of claim.
Moreover, the petitioner merely waited for the victims or beneficiaries to file their
complaint. As matters stand now, the defense of laches or prescription is deemed waived
because of petitioner’s failure to raise it not only before but also during the hearing.
● To recapitulate, petitioner seeks a definitive ruling only on the extent of its liability, as
insurer of NFA, to those injured or killed in the May 9, 1979 vehicular collision.
DISPOSITIVE PORTION:
WHEREFORE, the instant petition is hereby GRANTED, but the decision of the trial court as
affirmed by the Court of Appeals is hereby MODIFIED, as follows:
1. Petitioner Government Service Insurance System is ordered to pay (a) twelve thousand
pesos (P12,000.00) as death indemnity to each group of heirs of the deceased, Willie Calabia
Sr., Roland Kho and Maxima Ugmad Vda. de Kho; (b) eight hundred thirty-two (P832.00)
pesos for medical expenses of Victoria Jaime Vda. de Kho; and (c) eight thousand, nine
hundred thirty-five pesos and six centavos (P8,935.06) for medical expenses of Gloria Kho
Vda. de Calabia.
2. Guillermo Corbeta, National Foods Authority, and Mabuhay Insurance & Guaranty Co.,
Inc., jointly and severally, are ordered to pay private respondents’ claims 28 as adjudged by
the Regional Trial Court of Butuan City, minus the amounts that GSIS must pay to the injured
victims and the heirs of the deceased victims as above stated.
This decision is immediately executory. No pronouncement as to costs.
SO ORDERED.
7. First Integrated Bonding v Hernando
G.R. No. 51221
July 31, 1991
SPV
Topic: Casualty Insurance
Petitioners: First Integrated Bonding & Insurance Co
Respondents: Hon. Harold M. Hernando, Victorino Advincula, Romana Advincula, Silverio
Blanco and the Sheriff of Manila and his Deputy Sheriffs
Ponente: Medialdea
FACTS
- Silverio Blanco owned a passenger jeepney which is insured against liabilities for
death and injuries to third persons with First Integrated Bonding & Insurance
Company (First Insurance)
- Said jeepney bumped a five-year old child, Deogracias Advincula, causing his death.
- The child’s parents (Sps Advincula) filed a complaint against Silverio Blanco.
o First Insurance was impleaded as insurer.
- Only Blanco filed an answer and First Insurance was declared in default.
- The trial court ruled in favor of Sps Advincula:
o 5K for moral damages
o 12K for the life of Deogracias
o 3,664.50 for funeral expenses
o The satisfaction of these damages divulged independently upon First
insurance
 - First Insurance filed a petition for relief from judgment
- Sps Advincula opposed stating that:
o the petition is filed out of time
o there was gross and notorious negligence of First Insurance
o the court has jurisdiction over their cause of action
- Trial court denied the petition
o 191 days already expired, which is more that the 6-month period
required by Sec 3 Rule 38 of the Rules of Court.
o First Insurance was duly summoned and served a copy of the complaint,
and it was received by the President of the Insurance Company as shown
by the Certificate of Service of Sheriff of Manila.
▪ First Insurance was grossly and notoriously negligent in giving
proper attention to the case (since they have been declared in
default before)
o The court has jurisdiction since Section 416 of the Insurance Code
provides that the authority granted to the Commissioner of Insurance
shall be concurrent to that of the civil courts, but the filing of a complaint
with the commissioner shall preclude the civil courts from taking
cognizance of a suit involving the same subject matter.
▪ Matter of exhaustion of administrative remedy may be waived
since First Insurance was declared in default.
- First Insurance filed an MR but it again failed to appear hence it was denied by the
trial court.
- First Insurance filed a petition for certiorari on the grounds that:
1. Sps Advincula has no cause of action against First Insurance
o They may only proceed against the driver, Blanco.
o They are not parties to the insurance contract hence they have no COA
against First Insurance
2. The trial court erred when it rendered judgment only on the basis of the
documentary evidence presented during the pre-trial conference
3. It cannot be held liable in excess of the limits of liability as provided in the
insurance policy
ISSUE: W/N Sps. Advincula has cause of action against First Insurance – YES
HELD:
- Where the insurance contract provides for indemnity against liability to a third
party, such third party can directly sue the insurer.
- The liability of the insurer to such third person is based on contract while the
liability of the insured to the third party is based on tort.
o The purpose is to protect injured persons against the insolvency of the
insured who causes such injury, and to give such injured person a certain
beneficial interest in the proceeds of the policy.
- A provision creates a contractual relation which inures to the benefit of any and
every person who may be negligently injured by the named insured as if such
injured person were specifically named in the policy.
- First Insurance e cannot evade its liability as insurer by hiding under the cloak of
the insured.
o Its liability is primary and not dependent on the recovery of judgment
from the insured.
- "Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is
primarily intended to provide compensation for the death or bodily injuries
suffered by innocent third parties or passengers as a result of a negligent operation
and use of motor vehicles.
o The victims and or their dependents are assured of immediate financial
assistance, regardless of the financial capacity of the motor vehicle
owners.
- ". . . the insurer's liability accrues immediately upon the occurrence of the injury or
event upon which the liability depends, and does not depend on the recovery of
judgment by the injured party against the insured.
- It should be noted that First Insurance was declared in default because of its failure
to file an answer.
o It failed to raise any triable issue. It lost its standing in court and
judgment may be rendered against it on the basis only of the evidence of
the Advincula spouses.
- First Insurance had been given its day in court. Despite its having been declared in
default and its failure to file a motion to lift the order of default, it was still notified
of the subsequent proceedings in the trial court.
o But no positive step was taken by it on time to vacate the order of
default, the decision nor the amended decision. Instead, it chose to file a
petition for relief from judgment, almost five (5) months from its receipt
of a copy of the amended decision.
o Clearly, the said petition for relief from judgment was filed out of time.
- The rules require that such petitions must be filed within sixty (60) days after the
petitioner learns of the j udgment and not more than six (6) months after such
judgment was entered (Rule 38, Section 3).
o The period fixed by Rule 38 of the Rules of Court is non-extendible and
never interrupted. It is not subject to any condition or contingency,
because it is itself devised to meet a condition or contingency.
- The remedy allowed by Rule 38 is an act of grace, as it were, designed to give the
aggrieved party another and last chance.
o Being in the position of one who begs, such party's privilege is not to
impose conditions, haggle or dilly-dally, but to grab what is offered him.
Dispositive
ACCORDINGLY, finding respondent judge to have acted within his jurisdiction in denying the
petition for relief from judgment, the petition is DISMISSED. The questioned decision of the
trial court in Civil Case No. 1104 having become final and executory, is AFFIRMED. The
temporary restraining order issued on August 20, 1979 is hereby lifted.

ISSUE: W/N the insurance company may be impleaded as third party defendant in a criminal
case – YES.
HELD/RATIO:
8. Shafer v. RTC Judge
GR NO. 78848. November 14, 1988.
RMS
Topic: Casualty insurance; no fault indemnity
Petitioners: SHERMAN SHAFER
Respondents: HON. JUDGE, REGIONAL TRIAL COURT OLONGAPO CITY, BRANCH 75, AND
MAKATI INSURANCE COMPANY, INC.
FACTS:
● Shafer obtained a private car policy for third party liability over his Ford Laser from
Makati Insurance.
● During effectivity of the policy, the Ford Laser hit a Volkswagen car.
o Felino Legaspi (owner of the Volkswagen) filed an information for
reckless imprudence resulting in damage and serious physical injuries
against Shafer
o Jovencio Poblete Sr. (passenger) testified on his claim for damages during
trial.
● Shafer filed a third party complaint against Makati Insurance.
o Dismissed by RTC Olongapo on the ground that it was premature based
on the premise that unless the accused (Shafer) is found guilty and
sentenced to pay the offended party (Poblete, Sr.) indemnity or damages,
the third party complaint is without cause of action.
● Shafer: the dismissal of the third party complaint amounts to a denial or
curtailment of his right to defend himself in the civil aspect of the case; and further
raises the legal question of whether the accused in a criminal action for reckless
imprudence, where the civil action is jointly prosecuted, can legally implead the
insurance company as third party defendant under its private car insurance policy,
as one of his modes of defense in the civil aspect of said proceedings.
● Makati Insurance:
o That a third party complaint is, under the rules, available only if the
defendant has a right to demand contribution, indemnity, subrogation or
any other relief in respect of plaintiffs claim, to minimize the number of
lawsuits and avoid the necessity of bringing 2 or more suits involving the
same subject matter.
o that the contract of motor vehicle insurance, the damages and attorney's
fees claimed by accused third party plaintiff are matters entirely different
from his criminal liability in the reckless imprudence case, and that
petitioner has no cause of action against the insurer until petitioner's
liability shall have been determined by final judgment, as stipulated in
the contract of insurance.
● Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is
primarily intended to provide compensation for the death or bodily injuries
suffered by innocent third parties or passengers as a result of a negligent operation
and use of motor vehicles. The victims and/or their defendants are assured of
immediate financial assistance, regardless of the financial capacity of motor vehicle
owners.
● The liability of the insurance company under the Compulsory Motor Vehicle
Liability Insurance is for loss or damage.
o Where an insurance policy insures directly against liability, the insurer's
liability accrues immediately upon the occurrence of the injury or event
upon which the liability depends, and does not depend on the recovery
of judgment by the injured party against the insured.
o The injured for whom the contract of insurance is intended can sue
directly the insurer to protect injured persons against the insolvency of
the insured who causes such injury.
o Such a provision creates a contractual relation which inures to the benefit
of any and every person who may be negligently injured by the named
insured as if such injured person were specifically named in the policy.
● In the event that the injured fails or refuses to include the insurer as party
defendant in his claim for indemnity against the insured, the latter is not
prevented by law to avail of the procedural rules intended to avoid multiplicity of
suits. Not even a "no action" clause under the policy which requires that a final
judgment be first obtained against the insured and that only thereafter can the
person insured recover on the policy can prevail over the Rules of Court provisions
aimed at avoiding multiplicity of suits.
● A third party complaint is a device allowed by the rules of procedure by which the
defendant can bring the original into the original suit a party against whom he will
have a claim for indemnity or remuneration as a result of a liability established
against him in the original suit to minimize the number of lawsuits and avoid the
necessity of bringing 2 or more actions involving the same subject matter.
o If it appears probable that a second action will result if the plaintiff
prevails, and that this result can be avoided by allowing the third party
complaint to remain, then the motion to dismiss the third party
complaint should be denied.
 ● In the instant case, the civil aspect of the offense charged, i.e., serious physical
injuries allegedly suffered by Jovencio Poblete, Sr., was impliedly instituted with
the criminal case. Petitioner may thus raise all defenses available to him insofar as
the criminal and civil aspects of the case are concerned.
o The claim of petitioner for payment of indemnity to the injured third
party, under the insurance policy, for the alleged bodily injuries caused to
said third party, arose from the offense charged in the criminal case, from
which the injured (Jovencio Poblete, Sr.) has sought to recover civil
damages.
o Hence, such claim of petitioner against the insurance company cannot be
regarded as not related to the criminal action.
DISPOSITIVE:
WHEREFORE, the instant petition is GRANTED. The questioned order dated 24 April 1987 is
SET ASIDE and a new one entered admitting petitioner's third party complaint against the
private respondent Makati Insurance Company, Inc.
SO ORDERED.
9 VDA DE MAGLANA v CONSOLACION
GR 60506 | August 6, 1992
TS
Topic: CASUALTY INSURANCE
Petitioners: FIGURACION VDA. DE MAGLANA, EDITHA M. CRUZ, ERLINDA M. MASESAR,
LEONILA M. MALLARI, GILDA ANTONIO and the minors LEAH, LOPE, JR., and ELVIRA, all
surnamed MAGLANA, herein represented by their mother, FIGURACION VDA. DE MAGLANA
Respondents: HONORABLE FRANCISCO Z. CONSOLACION, Presiding Judge of Davao City,
Branch II, and AFISCO INSURANCE CORPORATION
Ponente: ROMERO
FACTS:
● Lope Maglana was an employee of the Bureau of Customs (BOC) whose work
station was at Lasa, Davao City. One early morning, Maglana was on his way to his
work station, driving a motorcycle owned by the BOC. At Km. 7, Lanang, he met an
accident that resulted in his death. He died on the spot.
ISSUE: W/N AFISCO is directly liable with the negligent operator up to the extent of its
● The PUJ jeep that bumped the deceased was driven by Pepito Into, operated and
insurance coverage. – YES.
owned by Destrajo.
● From the investigation conducted by the traffic investigator, the PUJ jeep was
RULING:
overtaking another passenger jeep that was going towards the city poblacion.
● While overtaking, the PUJ jeep of Destrajo running abreast with the overtaken
jeep, bumped the motorcycle driven by the deceased who was going towards the
direction of Lasa, Davao City.
● The point of impact was on the lane of the motorcycle and the deceased was
thrown from the road and met his untimely death.
● the heirs of Lope Maglana, Sr., here petitioners, filed an action for damages and
attorney’s fees against operator Destrajo and the Afisco Insurance Corporation
(AFISCO) before CFI Davao Branch II. An information for homicide thru reckless
imprudence was also filed against Pepito Into.
● During the pendency of the civil case, Into was sentenced to suffer an
indeterminate penalty of 1 year, 8 months and 1 day of prision correccional, as
minimum, to 4 years, 9 months and 11 days of prision correccional, as maximum,
with all the accessory penalties provided by law, and to indemnify the heirs of Lope
Maglana, Sr. in the amount of P12K with subsidiary imprisonment in case of
insolvency, plus P5K in the concept of moral and exemplary damages with costs. No
appeal was interposed by accused who later applied for probation.
● CFI found that Destrajo had not exercised sufficient diligence as the operator of the
jeepney.
● Heirs of Maglana filed an MR for the 2 nd paragraph of the dispositive portion which
stated: “The defendant insurance company is ordered to reimburse Destrajo
whatever amounts the latter shall have paid only up to the extent of its insurance
coverage.”
○ The heirs were contending that AFISCO should not merely be held
secondarily liable because the Insurance Code provides that the insurer’s
liability is “direct and primary and/or jointly and severally with the
operator of the vehicle, although only up to the extent of the insurance
coverage.”
○ they argued that the P20K coverage of the insurance policy issued by
AFISCO should have been awarded in their favor.
● AFISCO argued that since the Insurance Code does not expressly provide for a
solidary obligation, the presumption is that the obligation is joint.
● CFI denied the MR ruling that since the insurance contract “is in the nature of
suretyship, then the liability of the insurer is secondary only up to the extent of the
insurance coverage.
● Heirs of Maglana filed a 2 nd MR reiterating that the liability of the insurer is direct,
primary and solidary with the jeepney operator because the petitioners became
direct beneficiaries under the provision of the policy which, in effect, is a stipulation
pour autrui.
○ This was denied for lack of merit.
● Thus, heirs of Maglana filed the instant petition for certiorari which, prays for the
setting aside or modification of the second paragraph of the dispositive portion of
said decision.
● The particular provision of the insurance policy on which petitioners base their
claim is as follows:
“SECTION 1—LIABILITY TO THE PUBLIC
1. The Company will, subject to the Limits of Liability, pay all sums necessary to
discharge liability of the insured in respect of
(a) death of or bodily injury to any THIRD PARTY
(b) xxx.
2. xxx.
3. In the event of the death of any person entitled to indemnity under this Policy,
the Company will, in respect of the liability incurred to such person indemnify his
 personal representatives in terms of, and subject to the terms and conditions
thereof.
● The provision leads to no other conclusion but that AFISCO can be held directly
liable by the heirs of Maglana.
● Shafer vs. Judge, RTC of Olongapo City, Br. 75: Where an insurance policy insures
directly against liability, the insurer’s liability accrues immediately upon the
occurrence of the injury or event upon which the liability depends, and does not
depend on the recovery of judgment by the injured party against the insured.
● The underlying reason behind the third party liability (TPL) of the Compulsory
Motor Vehicle Liability Insurance is “to protect injured persons against the
insolvency of the insured who causes such injury, and to give such injured person a
9certain beneficial interest in the proceeds of the policy x x x.”
● Since heirs of Maglana had received from AFISCO the sum of P5K under the no-
fault clause, AFISCO’s liability is now limited to P15K.
ISSUE: W/N AFISCO is solidarily liable with the negligent operator up to the extent of its
insurance coverage. – NO.
o What should have been clearly stressed as to leave no room for doubt
was the liability of AFISCO under the explicit terms of the insurance
contract.
● The liability of AFISCO based on the insurance contract is direct, but not solidary
with that of Destrajo which is based on Article 2180 of the Civil Code.
● As such, the heirs have the option either to claim the P15,000 from AFISCO and the
balance from Destrajo or enforce the entire judgment from Destrajo subject to
reimbursement from AFISCO to the extent of the insurance coverage.
DISPOSITIVE PORTION: WHEREFORE, premises considered, the present petition is
hereby GRANTED. The award of P28,800.00 representing loss of income is INCREASED to
P192,000.00 and the death indemnity of P12,000.00 to P50,000.00.

RULING:
● Malayan Insurance Co., Inc. v. CA: this Court had the opportunity to resolve the
issue as to the nature of the liability of the insurer and the insured vis-a-vis the
third party injured in an accident.
o “While it is true that where the insurance contract provides for indemnity
against liability to third persons, such third persons can directly sue the
insurer, however, the direct liability of the insurer under indemnity
contracts against third party liability does not mean that the insurer can 10. Guingon v Del Monte
be held solidarily liable with the insured and/or the other parties found at G.R. No. L-22042 17 August 1967
fault. The liability of the insurer is based on contract; that of the insured is By: Kath
based on tort. Topic: Casualty Insurance
o In the case at bar, petitioner as insurer of Sio Choy, is liable to respondent Petitioners: DIONISIA, EULOGIA, MARINA, GUILLERMO, and NORBERTO, all surnamed
Vallejos (the injured third party), but it cannot, as incorrectly held by the GUINGON
trial court, be made ‘solidarily’ liable with the two principal tortfeasors, Respondents: ILLUMINADO DEL MONTE, JULlO AGUILAR, and CAPITAL INSURANCE & SURETY
namely respondents Sio Choy and San Leon Rice Mill, Inc. For if CO., INC.
petitioner-insurer were solidarily liable with said two (2) respondents by Ponente: BENGZON, J.P., J.
reason of the indemnity contract against third party liability—under FACTS:
which an insurer can be directly sued by a third party—this will result in a ● Aguilar owned and operated several jeepneys in the City of Manila
violation of the principles underlying solidary obligation and insurance o He entered into a contract with the Capital insuring the operation of his
contracts.”
jeepneys against accidents with third- party liability
● While in solidary obligations, the creditor may enforce the entire obligation against
● an insurance policy was executed by the Capital Insurance. the pertinent provisions
one of the solidary debtors, in an insurance contract, the insurer undertakes for a
of which contains the following:
consideration to indemnify the insured against loss, damage or liability arising from
o "Section II — LIABILITY TO THE PUBLIC "1. The Company, will, subject to
an unknown or contingent event.
the limits of liability, indemnify the Insured in the event of accident
● Heirs of Maglana cannot validly claim that AFISCO, whose liability under the
caused by or arising out of the use of the Motor Vehicle/s or in
insurance policy is also P20,000.00, can be held solidarily liable with Destrajo for
connection with the loading or unloading of the Motor Vehicle/s, against
the total amount of P53,901.70 in accordance with the decision of the lower court.
all sums including claimant's costs and expenses which the Insured shall
o Since under both the law and the insurance policy, AFISCO’s liability is
become legally liable to pay in respect of: "a. death of or bodily injury
only up to P20K, the second paragraph of the dispositive portion of the
to any person "b. damage to property"
decision in question may have unwittingly sown confusion among the
o "E. Action Against Company No action shall lie against the Company
heirs and their counsel.
unless, as a condition precedents thereto, the Insured shall have fully
 complied with all of the terms of this Policy, nor until the amount of the
Insured's obligation to pay shall have been finally determined either by
judgment against the Insured after actual trial or by written agreement of
the Insured, the claimant, and the Company.
Any person or organization or the legal representative thereof who has secured
such judgment or written agreement shall thereafter be entitled to
recover under this policy to the extent of the insurance afforded by the
Policy. Nothing contained in this policy shall give any person or
organization any right to join the Company as a co- defendant in any
action against the Insured to determine the Insured's liability
● During the effectivity of such insurance policy, Del Monte, one of the drivers of
jeepneys operated by Aguilar, while driving along the intersection of Juan Luna and
Moro streets, bumped Guingon who had just alighted from another jeepney. the
latter died some days thereafter
o information for homicide thru reckless imprudence was filed against del
Monte. penalty of four months imprisonment was imposed on him
● the heirs of Guingon filed an action for damages praying that the sum of
P82,771.80 be paid to them jointly and severally by, del Monte, Aguilar, and the
Capital Insurance
o Capital Insurance & Surety Co., Inc. answered, alleging that the heirs of
Guingon has no cause of action against it
● CFI of Manila sentenced del Monte and Aguilar jointly and severally to pay
P8,572.95 and Capital Insurance to pay P5,500
● The case was appealed to the CA, which certified the case to the SC
o Capital Insurance contends that the "no action" clause in the policy closes
the avenue to any third party which may be injured in an accident
wherein the jeepney of the insured might have been the cause
ISSUE:
1. W/N the heirs of Guingon can sue Capital Insurance – YES.
2 W/N the heirs of Guingon can sue Capital Insurance jointly with the insured? – YES.
RULING:
1. The right of the person injured to sue the insurer of the party at fault (insured), depends
on whether the contract of insurance is intended to benefit third persons also or only the
insured. And the test applied has been this: Where the contract provides for indemnity
against liability to third persons, then third persons to whom the insured is liable, can sue the
insurer
● The policy in the present case is one whereby the insurer agreed to indemnify the
insured "against all sums . . . which the Insured shall become legally liable to pay in
respect of: a. death of or bodily injury to any person . . ."
o Clearly, therefore, it is one for indemnity against liability; from the fact
then that the insured is liable to the third person, such third person is
entitled to sue the insurer.
o Where the contract is for indemnity against actual loss or payment, then
third persons cannot proceed against the insurer, the contract being
solely to reimburse the insured for liability actually discharged by him
thru payment to third persons, said third persons' recourse being thus
limited to the insured alone
2. The "no action" clause in the policy of insurance cannot prevail over the Rules of Court
provision aimed at avoiding multiplicity of suits
o The policy requires that suit and final judgment be first obtained against the
insured; that only "thereafter" can the person injured recover on the policy; it
expressly disallows suing the insurer as a co-defendant of the insured in a suit to
determine the latter's liability.
o Sec. 5 of Rule 2 on "Joinder of causes of action" and Sec. 6 of Rule 3 on "Permissive
joinder of parties" cannot be superseded, at least with respect to third persons not
a party to the contract, as herein, by a "no action" clause in the contract of
insurance.
DISPOSITIVE PORTION:
Wherefore, the judgment appealed from is affirmed in toto. Costs against appellant. So
ordered.
11. Perla Cia v Ancheta
G.R. No. L-49699 August 8, 1988
By: HH
Topic: Casualty insurance
Petitioners: PERLA COMPANIA DE SEGUROS, INC.
Respondents: HON. CONSTANTE A. ANCHETA, Presiding Judge of the Court of First Instance
of Camarines Norte, Branch III, ERNESTO A. RAMOS and GOYENA ZENAROSA-RAMOS, for
themselves and as Guardian Ad Litem for Minors JOBET, BANJO, DAVID and GRACE all
surnamed RAMOS, FERNANDO M. ABCEDE, SR., for himself and Guardian Ad Litem for minor
FERNANDO G. ABCEDE, JR., MIGUEL JEREZ MAGO as Guardian Ad Litem for minors ARLEEN R.
MAGO, and ANACLETA J. ZENAROSA.
Ponente: NOCON, J.
Doctrine: The following rules on claims under the “no fault indemnity” provision, where
proof of fault or negligence is not necessary for payment of any claim for death or injury to a
passenger or a third party, are established:
1. A claim may be made against one motor vehicle only.
2. If the victim is an occupant of a vehicle, the claim shall lie against the insurer of the vehicle
in which he is riding, mounting or dismounting from.
3. In any other case (i.e. if the victim is not an occupant of a vehicle), the claim shall lie
against the insurer of the directly offending vehicle.
4. In all cases, the right of the party paying the claim to recover against the owner of the
vehicle responsible for the accident shall be maintained.
The claim shall lie against the insurer of the vehicle in which the “occupant” is riding, and no
other. The claimant is not free to choose from which insurer he will claim the “no fault
indemnity,” as the law, by using the word “shall,” makes it mandatory that the claim be
made against the insurer of the vehicle in which the occupant is riding, mounting or
dismounting from.
That said vehicle might not be the one that caused the accident is of no moment since the
law itself provides that the party paying the claim under Sec. 378 may recover against the
owner of the vehicle responsible for the accident. This is precisely the essence of “no fault
indemnity” insurance which was introduced to and made part of our laws in order to provide
victims of vehicular accidents or their heirs immediate compensation, although in a limited
amount, pending final determination of who is responsible for the accident and liable for the
victims’ injuries or death. In turn, the “no fault indemnity” provision is part and parcel of the
insurance Code provisions on compulsory motor vehicle liability insurance [Sec. 373-389] and
should be read together with the requirement for compulsory passenger and/or third party
liability insurance [Sec. 377] which was mandated in order to ensure ready compensation for
victims of vehicular accidents.
Whether or not the fault or negligence lies with the driver of the bus, private respondents
not being occupants of the bus cannot claim the “no fault indemnity” agreement against the
insurer of the bus, but against the insurer of the vehicle they were riding.
FACTS:
1. In a collision between the IH Scout in which private respondents were riding and a
Superlines bus along the national highway in Sta. Elena, Camarines Norte, private
respondents sustained physical injuries in varying degrees of gravity.
2. They filed a complaint for damages against Superlines, the bus driver and Perla, the
insurer of the bus.
3. The bus was insured for the amount of P50,000.00 as and for passenger liability
and P50,000.00 as and for third party liability. The vehicle in which private
respondents were riding was insured with Malayan Insurance Co.
4. Even before summons could be served, respondent judge issued an order directing
Perla to pay private respondents under the “no fault clause” as provided for under
Section 378 of the Insurance Code.
5. Perla denied liability under the “no fault indemnity” provision.
a. The position that under Sec. 378 of the Insurance Code, the insurer liable
to pay the P5,000.00 is the insurer of the vehicle in which private
respondents were riding, Perla, as the provision states that “[i]n the case
of an occupant of a vehicle, claim shall lie against the insurer of the
vehicle in which the occupant is riding, mounting or dismounting from.”
6. Respondent judge, however, denied reconsideration. MR denied and ordered the
issuance of a writ of execution.
7. Hence, the instant petition praying principally for the annulment and setting aside
of respondent judge’s orders.
ISSUE: Whether or not the insurer is liable to indemnify private respondents under Sec. 378
of the Insurance Code. (NO)
HELD:
Sec. 378. Any claim for death or injury to any passenger or third party pursuant to the
provisions of this chapter shall be paid without the necessity of proving fault or negligence of
any kind. Provided, That for purposes of this section—
(i) The indemnity in respect of any one person shall not exceed five thousand pesos;
(ii) The following proofs of loss, when submitted under oath, shall be sufficient evidence to
substantiate the claim:
(a) Police report of accident, and
(b) Death certificate and evidence sufficient to establish the proper payee, or
(c) Medical report and evidence of medical or hospital disbursement in respect of which
refund is claimed;|
(iii)Claim may be made against one motor vehicle only. In the case of an occupant of a
vehicle, claim shall lie against the insurer of the vehicle in which the occupant is riding,
mounting or dismounting from. In any other case, claim shall lie against the insurer of the
directly offending vehicle. In all cases, the right of the party paying the claim to recover
against the owner of the vehicle responsible for the accident shall be maintained.
The following rules on claims under the “no fault indemnity” provision, where proof of fault
or negligence is not necessary for payment of any claim for death or injury to a passenger or
a third party, are established:
1. A claim may be made against one motor vehicle only.
2. If the victim is an occupant of a vehicle, the claim shall lie against the insurer of the vehicle
in which he is riding, mounting or dismounting from.|
3. In any other case (i.e. if the victim is not an occupant of a vehicle), the claim shall lie
against the insurer of the directly offending vehicle.
4. In all cases, the right of the party paying the claim to recover against the owner of the
vehicle responsible for the accident shall be maintained.
● The law is very clear—the claim shall lie against the insurer of the vehicle in which
the “occupant”*** is riding, and no other.
● The claimant is not free to choose from which insurer he will claim the “no fault
indemnity,” as the law, by using the word “shall, makes it mandatory that the claim
be made against the insurer of the vehicle in which the occupant is riding,
mounting or dismounting from.
That said vehicle might not be the one that caused the accident is of no moment since the
law itself provides that the party paying the claim under Sec. 378 may recover against the
owner of the vehicle responsible for the accident.
● This is precisely the essence of “no fault indemnity” insurance which was
introduced to and made part of our laws in order to provide victims of vehicular
accidents or their heirs immediate compensation, although in a limited amount,
pending final determination of who is responsible for the accident and liable for the
victims’ injuries or death.
● In turn, the “no fault indemnity” provision is part and parcel of the Insurance Code
provisions on compulsory motor vehicle liability insurance [Sec. 373-389] and
should be read together with the requirement for compulsory passenger and/or
 third party liability insurance [Sec. 377] which was mandated in order to ensure
ready compensation for victims of vehicular accidents.
Irrespective of whether or not fault or negligence lies with the driver of the Superlines bus, as
private respondents were not occupants of the bus, they cannot claim the “no fault
indemnity” provided in Sec. 378 from petitioner.
● The claim should be made against the insurer of the vehicle they were riding. This is
very clear from the law.
● In ordering petitioner to pay private respondents the “no fault indemnity,”
respondent judge gravely abused his discretion in a manner that amounts to lack of
jurisdiction.
DISPOSITIVE PORTION: WHEREFORE, the petition is GRANTED.
ISSUE: W/N Villacorta can recover from the policy. YES
12. Villacorta v Insurance Commission
Topic: Casualty Insurance
Petitioners: JEWEL VILLACORTA, assisted by her husband, GUERRERO VILLACORTA
Respondents: THE INSURANCE COMMISSION and EMPIRE INSURANCE COMPANY
FACTS:
● Villacorta wons a Colt Lancer insured with respondent company under Private Car
Policy No. MBI/PC-0704 for P35,000.00 — Own Damage; P30,000.00 — Theft; and
P30,000.00 — Third Party Liability, effective May 16, 1977 - 1978.
○ The comprehensive motor car insurance policy for P35,000.00 issued by
respondent Empire Insurance Company undertook to indemnifyagainst
loss or damage to the car
■ (a) by accidental collision or overturning, or collision or
overturning consequent upon mechanical breakdown or
consequent upon wear and tear;
■ (b) by fire, external explosion, self-ignition or lightning or
burglary, housebreaking or theft; and
■ (c) by malicious act.
● May 9, 1978: the vehicle was brought to the Sunday Machine Works, Inc., for
general check-up and repairs.
● May 11, 1978: while in the custody of the Sunday Machine Works, the car was
allegedly taken by 6 persons and driven out to Montalban, Rizal.
○ While travelling along Mabini St., the car figured in an accident, hitting
and bumping a gravel and sand truck parked at the right side of the road
going south.
○ As a consequence, the gravel and sand truck veered to the right side of
the pavement going south and the car veered to the right side of the
pavement going north.
○ The driver, Benito Mabasa, and one of the passengers died and the other
four sustained physical injuries. The car, as well, suffered extensive
damage.
● Villacorta then filed a claim for total loss with the respondent company but claim
was denied.
● Hence, complainant, was compelled to institute the present action.
● Insurance Commission: dismissed complaint for recovery of the total loss of the
vehicle.
○ The "Authorized Driver" clause in this wise: "It must be observed that
under the above-quoted provisions, the policy limits the use of the
insured vehicle to two (2) persons only, namely: the insured himself or
any person on his (insured's) permission. Under the second category, it is
to be noted that the words "any person' is qualified by the phrase
○ the car was not stolen and therefore not covered by the Theft clause
(based on RPC)
● The main purpose of the "authorized driver" clause, as may be seen from its text,
supra, is that a person other than the insured owner, who drives the car on the
insured's order, such as his regular driver, or with his permission, such as a friend
or member of the family or the employees of a car service or repair shop must be
duly licensed drivers and have no disqualification to drive a motor vehicle.
○ A car owner who entrusts his car to an established car service and repair
shop necessarily entrusts his car key to the shop owner and employees
who are presumed to have the insured's permission to drive the car for
legitimate purposes of checking or road-testing the car.
○ The mere happenstance that the employee(s) of the shop owner diverts
the use of the car to his own illicit or unauthorized purpose in violation of
the trust reposed in the shop by the insured car owner does not mean
that the "authorized driver" clause has been violated such as to bar
recovery, provided that such employee is duly qualified to drive under a
valid driver's license.
● There is no question of his being an "authorized driver" which allows recovery of
the loss although his trip was for a personal or illicit purpose without the owner's
authorization.
● where a car is admittedly as in this case unlawfully and wrongfully taken by some
people, be they employees of the car shop or not to whom it had been entrusted,
and taken on a long trip to Montalban without the owner's consent or knowledge,
such taking constitutes or partakes of the nature of theft as defined in Article 308
of the Revised Penal Code, viz.
○ "Who are liable for theft. — Theft is committed by any person who, with
intent to gain but without violence against or intimidation of persons nor
force upon things, shall take personal property of another without the
 latter's consent," for purposes of recovering the loss under the policy in
question.
● The Court rejects respondent commission's premise that there must be an intent
on the part of the taker of the car "permanently to deprive the insured of his car"
and that since the taking here was for a "joy ride" and "merely temporary in
nature," a "temporary taking is held not a taking insured against."
● The evidence does not warrant respondent commission's findings that it was a
mere "joy ride".
● From the very investigator's report cited in its comment, 3 the police found from
the waist of the car driver Benito Mabasa Bartolome who smashed the car and was
found dead right after the incident "one cal. 45 Colt. and one apple type grenade,"
hardly the materials one would bring along on a "joy ride". Then, again, it is equally
evident that the taking proved to be quite permanent rather than temporary, for
the car was totally smashed in the fatal accident and was never returned in
serviceable and useful condition to petitioner-owner.
● The Court sustains as the better view that which holds that when a person, either
with the object of going to a certain place, or learning how to drive, or enjoying a
free ride, takes possession of a vehicle belonging to another, without the consent
of its owner, he is guilty of theft because by taking possession of the personal
property belonging to another and using it, his intent to gain is evident since he
derives therefrom utility, satisfaction, enjoyment and pleasure. Justice Ramon C.
Aquino cites in his work Groizard who holds that the use of a thing constitutes gain
and Cuello Calon who calls it "hurt de uso. " 4
● The insurer must therefore indemnify the petitioner-owner for the total loss of the
insured car in the sum of P35,000.00 under the theft clause of the policy, subject to
the filing of such claim for reimbursement or payment as it may have as subrogee
against the Sunday Machine Works, Inc.
DISPOSITIVE PORTION: ACCORDINGLY, the appealed decision is set aside and judgment is
hereby rendered sentencing private respondent to pay petitioner the sum of P35,000.00 with
legal interest from the filing of the complaint until full payment is made and to pay the costs
of suit
13. Palermo v Pyramid Insurance
G.R. No. L-36480.
May 31, 1988.
Richie Rich
Topic: Casualty Insurance
Petitioners: Andrew Palermo
Respondents: PYRAMID INSURANCE CO., INC.
FACTS:
● the only question involved is the interpretation of the provision of the insurance
contract regarding the "authorized driver" of the insured motor vehicle.
● After having purchased a brand new Nissan Cedric de Luxe Sedan car bearing
Motor No. 087797 from the Ng Sam Bok Motors Co. in Bacolod City, plaintiff
insured the same with the defendant insurance company against any loss or
damage for P20,000.00 and against third party liability for P10,000.00.
● While driving the automobile in question, the Palermo met a violent accident. The
La Carlota City fire engine crashed head on, and as a consequence, the plaintiff
sustained physical injuries, his father, Cesar Palermo, who was with him in the car
at the time was likewise seriously injured and died shortly thereafter, and the car in
question was totally wrecked.
● The insurer, however, refused to indemnify Palermo on the ground that the insured
himself had violated the terms of the policy when he drove the car in question with
an expired driver's license.
● Andrew Palermo filed a complaint against Pyramid Insurance Co., Inc., for payment
of his claim under a Private Car Comprehensive Policy.
● In its answer, the appellant Pyramid Insurance Co., Inc., alleged that it disallowed
the claim because at the time of the accident, the insured was driving his car with
an expired driver's license.
● The policy provided:
○ "AUTHORIZED DRIVER:
○ Any of the following:
■ (a) The Insured.
■ (b) Any person driving on the Insured's order or with his
permission. Provided that the person driving is permitted in
accordance with the licensing or other laws or regulations to
drive the Motor Vehicle and is not disqualified from driving
such motor vehicle by order of a Court of law or by reason of
any enactment or regulation in that behalf."
ISSUE: W/N Palermo was an authorized driver under the insurance policy - YES
● There is no merit in the appellant's allegation that the plaintiff was not authorized
to drive the insured motor vehicle because his driver's license had expired. The
driver of the insured motor vehicle at the time of the accident was the insured
himself, hence an "authorized driver" under the policy.
● While the Motor Vehicle Law prohibits a person from operating a motor vehicle on
the highway without a license or with an expired license, an infraction of the Motor
Vehicle Law on the part of the insured, is not a bar to recovery under the insurance
contract. It however renders him subject to the penal sanctions of the Motor
Vehicle Law.
● The requirement that the driver be "permitted. in accordance with the licensing or
other laws or regulations to drive the Motor Vehicle and is not disqualified from
driving such motor vehicle by order of a Court of Law or by reason of any
enactment or regulation in that behalf," applies only when the driver "is driving on
the insured's order or with his permission." It does not apply when the person
driving is the insured himself.
● The main purpose of the 'authorized driver' clause, as may be seen from its text,
is that a person other than the insured owner, who drives the car on the insured's
order, such as his regular driver, or with his permission, such as a friend or
member of the family or the employees of a car service or repair shop, must be
duly licensed drivers and have no disqualification to drive a motor vehicle.
● Operating an automobile on a public highway without a license, which act is a
statutory crime is not precluded by public policy from enforcing a policy
 indemnifying her against liability for bodily injuries inflicted by use of the
automobile.
WHEREFORE, the appealed decision is affirmed with costs against the
defendant-appellant.
SO ORDERED
14. Perla Compania De Seguros, Inc. v Court of Appeals
GR No. 96452
May 7, 1992
By: Pax
Petitioner: Perla Compania De Seguros, Inc
Respondent: The Court Of Appeals, Herminio Lim And Evelyn Lim
Ponente: Nocon
Doctrine: Where a car is admittedly unlawfully and wrongfully taken without the owner's
consent or knowledge, such taking constitutes theft— it is the "Theft" clause, and not the
"Authorized Driver" clause that applies
Facts:
- The spouses Herminio and Evelyn Lim executed a promissory note in favor of Supercars, Inc
in the sum of PHP 77,490 payable monthly installments + Secured by a chattel mortgage over
a brand new red Ford Laser (5-Door 1981 model; Hatchback)
- The car was insured with Perla Compania de Seguros for comprehensive coverage
- Supercars, Inc., with notice to the spouses, assigned to petitioner FCP Credit Corporation
(FCP) its rights, title and interest on said promissory note and chattel mortgage as shown by
the Deed of Assignments
- On November 9, 1982 the vehicle was carnapped while parked at the back of Broadway
Centrum along N. Domingo Street, Quezon City
- Evelyn Lim, who was driving the car, immediately called up the Anti-Carnapping Unit of the
Philippine Constabulary to report said incident
- She also went to the nearest police substation at Araneta, Cubao to make a police report
regarding said incident
- The Spouses requested from FCP for a suspension of payment on the monthly amortization
agreed upon due to the loss of the vehicle
- They theorize that since the carnapped vehicle was insured with Perla, said insurance
company should be made to pay the remaining balance of the promissory note and the
chattel mortgage contract
- Perla denied the claim. FCP manded that the spouses pay the whole balance of the
promissory note or to return the vehicle but the latter refused
- FCP filed a complaint against the Spouses who in turn filed a 3 rd party complaint against
Perla
- Trial Court ordered the spouses to pay FCP and dismissed the 3 rd party complaint
- After petitioners' separate motions for reconsideration were denied by the CA petitioners
filed these separate petitions for review on certiorari
- Perla alleges that there was grave abuse of discretion on the part of the CA in holding that
the spouses did not violate the insurance contract because the authorized driver clause is not
applicable to the "Theft" clause of said Contract
Issue: W/N the Insurer can deny the claim based on the “Authorized Driver” clause? No.
Ratio
- The comprehensive motor car insurance policy issued by petitioner Perla undertook to
indemnify the private respondents against loss or damages to the car (a) by accidental
collision or overturning, or collision or overturning consequent upon mechanical breakdown
or consequent upon wear and tear; (b) by fire, external explosion, self-ignition or lightning or
burglary, housebreaking or theft; and (c) by malicious act
- Where a car is admittedly unlawfully and wrongfully taken without the owner's consent or
knowledge, such taking constitutes theft
- It is the "Theft" clause, and not the "Authorized Driver" clause, that applies
- Theft is an entirely different legal concept from that of accident. Theft is committed by a
person with the intent to gain or, to put it in another way, with the concurrence of the doer's
will. On the other hand, accident, although it may proceed or result from negligence, is the
happening of an event without the concurrence of the will of the person by whose agency it
was caused
- The risk against accident is distinct from the risk against theft
- The “Authorized Driver Clause” in a typical insurance policy as in contemplation or
anticipation of accident in the legal sense in which it should be understood, and not in
contemplation or anticipation of an event such as theft
- The distinction (which is often seized upon by insurance companies in resisting claims from
their assureds) between death occurring as a result of accident and death occurring as a
result of intent may, by analogy, apply to the case at bar
- If the insured vehicle had figured in an accident at the time she drove it with an expired
license, then, appellee Perla Compania could properly resist appellants' claim for
indemnification for the loss or destruction of the vehicle resulting from the accident
- But in the present case, the loss of the insured vehicle did not result from an accident
where intent was involved
- The loss in the present case was caused by theft, the commission of which was attended by
intent
- There is also no causal connection between the possession of a valid driver's license and the
loss of a vehicle
- To rule otherwise would render car insurance practically a sham since an insurance
company can easily escape liability by citing restrictions which are not applicable or germane
to the claim, thereby reducing indemnity to a shadow
WHEREFORE, the assailed decision of the Court of Appeals is hereby MODIFIED to require
private respondents to pay petitioner FCP the amount of P55,055.93, with legal interest from
July 2, 1983 until fully paid. The decision appealed from is hereby affirmed as to all other
respects. No pronouncement as to costs.
15. TANCO V. PH GUARANTY
G.R. No. L-17312 ; November 29, 1965
By: Nico Nunez
Topic: CASUALTY INSURANCE
Petitioners: ARTURO R. TANCO, JR.
Respondents: THE PHILIPPINE GUARANTY COMPANY
Ponente: MAKALINTAL, J..
DOCTRINE: The exclusion clause in the contract invoked by appellant is clear. It does not refer
to violations of law in general, which indeed would tend to render automobile insurance
practically a sham, but to a specific situation where a person other than the insured himself,
even upon his order or with his permission, drives the motor vehicle without a license or with
one that has already expired.
FACTS:
● Tanco’s car, while being driven by his brother Manuel, figured in a collision with a pick-
up delivery van, both vehicles damaged. Tanco paid for the repairs and then filed his
claim with PH Guaranty under the car insurance policy. The claim was rejected, setting
the stage for the commencement of suit.
● The policy sued upon covers, up to a certain limit, loss or damage to the insured vehicle
as well as damage to property of third persons as a consequence of or incident to the
operation of said vehicle. There is an exception clause, however, which provides that
"the company shall not be liable in respect of any accident, loss, damage or liability
caused, sustained or incurred ... whilst (the insured vehicle) is ... being driven by or is
for the purpose of being driven by him in the charge of any person other than an
Authorized Driver." The policy defined the term "Authorized Driver" to be the insured
himself and "(b) any person driving on the Insured's order or with his permission,
provided that the person driving is permitted in accordance with the licensing or other
laws or regulations to drive the Motor Vehicle or has been permitted and is not
disqualified by order of a court of law or by reason of any enactment or regulation in
that behalf from driving such Motor Vehicle."
● At the time of the collision, Manuel who was at the wheel, did not have a valid license,
the one he had obtained for the year 1958 not having been renewed, as required by
section 31 of the Motor Vehicle Law, Act No. 3992. That section states that any license
not so renewed "shall become delinquent and invalid," and section 21 states that
"except as otherwise specifically provided in this Act no person shall operate any motor
vehicle on the public highways without having procured a license for the current year,
nor while such license is delinquent, invalid, suspended or revoked."
● Suit was filed in MC and was elevated to CFI which ruled in favor of Tanco. Appeal was
taken by defendant directly to SC, there being no dispute as to the facts.
ISSUE(s): W/N the insured could recover on an automobile policy for damage sustained in a
collision which occurred while the vehicle was being driven in violation of law
HELD/RATIO: NO
● At the time of the collision plaintiff's brother who was at the wheel, did not have a valid
license, the one he had obtained for the year 1958 not having been renewed on or
before the last working day of February 1959, as required by section 31 of the Motor
Vehicle Law, Act No. 3992. That section states that any license not so renewed "shall
become delinquent and invalid," and section 21 states that "except as otherwise
specifically provided in this Act no person shall operate any motor vehicle on the public
highways without having procured a license for the current year, nor while such license
is delinquent, invalid, suspended or revoked."
● In the case before Us now appellant's defense does not rest on the general proposition
that if a law is violated at the time of the accident which causes the damage or injury
there can be no recovery, but rather on a specific provision in the policy that appellant
shall not be liable if the accident occurs while the vehicle is being driven by any person
other than an authorized driver and that an authorized driver, if not the insured
himself, is one who is acting on his order or with his permission, provided he is
permitted to drive under the licensing laws.
● If such a defense (that the vehicle was being driven in violation of law) were
permissible, car insurance would be practically valueless. The exclusion clause in the
contract invoked by appellant is clear. It does not refer to violations of law in general,
which indeed would tend to render automobile insurance practically a sham, but to a
specific situation where a person other than the insured himself, even upon his order
or with his permission, drives the motor vehicle without a license or with one that has
already expired. No principle of law or of public policy militates against the validity of
such a provision.
Dispositive Portion: The judgment appealed from is reversed, with costs.
ISSUE: WON Paramount is liable under the policy for the loss of the vehicle – YES
HELD:
16. PARAMOUNT INSURANCE V. SPS. REMONDEULAZ
GR 173773 / NOV 28 2012
By: Claire
Topic: CASUALTY INSURANCE
Petitioners: PARAMOUNT INSURANCE CORPORATION
Respondents: SPOUSES YVES and MARIA TERESA REMONDEULAZ
Ponente: PERALTA
FACTS:
▪ The spouses insured their Toyota Corolla 1994 with Paramount under a
comprehensive motor vehicle insurance policy for 1 year
▪ During the effectivity of said policy, their car was stolen. Hence, they immediately
reported the theft to the Traffic Management Command of PNP who made them
accomplish a complaint sheet
o In said complaint sheet, the spouses alleged that a certain Ricardo Sales
took possession of the vehicle to add accessories and improvements,
however, Sales failed to return the vehicle within the agreed 3-day period
▪ The spouses notified Paramount to claim for reimbursement of the lost vehicle.
Paramount refused to pay.
▪ The spouses filed a complaint for a sum of money against Paramount before RTC
Makati for the payment of the insured value of their car + damages
▪ RTC dismissed the complaint.
o RTC held that the spouses had been awarded the amount claimed in this
action in another civil case, which involved the loss of the same vehicle
under the same circumstances although under a different policy and
insurance company.
o This, considered with the principle that an insured may not recover more
than its interest in any property subject of an insurance, leads the court
to dismiss this action.
▪ CA reversed and set aside the RTC decision.
o CA held that the trial court erred when it dismissed the action on the
ground of double recovery since it is clear that the subject car is different
from the one insured with another insurance company, the Standard
Insurance Company. In this case, defendant-appellee [herein petitioner]
denied the reimbursement for the lost vehicle on the ground that the
said loss could not fall within the concept of the "theft clause" under the
insurance policy.
▪ Paramount argues that the loss is not a peril covered by the policy. It cannot be
classified as stolen as the spouses entrusted the possession to another person.
▪ The policy clearly undertook to indemnify the insured against loss/damage when
cause by theft (check notes)
▪ People v. Bustinera: when one takes the motor vehicle of another w/o the latter’s
consent even when it is later returned, there is theft – there being intent to gain as
the use of the thing unlawfully taken constitutes gain.
▪ Malayan Insurance v. CA: taking of a vehicle w/o permission from owner is
sufficient to place it within the ambit of the word theft as contemplated in the
policy
▪ Santos v. People: same with this case; entrusted the vehicle to someone. When the
owner tried to retrieve it, she was not able to do so as Santos abandoned his shop.
o Court held that there may be theft even if accused has possession of the
property. If he was entrusted only w/ the material or physical or de facto
possession of the thing, his misappropriation constitutes theft.
▪ In the instant case, Sales did not have juridical possession over the vehicle. Here, it
is apparent that the taking of respondents' vehicle by Sales is without any consent
or authority from the former.
 ▪ Records would show that respondents entrusted possession of their vehicle only to
the extent that Sales will introduce repairs and improvements thereon, and not to
permanently deprive them of possession thereof. Since, Theft can also be
committed through misappropriation, the fact that Sales failed to return the
subject vehicle to respondents constitutes Qualified Theft. Hence, since
respondents' car is undeniably covered by a Comprehensive Motor Vehicle
Insurance Policy that allows for recovery in cases of theft, petitioner is liable under
the policy for the loss of respondents' vehicle under the "theft clause."
▪ All told, Sales' act of depriving respondents of their motor vehicle at, or soon
after the transfer of physical possession of the movable property, constitutes
theft under the insurance policy, which is compensable.
WHEREFORE, the instant petition is DENIED. The Decision dated April 12, 2005 and
Resolution dated July 20, 2006 of the Court of Appeals are hereby AFFIRMED in toto. SO
ORDERED.
NOTES:
The Company will, subject to the Limits of Liability, indemnify the insured against loss of or
damage to the Scheduled Vehicle and its accessories and spare parts whilst thereon: —
(a) by accidental collision or overturning, or collision or overturning consequent upon
mechanical breakdown or consequent upon wear and tear;
(b) by fire, external explosion, self-ignition or lightning or burglary, housebreaking or theft;
(c) by malicious act;
(d) whilst in transit (including the [process] of loading and unloading) incidental to such
transit by road, rail, inland waterway, lift or elevator.
Issue: Whether or not the loss of respondent’s vehicle is excluded under the insurance policy
Held: No
17. Alpha Insurance and Surety v Castor
G.R. No. 198174 | September 2, 2013
By: Jon
Topic: Casualty Insurance
Petitioners: Alpha Insurance and Surety Co.
Respondents: Arsenia Sonia Castor
Ponente: Peralta, .J.
Facts:
● On February 21, 2007, respondent entered into a contract of insurance, Motor Car
Policy No. MAND/CV-00186, with petitioner, involving her motor vehicle, a Toyota
Revo DLX DSL.
o The contract of insurance obligates the petitioner to pay the respondent
the amount of Six Hundred Thirty Thousand Pesos (₱630,000.00) in case
of loss or damage to said vehicle during the period covered, which is from
February 26, 2007 to February 26, 2008.
● On April 16, 2007, at about 9:00 a.m., respondent instructed her driver, Jose Joel
Salazar Lanuza (Lanuza), to bring the above-described vehicle to a nearby auto-
shop for a tune-up.
o However, Lanuza no longer returned the motor vehicle to respondent
and despite diligent efforts to locate the same, said efforts proved futile.
o Resultantly, respondent promptly reported the incident to the police and
concomitantly notified petitioner of the said loss and demanded payment
of the insurance proceeds in the total sum of ₱630,000.00.
● Upon verification of the documents submitted, particularly the Police Report and
your Affidavit, which states that the culprit, who stole the Insure[d] unit, is
employed with you. We would like to invite you on the provision of the Policy
under Exceptions to Section-III, which we quote:
o 1.) The Company shall not be liable for:
o (4) Any malicious damage caused by the Insured, any member of his
family or by "A PERSON IN THE INSURED’S SERVICE."
o In view [of] the foregoing, we regret that we cannot act favorably on your
claim.
● Respondent reiterated her claim and argued that the exception refers to damage of
the motor vehicle and not to its loss. However, petitioner’s denial of respondent’s
insured claim remains firm.
● Respondent filed a Complaint for Sum of Money with Damages against petitioner
before the RTC
o The RTC of Quezon City ruled in favor of respondent
● The CA rendered a Decision affirming in toto the RTC of Quezon City’s decision
● Significant portions of Section III of the Insurance Policy states:
● SECTION III – LOSS OR DAMAGE
● The Company will, subject to the Limits of Liability, indemnify the Insured against
loss of or damage to the Schedule Vehicle and its accessories and spare parts
whilst thereon:
o (a) by accidental collision or overturning, or collision or overturning
consequent upon mechanical breakdown or consequent upon wear and
tear;
o (b) by fire, external explosion, self-ignition or lightning or burglary,
housebreaking or theft;
o (c) by malicious act;
o (d) whilst in transit (including the processes of loading and unloading)
incidental to such transit by road, rail, inland waterway, lift or elevator.
● EXCEPTIONS TO SECTION III
● The Company shall not be liable to pay for:
o Loss or Damage in respect of any claim or series of claims arising out of
one event, the first amount of each and every loss for each and every
vehicle insured by this Policy, such amount being equal to one percent
(1.00%) of the Insured’s estimate of Fair Market Value as shown in the
Policy Schedule with a minimum deductible amount of Php3,000.00;
o Consequential loss, depreciation, wear and tear, mechanical or electrical
breakdowns, failures or breakages;
o Damage to tires, unless the Schedule Vehicle is damaged at the same
time;
o Any malicious damage caused by the Insured, any member of his family
or by a person in the Insured’s service.
● Petitioner takes exception by arguing that the word "damage," under paragraph 4
of "Exceptions to Section III," means loss due to injury or harm to person, property
or reputation, and should be construed to cover malicious "loss" as in "theft."
● Thus, it asserts that the loss of respondent’s vehicle as a result of it being stolen by
the latter’s driver is excluded from the policy.
● The RTC of Quezon City scrupulously elaborated that theft perpetrated by the
driver of the insured is not an exception to the coverage from the insurance policy,
since Section III thereof did not qualify as to who would commit the theft.
o Theft perpetrated by a driver of the insured is not an exception to the
coverage from the insurance policy subject of this case.
o This is evident from the very provision of Section III – "Loss or Damage."
The insurance company, subject to the limits of liability, is obligated to
indemnify the insured against theft.
o Said provision does not qualify as to who would commit the theft.
o Thus, even if the same is committed by the driver of the insured, there
being no categorical declaration of exception, the same must be covered.
● 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. If such
terms are clear and unambiguous, they must be taken and understood in their
plain, ordinary and popular sense.
● In interpreting the exclusions in an insurance contract, the terms used specifying
the excluded classes therein are to be given their meaning as understood in
common speech
● Adverse to petitioner’s claim, the words "loss" and "damage" mean different things
in common ordinary usage. The word "loss" refers to the act or fact of losing, or
failure to keep possession, while the word "damage" means deterioration or injury
to property.1âwphi1
● Petitioner cannot exclude the loss of respondent’s vehicle under the insurance
policy under paragraph 4 of "Exceptions to Section III," since the same refers only
to "malicious damage," or more specifically, "injury" to the motor vehicle caused by
a person under the insured’s service.
o Paragraph 4 clearly does not contemplate "loss of property," as what
happened in the instant case.
● If the intention of the defendant-appellant was to include the term "loss" within
the term "damage" then logic dictates that it should have used the term "damage"
alone in the entire policy or otherwise included a clear definition of the said term
as part of the provisions of the said insurance contract.
● It is a basic rule in the interpretation of contracts that the terms of a contract are to
be construed according to the sense and meaning of the terms which the parties
thereto have used.
● In the case of property insurance policies, the evident intention of the contracting
parties, i.e., the insurer and the assured, determine the import of the various terms
and provisions embodied in the policy.
● However, when the terms of the insurance policy are ambiguous, equivocal or
uncertain, such that the parties themselves disagree about the meaning of
particular provisions, the policy will be construed by the courts liberally in favor of
the assured and strictly against the insurer.
● Lastly, a contract of insurance is a contract of adhesion. So, when the terms of the
insurance contract contain limitations on liability, courts should construe them in
such a way as to preclude the insurer from non-compliance with his obligation. 
● It must be remembered that an insurance contract is a contract of adhesion which
must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latter’s interest.
Dispositive Portion: WHEREFORE, premises considered, the instant Petition for Review on
Certiorari is DENIED. Accordingly, the Decision dated May 31, 2011 and Resolution dated
August 10, 2011 of the Court of Appeals are hereby AFFIRMED.
SO ORDERED.
18. FORTUNE INSURANCE v CA
[G.R. No. 115278. May 23, 1995.]
CB
TOPIC: CASUALTY INSURANCE
PETITIONER: FORTUNE INSURANCE AND SURETY CO., INC., 
RESPONDENT: COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES
PONENTE: DAVIDE, JR., J
FACTS:
● Private respondent Producers Bank of the Philippines (hereinafter Producers) filed a case
in the RTC against petitioner Fortune Insurance and Surety Co., Inc. (hereinafter Fortune)
 of a complaint for recovery of the sum of P725,000.00 under the policy issued by
Fortune.
● The sum was allegedly lost during a robbery of Producer's armored vehicle while it was in
transit to transfer the money from its Pasay City Branch to its head office in Makati.
● Accordingly:
o An armored car of the plaintiff, while in the process of transferring cash in the sum of
P725,000.00 under the custody of its teller, Maribeth Alampay, from its Pasay Branch
to its Head Office at 8737 Paseo de Roxas, Makati, Metro Manila on June 29, 1987,
was robbed of the said cash. The robbery took place while the armored car was
traveling along Taft Avenue in Pasay City;
o The said armored car was driven by Benjamin Magalong y de Vera, escorted by
Security Guard Saturnino Atiga y Rosete. Driver Magalong was assigned by PRC
Management Systems with the plaintiff by virtue of an Agreement executed on
August 7, 1983
o The Security Guard Atiga was assigned by Unicorn Security Services, Inc. with the
plaintiff by virtue of a contract of Security Service executed on October 25, 1982
● After an investigation conducted by the Pasay police authorities, the driver Magalong and
guard Atiga were charged, together with Edelmer Bantigue Y Eulalio, Reynaldo Aquino
and John Doe, with violation of P.D. 532 (Anti-Highway Robbery Law) before the Fiscal of
Pasay City.
● The Fiscal of Pasay City then filed an information charging the aforesaid persons with the
said crime before Branch 112 of the Regional Trial Court of Pasay City.
● Demands were made by the plaintiff upon the defendant to pay the amount of the loss of
P725,000.00, but the latter refused to pay as the loss is excluded from the coverage of
the insurance policy, attached hereto as Exhibit "A," specifically under page 1 thereof,
"General Exceptions" Section (b)
o The company shall not be liable under this policy in respect of:
(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any
officer, employee, partner, director, trustee or authorized representative of the
Insured whether acting alone or in conjunction with others. . . . "
● The plaintiff opposes the contention of the defendant and contends that Atiga and
Magalong are not its "officer, employee, . . . trustee or authorized representative . . . at
the time of the robbery. Producers contends that Magalong and Atiga were not its
employees since it had nothing to do with their selection and engagement, the payment
of their wages, their dismissal, and the control of their conduct
● RTC: In favor of Producers. The trial court ruled that Magalong and Atiga were not
employees or representatives of Producers. The Court is satisfied that plaintiff may not
be said to have selected and engaged Magalong and Atiga, their services as armored car
driver and as security guard having been merely offered by PRC Management and by
Unicorn Security and which latter firms assigned them to plaintiff. The wages and salaries
of both Magalong and Atiga are presumably paid by their respective firms, which alone
wields the power to dismiss them.
● CA: affirmed in toto the appealed decision. Agreed with the conclusion of the trial court
that Magalong and Atiga were neither employees nor authorized representatives of
Producers.
ISSUE: Whether the petitioner is liable under the Money, Security, and Payroll Robbery policy
it issued to the private respondent or whether recovery thereunder is precluded under the
general exceptions clause thereof. NO
CONTENTION:
According to Fortune, when Producers commissioned a guard and a driver to transfer its
funds from one branch to another, they effectively and necessarily became its authorized
representatives in the care and custody of the money. Assuming that they could not be
considered authorized representatives, they were, nevertheless, employees of Producers. It
asserts that the existence of an employer-employee relationship "is determined by law and
being such, it cannot be the subject of agreement."
HELD:
● It should be noted that the insurance policy entered into by the parties is a theft or
robbery insurance policy which is a form of casualty insurance.
o Section 174 of the Insurance Code provides:
Sec. 174. Casualty insurance is insurance covering loss or liability arising from
accident or mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of insurance such as fire or marine.
It includes, but is not limited to, employer's liability insurance, public liability
insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft
insurance, personal accident and health insurance as written by non-life insurance
companies, and other substantially similar kinds of insurance.
● Except with respect to compulsory motor vehicle liability insurance, the Insurance Code
contains no other provisions applicable to casualty insurance or to robbery insurance in
particular. These contracts are, therefore, governed by the general provisions applicable
to all types of insurance. Outside of these, the rights and obligations of the parties must
be determined by the terms of their contract, taking into consideration its purpose and
always in accordance with the general principles of insurance law.
● It has been aptly observed that in burglary, robbery, and theft insurance, "the
opportunity to defraud the insurer - the moral hazard — is so great that insurers have
found it necessary to fill up their policies with countless restrictions, many designed to
reduce this hazard. Seldom does the insurer assume the risk of all losses due to the
hazards insured against." Persons frequently excluded under such provisions are those in
the insured's service and employment. The purpose of the exception is to guard against
liability should the theft be committed by one having unrestricted access to the
property." In such cases, the terms specifying the excluded classes are to be given their
meaning as understood in common speech. The terms "service" and "employment" are
generally associated with the idea of selection, control, and compensation.
● With the foregoing principles in mind, it may now be asked whether Magalong and Atiga
qualify as employees or authorized representatives of Producers under paragraph (b) of
the general exceptions clause of the policy.
● When Fortune used then the term "employee," it must have had in mind any person who
qualifies as such as generally and universally understood, or jurisprudentially established
in the light of the four standards in the determination of the employer-employee
relationship, or as statutorily declared even in a limited sense as in the case of Article 106
of the Labor Code which considers the employees under a "labor-only" contract as
employees of the party employing them and not of the party who supplied them to the
employer.
● Fortune claims that Producers' contracts with PRC Management Systems and Unicorn
Security Services are "labor-only" contracts. Producers, however, insists that by the
express terms thereof, it is not the employer of Magalong. Notwithstanding such express
assumption of PRC Management Systems and Unicorn Security Services that the drivers
and the security guards each shall supply to Producers are not the latter's employees, it
may, in fact, be that it is because the contracts are, indeed, "labor-only" contracts.
Whether they are is, in the light of the criteria provided for in Article 106 of the Labor
Code, a question of fact.
● Since the parties opted to submit the case for judgment on the basis of their stipulation
of facts which are strictly limited to the insurance policy, the contracts with PRC
Management Systems and Unicorn Security Services, the complaint for violation of P.D.
No. 532, and the information therefor filed by the City Fiscal of Pasay City, there is a
paucity of evidence as to whether the contracts between Producers and the PRC
Management Systems and Unicorn Security Services are "labor-only" contracts.
● But even granting for the sake of argument that these contracts were not "labor-only"
contracts, and PRC Management Systems and Unicorn Security Services were truly
independent contractors, we are satisfied that Magalong and Atiga were, in respect of
19. Calanoc v. CA
GR NO. L-8151. December 16 1955.
SPV (si RM gumawa ty po)
Topic: Concept of Accident
Petitioners: VIRGINIA CALANOC
Respondents: COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE CO.
Ponente: BAUTISTA ANGELO, J
FACTS
● Melencio Basilio was a watchman of Manila Auto Supply.
o He was insured with Philam Life for P2,000 to which was attached a
supplementary contract covering death by accident.
● Basilio died of a gunshot wound on the occasion of a robbery committed in Atty.
Ojeda’s house. (circumstances provided below)
o Atty. Ojeda, suspicious that there were culprits in his house looked for a
policeman and finding Basilio in khaki uniform, asked him to accompany
him to the house but the latter refused on the ground that he was not a
policeman.
o Atty. Ojeda found a traffic policeman, and on the way to the Ojeda
residence, they passed by Basilio and invited hinm to come along.
o Approaching the Ojeda residence, a shot was fired and Basilio was hit in
the abdomen, the wound causing his instantaneous death.
the transfer of Producer's money from its Pasay City branch to its head office in Makati,
its "authorized representatives" who served as such with its teller Maribeth Alampay.
● Howsoever viewed, Producers entrusted the three with the specific duty to safely
transfer the money to its head office, with Alampay to be responsible for its custody in
transit; Magalong to drive the armored vehicle which would carry the money; and Atiga
to provide the needed security for the money, the vehicle, and his two other
companions. In short, for these particular tasks, the three acted as agents of Producers.
● A "representative" is defined as one who represents or stands in the place of another;
one who represents others or another in a special capacity, as an agent, and is
interchangeable with "agent."
● In view of the foregoing, Fortune is exempt from liability under the general exceptions
clause of the insurance policy.
DISPOSITIVE PORTION: WHEREFORE, the instant petition is hereby GRANTED. The decision of
the Court of Appeals in CA-G.R. CV No. 32946 dated 3 May 1994 as well as that of Branch 146
of the Regional Trial Court of Makati in Civil Case No. 1817 are REVERSED and SET ASIDE. The
complaint in Civil Case No. 1817 is DISMISSED. No pronouncement as to costs. SO ORDERED
● Virgina Calanoc (widow) was paid P2,000 representing the face value of the policy
but was denied of the additional P2,000 representing the value of the
supplemental policy.
● Philam Life: deceased died because he was murdered by a person who took part in
the commission of the robbery and while making an arrest as an officer of the law
which contingencies were expressly excluded in the contract and have the effect of
exempting the company from liability.
● MTC and CFI in favor of Calanoc; CA reversed.
ISSUE: W/N the death of Basilio is an accident covered by the supplemental policy – YES.
HELD:
● The circumstance that he was a mere watchman and had no duty to heed the call
of Atty. Ojeda should not be taken as a capricious desire on his part to expose his
life to danger considering the fact that the place he was in duty-bound to guard
was only a block away.
o No doubt there was some risk coming to him in pursuing that errand, but
that risk always existed it being inherent in the position he was holding.
He cannot therefore be blamed solely for doing what he believed was in
keeping with his duty as a watchman and as a citizen.
o And he cannot be considered as making an arrest as an officer of the law,
as contended, simply because he went with the traffic policeman, for
certainly he did not go there for that purpose nor was he asked to do so
by the policeman.
● Much less can it be pretended that Basilio died in the course of an assault or
murder considering the very nature of these crimes.
o In the First place, there is no proof that the death of Basilio is the result
of either crime for the record is barren of any circumstance showing how
the fatal shot was fired. Nor can it be said that the killing was intentional
for there is the possibility that the malefactor had Fred the shot merely to
 scare away the people around for his own protection and not necessarily
to kill or hit the victim.
o In any event, while the act may not exempt the triggerman from liability
for the damage done, the fact remains that the happening was a pure
accident on the part of the victim. The victim could have been either the
policeman or Atty. Ojeda for it cannot be pretended that the malefactor
aimed at the deceased precisely because he wanted to take his life.
● While as a general rule "the parties may limit the coverage of the policy to certain
particular accidents and risks or causes of loss, and may expressly except other
risks or causes of loss therefrom", however, it is to be desired that the terms and
phraseology of the exception clause be clearly expressed so as to be within the
easy grasp and understanding of the insured, for if the terms are doubtful or
obscure the same must of necessity be interpreted or resolved against the one
who has caused the obscurity.
o the reason for this rule is that the "insured usually has no voice in the
selection or arrangement of the words employed and that the language
of the contract is selected with great care and deliberation by experts
and legal advisers employed by, and acting exclusively in the interest of,
the insurance company."
● The circumstances unfolded in the present case do not warrant the finding that the
death of the unfortunate victim comes within the purview of the exception clause
of the supplementary policy and, hence, do not exempt the company from liability.
Dispositive
Wherefore, reversing the decision appealed from, we hereby order the company to pay
petitioner-appellant the amount of P2,000, with legal interest from January 26, 1951 until
fully paid, with costs.
20. Biagtan v. Insular Life
GR NO. L-25579. March 29, 1972.
RMS
Topic: Casualty insurance; concept of accident
Petitioners: EMILIA T. BIAGTAN, JUAN T. BIAGTAN, JR., MIGUEL T. BIAGTAN, GIL T. BIAGTAN
and GRACIA T. BIAGTAN
Respondents: THE INSULAR LIFE ASSURANCE COMPANY, LTD.
FACTS:
● Juan Biagtan was insured with Insular Life under contract denominated "Accidental
Death Benefit Clause, for an additional sum of P5,000.00 if "the death of the
Insured resulted directly from bodily injury effected solely through external and
violent means sustained in an accident . . . and independently of all other causes."
o The clause expressly excludes death resulting from an injury intentionally
inflicted by a third party.
● A band of robbers entered the house of Biagtan and the latter was killed.
● The Biagtans, as beneficiaries, filed a claim under the policy.
o Insular Life paid the basic amount of P5,000.00 but refused to pay the
additional sum of P5,000.00 under the accidental death bene t clause, on
the ground that the insured's death resulted from injuries intentionally
inflicted by third parties and therefore was not covered.
● Biagtans filed suit to recover. Trial court ruled in their favor relying on the case of
Calanoc v. CA.
ISSUE: W/N the wounds received by the insured were inflicted intentionally thus not covered
by the policy – YES.
HELD/RATIO:
● Nine wounds were inflicted upon the deceased, all by means of thrusts with sharp-
pointed instruments wielded by the robbers. This is a physical fact as to which
there is no dispute. So is the fact that five of those wounds caused the death of the
insured.
o Whether the robbers had the intent to kill or merely to scare the victim
or to ward off any defense he might offer, it cannot be denied that the
act itself of inflicting the injuries was intentional.
▪ Instances where the infliction of the injury is unintentional and
therefore would be within the coverage of an accidental death
benefit clause: A gun which discharges while being cleaned and
kills a bystander; a hunter who shoots at his prey and hits a
person instead; an athlete in a competitive game involving
physical effort who collides with an opponent and fatally injures
him as a result
▪ But where a gang of robbers enter a house and coming face to
face with the owner, even if unexpectedly, stab him
repeatedly, it is contrary to all reason and logic to say that his
injuries are not intentionally inflicted, regardless of whether
they prove fatal or not.
● The facts in the case of Calanoc are different. The insured there was a watchman in
a certain company, who happened to be invited by a policeman to come along as
the latter was on his way to investigate a reported robbery going on in a private
house. As the two of them, together with the owner of the house, approached and
 stood in front of the main gate, a shot was red and it turned out afterwards that
the watchman was hit in the abdomen, the wound causing his death.
o Under the circumstances this Court held that it could not be said that the
killing was intentional for there was the possibility that the malefactor
had fired the shot to scare the people around for his own protection and
not necessarily to kill of hit the victim.
o A similar possibility is clearly ruled out by the facts in the present case,
for while a single shot red from a distance, and by a person who was not
even seen aiming at the victim, could indeed have been red without
intent to kill or injure, nine wounds inflicted with bladed weapons at
close range cannot conceivably be considered as innocent insofar as such
intent is concerned.
● Where a provision of the policy excludes intentional injury, it is the intention of
the person inflicting the injury that is controlling. If the injuries suffered by the
insured clearly resulted from the intentional act of a third person the insurer is
relieved from liability as stipulated.
o Hutchcraft’s v. Travelers: the insured was waylaid and assassinated for
the purpose of robbery.
▪ While the assassination of the insured was as to him an
unforeseen event and therefore accidental, "the clause of the
proviso "that excludes the (insurer's) liability, in case death or
injury is intentionally inflicted by any other person, applies to
this case."
o Butero v. Travelers: the insured was shot three times by a person
unknown late on a dark and stormy night, while working in the coal shed
of a railroad company.
▪ Showing that the murderer knew his victim and that he red
with intent to kill, there could be no recovery under the policy
which excepted death from intentional injuries inflicted by any
person.
DISPOSITIVE:
WHEREFORE, the decision appealed from is reversed and the complaint dismissed, without
pronouncement as to costs.
21 FINMAN GENERAL INSURANCE v CA
GR No. 100970 | September 2, 1992
TS
Topic: CASUALTY INSURANCE – CONCEPT OF ACCIDENT
Petitioners: FINMAN GENERAL ASSURANCE CORPORATION
Respondents: THE HONORABLE COURT OF APPEALS and JULIA SURPOSA
Ponente: NOCON
FACTS:
● Deceased Carlie Surposa was insured with Finman General Assurance Corporation
under Finman General Teachers Protection Plan Master Policy No. 2005 and
Individual Policy No. 08924 with his parents, spouses Julia and Carlos Surposa, and
brothers Christopher, Charles, Chester and Clifton, all surnamed Surposa, as
beneficiaries.
● While said insurance policy was in full force and effect, the insured Carlie Surposa,
died as a result of a stab would inflicted by one of the 3 unidentified men without
provocation and warning on the part of the former as he and his cousin Winston
Surposa were waiting for a ride on their way home along Rizal-Locsin Streets,
Bacolod City after attending the celebration of the “Maskarra Annual Festival.”
● Julia Surposa and the other beneficiaries filed a written notice of claim, But Finman
denied said claim contending that murder and assault are not within the scope of
the coverage of the insurance policy.
● Julia Surposa filed a complaint with the Insurance Commission which subsequently
rendered a decision, ordering Finman to pay Julia Surposa P15K representing the
proceeds of the policy with interest.
● CA affirmed.
ISSUE: W/N the death can be indemnified under the personal accident insurance policy. –
YES
RULING:
● Finman is alleging grave abuse of discretion on the part of the appellate court in
applying the principle of “expresso unius exclusio alterius” in a personal accident
insurance policy.
● Finman contends that the death resulting from murder and/or assault are impliedly
excluded in said insurance policy, considering that the cause of death of the
insured was not accidental, but rather a deliberate and intentional act of the
assailant in killing the former as indicated by the location of the lone stab wound
on the insured.
o Therefore, said death was committed with deliberate intent which, by the
very nature of a personal accident insurance policy, cannot be
indemnified.
● The terms ‘accident’ and ‘accidental’, as used in insurance contracts have not
acquired any technical meaning, and are construed by the courts in their ordinary
and common acceptation.
● The terms have been taken to mean that which happen by chance or fortuitously,
without intention and design, and which is unexpected, unusual, and unforeseen.
An accident is an event that takes place without one’s foresight or expectation—an
 event that proceeds from an unknown cause, or is an unusual effect of a known
cause and, therefore, not expected.
● The generally accepted rule is that, death or injury does not result from accident or
accidental means within the terms of an accident-policy if it is the natural result of
the insured’s voluntary act, unaccompanied by anything unforeseen except the
death or injury.
● There is no accident when a deliberate act is performed unless some additional, 22. De la Cruz v. Capital Insurance
unexpected, independent, and unforeseen happening occurs which produces or G.R. No. L-21574 30 June 1966
brings about the result of injury or death. By: Kath
● Where the death or injury is not the natural or probable result of the insured’s Topic: CONCEPT OF ACCIDENT
voluntary act, or if something unforeseen occurs in the doing of the act which Petitioners: SIMON DE LA CRUZ
produces the injury, the resulting death is within the protection of the policies Respondents: THE CAPITAL INSURANCE & SURETY CO., INC.,
insuring against death or injury from accident. Ponente: BARRERA, J.
● In the case at bar, it cannot be pretended that Carlie Surposa died in the course of
FACTS:
an assault or murder as a result of his voluntary act considering the very nature of
● Eduardo, employed as a mucker in the Itogon-Suyoc Mines, Inc., was the holder of
these crimes.
an accident insurance policy underwritten by the Capital Insurance
o In any event, while the act may not exempt the unknown perpetrator
o Eduardo was insured "against death or disability caused by accidental
from criminal liability, the fact remains that the happening was a pure
means"
accident on the part of the victim. The insured died from an event that
● in celebration of the New Year, the Itogon-Suyoc sponsored a boxing contest
took place without his foresight or expectation, an event that proceeded
wherein Eduardo, a non- professional boxer, participated
from an unusual effect of a known cause and, therefore, not expected.
● In the course of his bout with another person, Eduardo slipped and was hit by his
o Neither can it be said that there was a capricious desire on the part of the
opponent on the left part of the back of the head, causing Eduardo to fall, with his
accused to expose his life to danger considering that he was just going head hitting the rope of the ring
home after attending a festival. o He was brought to the Baguio General Hospital where died the following
● The personal accident insurance policy involved specifically enumerated only 10
day
circumstances wherein no liability attaches to Finman for any injury, disability or
o The cause of death was reported as hemorrhage, intracranial, left.
loss suffered by the insured as a result of any of the stipulated causes.
● Simon, the father of Eduardo and who was named beneficiary under the policy,
● The principle of “expresso unius exclusio alterius”—the mention of one thing
filed a claim with Capital Insurance for payment of indemnity
implies the exclusion of another thing is applicable in the instant case since murder
● As the claim was denied, Simon instituted the action in the CFI for specific
and assault, not having been expressly included in the enumeration of the
performance
circumstances that would negate liability in said insurance policy cannot be
● Capital Insurance set up the defense that the death of Eduardo, caused by his
considered by implication to discharge the petitioner insurance company from
participation in a boxing contest, was not accidental and therefore, not covered by
liability for any injury, disability or loss suffered by the insured.
insurance.
●
● CFI rendered the decision in favor of Simon
● Finman’s failure to include death resulting from murder or assault among the
● Capital Insurance appealed
prohibited risks leads inevitably to the conclusion that it did not intend to limit or
exempt itself from liability for such death.
ISSUE:
● Article 1377, Civil Code: The interpretation of obscure words or stipulations in a
W/N Eduardo’s death is within the protection of the policy? – YES.
contract shall not favor the party who caused the obscurity.
● It is well settled that contracts of insurance are to be construed liberally in favor of
RULING:
the insured and strictly against the insurer. Thus ambiguity in the words of an
● The terms "accident" and "accidental", as used in insurance contracts, have not
insurance contract should be interpreted in favor of its beneficiary.
acquired any technical meaning, and are construed by the courts in their ordinary
and common acceptation.
DISPOSITIVE PORTION: WHEREFORE, finding no irreversible error in the decision of the
o An accident is an event that takes place without one's foresight or
respondent Court of Appeals, the petition for certiorari with restraining order and
expectation — an event that proceeds from an unknown cause, or is an
preliminary injunction is hereby DENIED for lack of merit.
unusual effect of a known cause and, therefore, not expected
 ● where the death or injury is not the natural or probable result of the insured's
voluntary act which produces the injury, the resulting death is within the
protection of policies insuring against the death or injury from accident.
o while the participation of the Eduardo in the boxing contest is voluntary,
the injury was sustained when he slid, giving occasion to the infliction by
his opponent of the blow that threw him to the ropes of the ring
o Without the unintentional slipping of Eduardo, perhaps he could not have
received that blow in the head and would not have died
● The fact that boxing is attended with some risks of external injuries does not make
any injuries received in the course of the game not accidental.
o In boxing, as in other equally physically rigorous sports, such as basketball
or baseball, death is not ordinarily anticipated to result.
● Furthermore, the policy involved herein specifically excluded from its coverage —
"(e) Death or disablement consequent upon the Insured engaging in football,
hunting, pigsticking, steeplechasing, polo-playing, racing of any kind,
mountaineering, or motorcycling."
o Failure of Capital Insurance to include death resulting from a boxing
match or other sports among the prohibitive risks leads inevitably to the
conclusion that it did not intend to limit or exempt itself from liability for
such death
DISPOSITIVE PORTION:
WHEREFORE, in view of the foregoing considerations, the decision appealed from is hereby
affirmed, with costs against appellant. so ordered.
23. Sun Insurance Office Ltd v CA Sun Insurance Office Ltd v CA
GR 92383, 17 July 1992
By: HH
Topic: Concept of accident
Petitioners: SUN INSURANCE OFFICE, LTD
Respondents: THE HON. COURT OF APPEALS and NERISSA LIM
Ponente: CRUZ, J.
DOCTRINE:
There is no accident when a deliberate act is performed unless some additional, unexpected,
independent and unforeseen happening occurs which produces or brings about their injury
or death
FACTS:
● Sun Life issued Personal Accident Policy to Felix Lim, Jr. with a face value of
P200,000.00.
○ Two months later, he was dead with a bullet wound in his head.
■ According to Pilar Nalagon, Lim's secretary and was the only
eyewitness to his death, Lim was in a happy mood (but not
drunk) during his mother’s birthday party and was playing with
his handgun, from which he had previously removed the
magazine. As she watched television, he stood in front of her
and pointed the gun at her. She pushed it aside and said it
might he loaded. He assured her it was not and then pointed it
to his temple. The next moment there was an explosion and
Lim slumped to the floor. He was dead before he fell.
○ As beneficiary, his wife Nerissa Lim sought payment on the policy but her
claim was rejected.
○ The petitioner agreed that there was no suicide. It argued, however that
there was no accident either.
● RTC: In favor or Nerissa Lim
○ Sun Life sentenced to pay her P200,000.00, representing the face value of
the policy, with interest at the legal rate; P10,000.00 as moral damages;
P5,000.00 as exemplary damages; P5,000.00 as actual and compensatory
damages; and P5,000.00 as attorney's fees, plus the costs of the suit.
● CA: affirmed
ISSUE: Whether or not the death of Lim is considered an “accident” covered in the policy?
RULING: YES.
The term "accident" has been defined as follows:
The words "accident" and "accidental" have never acquired any technical signification in law,
and when used in an insurance contract are to be construed and considered according to the
ordinary understanding and common usage and speech of people generally. In-substance,
the courts are practically agreed that the words "accident" and "accidental" mean that which
happens by chance or fortuitously, without intention or design, and which is unexpected,
unusual, and unforeseen. The definition that has usually been adopted by the courts is that
an accident is an event that takes place without one's foresight or expectation — an event
that proceeds from an unknown cause, or is an unusual effect of a known case, and therefore
not expected. 4
An accident is an event which happens without any human agency or, if happening through
human agency, an event which, under the circumstances, is unusual to and not expected by
the person to whom it happens. It has also been defined as an injury which happens by
reason of some violence or casualty to the injured without his design, consent, or voluntary
co-operation.
In light of these definitions, the Court is convinced that the incident that resulted in Lim's
death was indeed an accident.
De la Cruz v. Capital Insurance says that "there is no accident when a deliberate act is
performed unless some additional, unexpected, independent and unforeseen happening
occurs which produces or brings about their injury or death." This was true when he fired the
gun.
Under the insurance contract, the company wasn’t liable for bodily injury caused by
attempted suicide or by one needlessly exposing himself to danger except to save another’s
life.
Lim wasn’t thought to needlessly expose himself to danger due to the witness testimony that
he took steps to ensure that the gun wasn’t loaded. He even assured his secretary that the
gun was not loaded.
There is nothing in the policy that relieves the insurer of responsibility to pay the indemnity
agreed upon if the insured is shown to have contributed to his own accident.
DISPOSITIVE PORTION:
WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED in so far as it holds
the petitioner liable to the private respondent in the sum of P200,000.00 representing the
face value of the insurance contract, with interest at the legal rate from the date of the filing
of the complaint until the full amount is paid, but MODIFIED with the deletion of all awards
for damages, including attorney's fees, except the costs of the suit.
OTHER ISSUE: Were the damages awarded vaild?
“In order that a person may be made liable to the payment of moral damages, the law
requires that his act be wrongful. The adverse result of an action does not per se make the
act wrongful and subject the act or to the payment of moral damages. The law could not
have meant to impose a penalty on the right to litigate; such right is so precious that moral
damages may not be charged on those who may exercise it erroneously. For these the law
taxes costs.”
If a party wins, he cannot, as a rule, recover attorney's fees and litigation expenses, since it is
not the fact of winning alone that entitles him to recover such damages of the exceptional
circumstances enumerated in Art. 2208. Otherwise, every time a defendant wins,
automatically the plaintiff must pay attorney's fees thereby putting a premium on the right to
litigate which should not be so. For those expenses, the law deems the award of costs as
sufficient.
24. Pan Malayan Insurance v CA
Petitioners: PAN MALAYAN INSURANCE CORPORATION
Respondents: COURT OF APPEALS, ERLINDA FABIE AND HER UNKNOWN DRIVER
FACTS:
● PANMALAY filed a complaint for damages against Erlinda Fabie and her driver.
○ PANMALAY insured a Mitsubishi Colt Lancer car (DDZ-431) registered in
the name of Canlubang Automotive Resources Corporation
[CANLUBANG];
○ due to the "carelessness, recklessness, and imprudence" of the unknown
driver of a pick-up, the insured car was hit and suffered damages
(P42,052.00)
○ PANMALAY defrayed the cost of repair of the insured car and, therefore,
was subrogated to the rights of CANLUBANG against the driver of the
pick-up and his employer, Erlinda Fabie;
○ despite repeated demands, Defendants, failed and refused to pay the
claim of PANMALAY.
● PANMALAY clarified that the damage caused was settled under the "own damage"
coverage of the insurance policy, and that the driver of the insured car was, at the
time of the accident, an authorized driver duly licensed to drive the vehicle.
○ PANMALAY also submitted a copy of the insurance policy and the Release
of Claim and Subrogation Receipt executed by CANLUBANG in favor of
PANMALAY.
● Fabie and driver filed M2D: payment under the "own damage" clause of the
insurance policy precluded subrogation under Article 2207 NCC, since
indemnification thereunder was made on the assumption that there was no
wrongdoer or no third party at fault.
● RTC: dismissing PANMALAY’s complaint for no cause of action.
● PANMALAY’S CONTENTION: the coverage of insured risks under Section III-1(a), is
comprehensive enough to include damage to the insured vehicle arising from
collision or overturning due to the fault or negligence of a third party.
UNDER THE POLICY:
Section III-1 of the insurance policy which refers to the conditions under which the insurer
PANMALAY is liable to indemnify the assured CANLUBANG against damage to or loss of the
insured vehicle, reads as follows:chanrob1es virtual 1aw library
SECTION III — LOSS OR DAMAGE.
1. The Company will, subject to the Limits of Liability, indemnify the Insured against
loss of or damage to the Scheduled Vehicle and its accessories and spare parts whilst
thereon: —
(a) by accidental collision or overturning, or collision or overturning
consequent upon mechanical breakdown or consequent upon wear and tear;
(b) by fire, external explosion, self ignition or lightning or burglary,
housebreaking or theft;
(c) by malicious act;
(d) whilst in transit (including the processes of loading and unloading)
incidental to such transit by road, rail, inland, water-way, lift or elevator.
ISSUE: whether or not the insurer PANMALAY may institute an action to recover the
amount it had paid its assured in settlement of an insurance claim against private
respondents as the parties allegedly responsible for the damage caused to the insured
vehicle. YES.
● Based on a police report wherein the driver of the insured car reported that after
the vehicle was sideswiped by a pick-up, the driver thereof fled the scene
● DOCTRINE: It cannot be said that the meaning given by PANMALAY and
CANLUBANG to the phrase "by accidental collision or overturning" found in the first
part of sub-paragraph (a) is untenable.
○ Although the terms "accident" or "accidental" as used in insurance
contracts have not acquired a technical meaning, the Court has on
several occasions defined these terms to mean that which takes place
"without one’s foresight or expectation, an event that proceeds from an
unknown cause, or is an unusual effect of a known cause and,
therefore, not expected.”
○ Certainly, it cannot be inferred from jurisprudence that these terms,
without qualification, exclude events resulting in damage or loss due to
the fault, recklessness or negligence of third parties.
 ○ The concept "accident" is not necessarily synonymous with the concept
of "no fault." It may be utilized simply to distinguish intentional or
malicious acts from negligent or careless acts of man., CANLUBANG filed
its claim with PANMALAY for indemnification of the damage caused to its
car. It then accepted payment from PANMALAY, and executed a Release
of Claim and Subrogation Receipt in favor of latter.
● Moreover, a perusal of the provisions of the insurance policy reveals that damage
to, or loss of, the insured vehicle due to negligent or careless acts of third parties is
not listed under the general and specific exceptions to the coverage of insured risks
which are enumerated in detail in the insurance policy itself
● The Court, furthermore, finds it noteworthy that the meaning advanced by
PANMALAY regarding the coverage of Section III-1(a) of the policy is undeniably
more beneficial to CANLUBANG than that insisted upon by respondents herein. By
arguing that this section covers losses or damages due not only to malicious, but
also to negligent acts of third parties, PANMALAY in effect advocates for a more
comprehensive coverage of insured risks. And this, in the final analysis, is more in
keeping with the rationale behind the various rules on the interpretation of
insurance contracts favoring the assured or beneficiary so as to effect the dominant
purpose of indemnity or payment
● In conclusion, it must be reiterated that in this present case, the insurer PANMALAY
as subrogee merely prays that it be allowed to institute an action to recover from
third parties who allegedly caused damage to the insured vehicle, the amount
which it had paid its assured under the insurance policy. Having thus shown from
the above discussion that PANMALAY has a cause of action against third parties
whose negligence may have caused damage to CANLUBANG’s car, the Court holds
that there is no legal obstacle to the filing by PANMALAY of a complaint for
damages against private respondents as the third parties allegedly responsible for
the damage. Respondent Court of Appeals therefore committed reversible error in
sustaining the lower court’s order which dismissed PANMALAY’s complaint against
private respondents for no cause of action. Hence, it is now for the trial court to
determine if in fact the damage caused to the insured vehicle was due to the
"carelessness, recklessness and imprudence" of the driver of private respondent
Erlinda Fabie.
DISPOSITIVE PORTION: WHEREFORE, in view of the foregoing, the present petition is
GRANTED. Petitioner’s complaint for damages against private respondents is hereby
REINSTATED. Let the case be remanded to the lower court for trial on the merits.