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SAN BEDA COLLEGE OF LAW

Mendiola, Manila

CASES IN INSURANCE

Prepared by: Dean o!e S"ndian#

I$ CONS%RUC%ION OF INSURANCE CON%RAC%

&$ Calano' ($ Co"r) o* Appeal!, + P-il$ .+ /&+0012$ Bia#)an ($ In!"lar Li*e A!!"ran'e Co$, L)d$, 33 SCRA 0

4$ Fin5an Gen$ In!"ran'e Corp$ ($ Co"r) o* Appeal!, 2&4 SCRA 3+4 /&++21

3$ 6eni)- In!"ran'e Corp$ ($ Co"r) o* Appeal!, &0 SCRA 4+

0$ S"n In!"ran'e O7'e L)d$ 8$ Co"r) o* Appeal!, 2&& SCRA 003 /&++21

9$ 8illa'or)a ($ In!"ran'e Co55i!!ion, & SCRA 39.

.$ Fi#"ra'ion 8da$ De Ma#lana ($ ;on$ Fran'i!'o Con!ola'ion 2&2 SCRA 29

/&++21

$ Perla Co5pania de Se#"ro, In'$ ($ 'o"r) o* Appeal!, 2 SCRA 3.

+$ Gea#onia ($ Co"r) o* Appeal!, 23& SCRA &02 /&++01

&$ For)"ne In!"ran'e and S"re)y Co$, In'$ ($ Co"r) o* Appeal!, 233 SCRA 4

/&++01

&&$ Edillon ($ Manila Ban<er! Li*e, &&. SCRA &.

&2$ Perla Co5pania de Se#"ro ($ CA, &0 SCRA .3& /&++1

&4$ Ai!porna ($ CA, &&4 SCRA 30+ =Cri!pona

&3$ W-i)e Gold Marine Ser(i'e!, In'$ (!$ Pioneer In!"ran'e and S"re)y

Corpora)ion and S)ea5!-ip M")"al Under>ri)in# A!!o'ia)ion L)d$ /G$R$ No$

393 SCRA 331

&0$ Rep"bli' (!$ S"nli*e A!!"ran'e Co5pany o* Canada /3.4 SCRA &2+, O')$

&3, 201

&9$ P-ila5 Care ;eal)- Sy!)e5!, In'$ ($ Co"r) o* Appeal!, 4.+ SCRA 409

/221&.$ Co55i!!ioner o* In)ernal Re(en"e ($ Lin'oln P-ilippine Li*e In!"ran'e

Co5pany, 4.+ SCRA 324 /221

II$ PERFEC%ION OF INSURANCE CON%RAC%

&$ Enri?"e@ ($ S"n Li*e A!!"ran'e Co$ o* Canada, 3& P-il$ 29+

&+$ Grea) Pa'i' Li*e In!"ran'e Co$ ($ Co"r) o* Appeal!, + SCRA 034

2$ De($ Ban< o* )-e P-il!$ 8$ Co"r) o* Appeal!, 24& SCRA 4. /&++31

2&$ P-ila5'are ;eal)- Sy!)e5!, In'$ ($ Co"r) o* Appeal!, 4.+ SCRA 409 /221

22$ G"l* Re!or)!, In'$ ($ P-il C-ar)er In!"ran'e, Corp$, 30 SCRA 00 /201

III$ SUBROGA%ION

24$ Malayan In!"ran'e Co$, In'$ ($ Co"r) o* Appeal!, &90 SCRA 04923$ Manila Ma-o#any ($ Co"r) o* Appeal!, &03 SCRA 90

20$ Pan Malayan In!$ Corp$ ($ Co"r) o* Appeal!, &3 SCRA 03

29$ Ceb" S-ipyard and En#ineerin# Wor<!, In'$ ($ Willia5 Line!, 49 SCRA

.92 /&+++1

2.$ Del!an %ran!por) Line!, In'$ ($ Co"r) o* Appeal!, 49+ SCRA 23 /2&1

2$ Federal Epre!! Corpora)ion ($ A5eri'an ;o5e A!!"ran'e Co5pany, 34.

SCRA 0 /231



I8$ INSURABLE IN%ERES%

2+$ Sp!$ Nilo and S)ella C-a ($ Co"r) o* Appeal!, 2.. SCRA 9+ /&++.1

4$ Grea) Pa'i' Li*e In!"ran'e Corp$ ($ CA, 4&9 SCRA 9.. /&+++1

4&$ ;ar(ardian Colle#e! o* San Fernando Pa5pan#a, In'$ ($ Co"n)ry Ban<er!

In!"ran'e Corp$, CA, & SCRA & /&+91

42$ An# a " ($ P-oeni A!!"ran'e Co$ L)d$, & SCRA .3 /&+9&1

8$ CONCEALMEN% AND REPRESEN%A%ION

44$ In!"lar Li*e A!!"ran'e Co$ ($ Seran D$ Feli'iano, .3 P-il$ 39

43$ S"nli*e A!!"ran'e Co$ o* Canada ($ Co"r) o* Appeal!, 230 SCRA 29

/&++01

40$ %-el5a 8da$ De Canilan# ($ Co"r) o* Appeal!, 224 SCRA 334 /&++41

8I$ PERSONS EN%I%LED %O RECO8ER UNDER %;E POLIC

49$ Boni*a'io Bro!$ ($ Mora, 2 SCRA 29&

4.$ Fir!) In)e#ra)ed Bondin# In!"ran'e Co$ ($ ;ernando &++ SCRA .+9

/&++&1

4$ S-er5an S-aper ($ ;on$ "d#e R%C o* Olon#apo Ci)y &9. SCRA49

8II$ INCON%ES%ABILI% CLAUSE

4+$ %an ($ Co"r) o* Appeal!, &.3 SCRA 34

8III$ LIABILI% UNDER AN OPEN POLIC

3$ De(elop5en) In!"ran'e Corp$ ($ In)er5edia)e Appella)e Co"r), &34 SCRA

92

I$ PRESCRIP%ION OF AC%ION

3&$ S"n In!"ran'e O7'e L)d$ 8$ Co"r) o* Appeal!, &+0 SCRA &4+ /&++&1

32$ a'?"eline i5ene@ 8da$ De Gabriel ($ Co"r) o* Appeal!, 293 SCRA &4.

/&++91

$ PREMIUM PAMEN%S34$ Malayan In!"ran'e Co$ In'$ ($ Gre#orio Cr"@ Arnaldo, &03 SCRA 9.2

33$ Ma<a)i %"!'any Condo5ini"5 Corp$ ($ Co"r) o* Appeal!, 2&0 SCRA 392

/&++21

30$ So")- Sea S"re)y and In!$ Co$ In'$ ($ Co"r) o* Appeal!, 233 SCRA .33

/&++01

39$ Sp!$ An)onio %ibay and 8iole)a %ibay e)$ al$ ($ Co"r) o* Appeal!, 20. SCRA

&29 /&++91

3.$ UCPB General In!"ran'e Co$ In'$ (!$ Ma!a#ana %ele5ar), In'$, 409 SCRA

4. /2&1

3$ A5eri'an ;o5e A!!"ran'e Co$ ($ An)onio C-"a, 4+ SCRA 20 /&+++13+$ Pa"lin ($ In!"lar Li*e A!!"ran'e$ Co$ L)d$, 3. OG 4&2 /&+3+1

I$ DOUBLE INSURANCE

0$ Pioneer In!"ran'e S"re)y Corp$ ($ Oli(ia ap 9& SCRA 329

0&$ Rep"bli' Ban< ($ P-il$ G"aran)y Co$, In'$, 3. SCRA 2.&

II$ MARINE INSURANCE

02$ Orien)al A!!"ran'e Corp$ ($ Co"r) o* Appeal!, 2 SCRA 30+ /&++&1

04$ Ro?"e ($ In)er5edia)e Appella)e Co"r), &4+ SCRA 0+.



03$ Filipina! Mer'-an)! In!"ran'e ($ 'o"r) o* Appeal!, &.+ SCRA 94

00$ C-oa %e< Sen# ($ Co"r) o* Appeal!, &$ SCRA 224

09$ Del!an %ran!por) Line!, In'$ ($ Co"r) o* Appel!, 49+ SCRA 23

III$ LIFE INSURANCE

0.$ Del 8al ($ Del 8al, 2+ P-il$ 040

0$ Ban< o* )-e P-il$ I!land! ($ Po!ada!, 09 P-il$ 2&00+$ In!"lar Li*e ($ Ebrado, SCRA &&

I8$ CAS; SURRENDER 8ALUE

9$ Man"*a')"rin# Li*e In!"ran'e Co$ ($ Meer, + P-il$ 40& /&+&1

8$ SURE%S;IP

9&$ De(elop5en) Ban< o* )-e P-il!$ ($ Co"r) o* Appeal!, 24& SCRA 4. /&++31

92$ P-il$ Pry'e A!!"ran'e Corp$ ($ CA, 24 SCRA &93

8I$ CLAIMS SE%%LEMEN% Se'!$ 243 233H AND PROOF OF LOSS

94$ %io -e C-io (!$ Co"r) o* Appeal!, 22 SCRA &&+ /&++&1

93$ Fin5an A!!"ran'e Corpora)ion ($ Co"r) o* Appeal!, 49& SCRA 0&3 /2&1

90$ Co"n)ry Ban<er! In!"ran'e Corpora)ion ($ Lian#a Bay and Co55"ni)y

M")iP"rpo!e Coopera)i(e, 4.3 SCRA 904 /221

8II$ Co5p"l!ory Mo)or! 8e-i'le Liabili)y INSURANCE

99$ Perla Co5pania de Se#"ro, In'$ ($ ;on$ Con!)an)e An'-e)a, &93 SCRA &33

9.$ Fir!) J"e@on Ci)y In!"ran'e Co$ ($ Co"r) o* Appeal!, 2& SCRA 020 /&++41

9$ Perla Co5pania de Se#"ro, In'$ ($ Ra5ole)e, 24 SCRA 3. /&++&1

9+$ Go(ern5en) Ser(i'e In!"ran'e Sy!)e5 ($ Co"r) o* Appeal!, 4 SCRA

00+, "ne 2&, &+++

8III$ URISDIC%ION OF %;E INSURANCE COMMISSION

.$ P-ilippine A5eri'an Li*e In!"ran'e Co$, ($ An!aldo, 243 SCRA 0+ /&++31



Republic of the PhilippinesSUPREME COURT

Manila

G.R. No. L-8151 December 16, 1955

VIRGINIA CALANOC, petitioner,vs.COURT O APPEALS !"# T$E P$ILIPPINE AMERICAN LIE INSURANCE CO., respondents.

Lucio Javillonar for petitioner.J. A. Wolfson, Manuel Y. Mecias, Emilio Abello and Anselmo A. Reyes for respondents.

%AUTISTA ANGELO, J.:

This suit involves the collection of P2,000 representing the value of a supplemental policy covering

accidental death which was secured by one Melencio Basilio from the Philippine merican !ife"nsurance #ompany. The case originated in the Municipal #ourt of Manila and $udgment beingfavorable to the plaintiff it was appealed to the court of first instance. The latter court affirmed the

$udgment but on appeal to the #ourt of ppeals the $udgment was reversed and the case is nowbefore us on a petition for review.

Melencio Basilio was a watchman of the Manila uto %upply located at the corner of venida Ri&aland 'urbaran. (e secured a life insurance policy from the Philippine merican !ife "nsurance#ompany in the amount of P2,000 to which was attached a supplementary contract covering deathby accident. )n *anuary 2+, -+, he died of a gunshot wound on the occasion of a robberycommitted in the house of tty. )$eda at the corner of )rouieta and 'urbaan streets. /irginia#alanoc, the widow, was paid the sum of P2,000, face value of the policy, but when she demanded

the payment of the additional sum of P2,000 representing the value of the supplemental policy, thecompany refused alleging, as main defense, that the deceased died because he was murdered by aperson who too part in the commission of the robbery and while maing an arrest as an officer ofthe law which contingencies were e1pressly e1cluded in the contract and have the effect ofe1empting the company from liability.

The pertinent facts which need to be considered for the determination of the uestions raised arethose reproduced in the decision of the #ourt of ppeals as follows

The circumstances surrounding the death of Melencio Basilio show that when he was illedat about seven o3cloc in the night of *anuary 2+, -+, he was on duty as watchman of theManila uto %upply at the corner of venida Ri&al and 'urbaran4 that it turned out that tty.

ntonio )$eda who had his residence at the corner of 'urbaran and )rouieta, a bloc awayfrom Basilio3s station, had come home that night and found that his house was well5lighted,but with the windows closed4 that getting suspicious that there were culprits in his house,

tty. )$eda retreated to loo for a policeman and finding Basilio in hai uniform, ased himto accompany him to the house with the latter refusing on the ground that he was not apoliceman, but suggesting that tty. )$eda should as the traffic policeman on duty at thecorner of Ri&al venue and 'urbaran4 that tty. )$eda went to the traffic policeman at saidcorner and reported the matter, asing the policeman to come along with him, to which thepoliceman agreed4 that on the way to the )$eda residence, the policeman and tty. )$edapassed by Basilio and somehow or other invited the latter to come along4 that as the tree



approached the )$eda residence and stood in front of the main gate which was covered withgalvani&ed iron, the fence itself being partly concrete and partly adobe stone, a shot wasfired4 that immediately after the shot, tty. )$eda and the policeman sought cover4 that thepoliceman, at the reuest of tty. )$eda, left the premises to loo for reinforcement4 that itturned out afterwards that the special watchman Melencio Basilio was hit in the abdomen,the wound causing his instantaneous death4 that the shot must have come from inside the

yard of tty. )$eda, the bullet passing through a hole waist5high in the galvani&ed iron gate4that upon inuiry tty. )$eda found out that the savings of his children in the amount of P60in coins ept in his aparador contained in stocings were taen away, the aparador havingbeen ransaced4 that a month thereafter the corresponding investigation conducted by thepolice authorities led to the arrest and prosecution of four persons in #riminal #ase 7o.+08 of the #ourt of 9irst "nstance of Manila for 3Robbery in an "nhabited (ouse and inBand with Murder3.

"t is contended in behalf of the company that Basilio was illed which :maing an arrest as an officerof the law: or as a result of an :assault or murder: committed in the place and therefore his deathwas caused by one of the riss e1cluded by the supplementary contract which e1empts the companyfrom liability. This contention was upheld by the #ourt of ppeals and, in reaching this conclusion,made the following comment

9rom the foregoing testimonies, we find that the deceased was a watchman of the Manila uto %upply, and, as such, he was not boud to leave his place and go with tty. )$eda andPoliceman Magsanoc to see the trouble, or robbery, that occurred in the house of tty.)$eda. "n fact, according to the finding of the lower court, tty. )$eda finding Basilio inuniform ased him to accompany him to his house, but the latter refused on the ground thathe was not a policeman and suggested to tty. )$eda to as help from the traffic policemanon duty at the corner of Ri&al venue and 'urbaran, but after tty. )$eda secured the help ofthe traffic policeman, the deceased went with )$eda and said traffic policeman to theresidence of )$eda, and while the deceased was standing in front of the main gate of saidresidence, he was shot and thus died. The death, therefore, of Basilio, although une1pected,was not caused by an accident, being a voluntary and intentional act on the part of the one

wh robbed, or one of those who robbed, the house of tty. )$eda. (ence, it is out consideredopinion that the death of Basilio, though une1pected, cannot be considered accidental, forhis death occurred because he left his post and $oined policeman Magsanoc and tty. )$edato repair to the latter3s residence to see what happened thereat. #ertainly, when Basilio

$oined Patrolman Magsanoc and tty. )$eda, he should have reali&ed the danger to which hewas e1posing himself, yet, instead of remaining in his place, he went with tty. )$eda andPatrolman Magsanoc to see what was the trouble in tty. )$eda3s house and thus he wasfatally shot.

;e dissent from the above findings of the #ourt of ppeals. 9or one thing, Basilio was a watchmanof the Manila uto %upply which was a bloc away from the house of tty. )$eda where somethingsuspicious was happening which caused the latter to as for help. ;hile at first he declied theinvitation of tty. )$eda to go with him to his residence to inuire into what was going on because hewas not a regular policeman, he later agreed to come along when prompted by the traffic policeman,and upon approaching the gate of the residence he was shot and died. The circumstance that hewas a mere watchman and had no duty to heed the call of tty. )$eda should not be taen as acapricious desire on his part to e1pose his life to danger considering the fact that the place he was induty5bound to guard was only a bloc away. "n volunteering to e1tend help under the situation, hemight have thought, rightly or wrongly, that to now the truth was in the interest of his employer itbeing a matter that affects the security of the neighborhood. 7o doubt there was some ris coming tohim in pursuing that errand, but that ris always e1isted it being inherent in the position he washolding. (e cannot therefore be blamed solely for doing what he believed was in eeping with his



duty as a watchman and as a citi&en. nd he cannot be considered as maing an arrest as an officer of the law, as contended, simply because he went with the traffic policeman, for certainly he did notgo there for that purpose nor was he ased to do so by the policeman.

Much less can it be pretended that Basilio died in the course of an assault or murder considering thevery nature of these crimes. "n 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.Perhaps this may be clarified in the criminal case now pending in court as regards the incident butbefore that is done anything that might be said on the point would be a mere con$ecture. 7or can itbe said that the illing was intentional for there is the possibility that the malefactor had fired the shotmerely to scare away the people around for his own protection and not necessarily to ill or hit thevictim. "n any event, while the act may not e1cempt the triggerman from liability for the damagedone, the fact remains that the happening was a pure accident on the part of the victim. The victimcould have been either the policeman or tty. )$eda for it cannot be pretended that the malefactoraimed at the deceased precisely because he wanted to tae his life.

;e tae note that these defenses are included among the riss e1luded in the supplementarycontract which enumerates the cases which may e1empt the company from liability. ;hile as a

general rule :the parties may limit the coverage of the policy to certain particular accidents and rissor causes of loss, and may e1pressly e1cept other riss or causes of loss therefrom: <8+ #. *. %.=>5=>2?, however, it is to be desired that the terms and phraseology of the e1ception clause beclearly e1pressed so as to be within the easy grasp and understanding of the insured, for if the termsare doubtful or obscure the same must of necessity be interpreted or resolved aganst the one whohas caused the obscurity. <rticle 6==, new #ivil #ode? nd so it has bene generally held that the:terms in an insurance policy, which are ambiguous, euivacal, or uncertain . . . are to be construedstrictly and most strongly against the insurer, and liberally in favor of the insured so as to effect thedominant purpose of indemnity or payment to the insured , especially where a forfeiture is involved:<2- m. *ur., >?, and the reason for this rule is that he :insured usually has no voice in theselection or arrangement of the words employed and that the language of the contract is selectedwith great care and deliberation by e1perts and legal advisers employed by, and acting e1clusively inthe interest of, the insurance company.: <88 #. *. %., p. =8.?

"nsurance is, in its nature, comple1 and difficult for the layman to understand. Policies areprepared by e1perts who now and can anticipate the bearings and possible complicationsof every contingency. %o long as insurance companies insist upon the use of ambiguous,intricate and technical provisions, which conceal rather than franly disclose, their ownintentions, the courts must, in fairness to those who purchase insurance, construe everyambiguity in favor of the insured. <lgoe vs. Pacific Mut. !. "ns. #o., - ;ash. 628, !R-=, 26=.?lawphi.net

n insurer should not be allowed, by the use of obscure phrases and e1ceptions, to defeatthe very purpose for which the policy was procured. <Moore vs. etna !ife "nsurance #o.,!R -+@, 2A8.?

;e are therefore persuaded to conclude that the circumstances unfolded in the present case do notwarrant the finding that the death of the unfortunate victim comes within the purview of the e1ceptionclause of the supplementary policy and, hence, do not e1empt the company from liability.

;herefore, reversing the decision appealed from, we hereby order the company to pay petitioner5appellant the amount of P2,000, with legal interest from *anuary 2A, -+ until fully paid, with costs.



aras, !. J., "eng#on, adilla, Montemayor, Reyes, A., Jugo, Labrador, !oncepcion, and Reyes, J.". L., JJ., concur.




Manila

7 B7#

G.R. No. L-&55'9 M!rc( &9, 19'&

EMILIA T. %IAGTAN, )UAN T. %IAGTAN, )R., MIGUEL T. %IAGTAN, GIL T. %IAGTAN !"#GRACIA T. %IAGTAN,plaintiffs5appellees,vs.T$E INSULAR LIE ASSURANCE COMPAN*, LTD., defendant5appellant.

$anopo, Millora, %erafica, and %a&e# for plaintiff'appellees.

Araneta, Mendo#a and apa for defendant'appellant.

MA+ALINTAL, J.: p

This is an appeal from the decision of the #ourt of 9irst "nstance of Pangasinan in its #ivil #ase 7o.@5=00.

The facts are stipulated. *uan %. Biagtan was insured with defendant "nsular!ife ssurance#ompany under Policy 7o. 6->0=+ for the sum of P+,000.00 and, under a supplementary contractdenominated :ccidental @eath Benefit #lause, for an additional sum of P+,000.00 if :the death ofthe "nsured resulted directly from bodily in$ury effected solely through e1ternal and violent means

sustained in an accident ... and independently of all other causes.: The clause, however,e1presslyprovided that it would not apply where death resulted from an in$ury:intentionally inflicted by anotherparty.:

)n the night of May 20, -A8, or during the first hours of the following day a band of robbers enteredthe house of the insured *uan %. Biagtan. ;hat happened then is related in the decision of the trialcourt as follows

...4 that on the night of May 20, -A8 or the first hours of May 2, -A8, while the saidlife policy and supplementary contract were in full force and effect, the house ofinsured *uan %. Biagtan was robbed by a band of robbers who were charged in andconvicted by the #ourt of 9irst "nstance of Pangasinan for robbery with homicide4 that

in committing the robbery, the robbers, on reaching the staircase landing on thesecond floor, rushed towards the door of the second floor room, where they suddenlymet a person near the door of oneof the rooms who turned out to be the insured*uan %. Biagtan who received thrusts from their sharp5pointed instruments, causingwounds on the body of said *uan %. Biagtan resulting in his death at about = a.m. onthe same day, May 2, -A84

Plaintiffs, as beneficiaries of the insured, filed a claim under the policy. The insurance company paidthe basic amount of P+,000.00 but refused to pay the additional sum of P+,000.00 under the



accidental death benefit clause, on the ground that the insured3s death resulted from in$uriesintentionally inflicted by third parties and therefore was not covered. Plaintiffs filed suit to recover,and after due hearing the court a (uo rendered $udgment in their favor. (ence the present appeal bythe insurer.

The only issue here is whether under the facts are stipulated and found by the trial court the wounds

received by the insured at the hands of the robbers C nine in all, five of them mortal and four non5mortal C were inflicted intentionally. The court, in ruling negatively on the issue, stated that since theparties presented no evidence and submitted the case upon stipulation, there was no :proof that theact of receiving thrust <sic? from the sharp5pointed instrument of the robbers was intended to inflictin$uries upon the person of the insured or any other person or merely to scare away any person soas to ward off any resistance or obstacle that might be offered in the pursuit of their main ob$ectivewhich was robbery.:

The trial court committed a plain error in drawing the conclusion it did from the admitted facts. 7inewounds were inflicted upon the deceased, all by means of thrusts with sharp5pointed instrumentswielded by the robbers. This is a physical fact as to which there is no dispute. %o is the fact that fiveof those wounds caused the death of the insured. ;hether the robbers had the intent to ill or

merely to scare the victim or to ward off any defense he might offer, it cannot be denied that the actitself of inflicting the in$uries was intentional. "t should be noted that the e1ception in the accidentalbenefit clause invoed by the appellant does not spea of the purpose C whether homicidal or notC of a third party in causing the in$uries, but only of the fact that such in$uries have been:intentionally: inflicted C this obviously to distinguish them from in$uries which, although received atthe hands of a third party, are purely accidental. This construction is the basic idea e1pressed in thecoverage of the clause itself, namely, that :the death of the insured resulted directly from bodilyin$ury effected solely through e1ternal and violent means sustained in an accident ... andindependently of all other causes.: gun which discharges while being cleaned and ills abystander4 a hunter who shoots at his prey and hits a person instead4 an athlete in a competitivegame involving physical effort who collides with an opponent and fatally in$ures him as a resultthese are instances where the infliction of the in$ury is unintentional and therefore would be withinthe coverage of an accidental death benefit clause such as thatin uestion in this case. But where a

gang of robbers enter a house and coming face to face with the owner, even if une1pectedly, stabhim repeatedly, it is contrary to all reason and logic to say that his in$uries are not intentionallyinflicted, regardless of whether they prove fatal or not. s it was, in the present case they did provefatal, and the robbers have been accused and convicted of the crime of robbery with homicide.

The case of !alanoc vs. !ourt of Appeals, -> Phil. =-, is relied upon by the trial court in support ofits decision. The facts in that case, however, are different from those obtaining here. The insuredthere was a watchman in a certain company, who happened to be invited by a policeman to comealong as the latter was on his way to investigate a reported robbery going on in a private house. sthe two of them, together with the owner of the house, approached and stood in front of the maingate, a shot was fired and it turned out afterwards that the watchman was hit in the abdomen, thewound causing his death. Dnder those circumstances this #ourt held that it could not be said thatthe illing was intentional for there was the possibility that the malefactor had fired the shot to scarepeople around for his own protection and not necessarrily to )ill or hit the victim. similar possibilityis clearly ruled out by the facts in the case now before Ds. 9or while a single shot fired from adistance, and by a person who was not even seen aiming at the victim, could indeed have been firedwithout intent to ill or in$ure, nine wounds inflicted with bladed weapons at close range cannotconceivably be considered as innocent insofar as such intent is concerned. The manner of e1ecutionof the crime permits no other conclusion.



#ourt decisions in the merican $urisdiction, where similar provisions in accidental death benefitclauses in insurance policies have been construed, may shed light on the issue before Ds. Thus, ithas been held that :intentional: as used in an accident policy e1cepting intentional in$uries inflictedby the insured or any other person, etc., implies the e1ercise of the reasoning faculties,consciousness and volition. 1 ;here a provision of the policy e1cludes intentional in$ury, it is the intentionof the person inflicting the in$ury that is controlling. & "f the in$uries suffered by the insured clearly resulted

from the intentional act of a third person the insurer is relieved from liability as stipulated.

"n the case of *utchcraft+s E+r v. $ravelers+ -ns. !o., >= Ey. 600, > %.;. +=0, 2 m. %t. Rep. 8>8,the insured was waylaid and assassinated for the purpose of robbery. Two <2? defenses wereinterposed to the action to recover indemnity, namely <? that the insured having been illed byintentional means, his death was not accidental, and <2? that the proviso in the policy e1presslye1empted the insurer from liability in case the insured died from in$uries intentionally inflicted byanother person. "n rendering $udgment for the insurance company the #ourt held that while theassassination of the insured was as to him an unforeseen event and therefore accidental, :theclause of the proviso that e1cludes the <insurer3s? liability, in case death or in$ury is intentionallyinflicted by another person, applies to this case.:

"n "utero v. $ravelers+ Acc. -ns. !o., -A ;is. +6A, A+ m. %t. Rep. A, = %.;. >, the insured wasshot three times by a person unnown late on a dar and stormy night, while woring in the coalshed of a railroad company. The policy did not cover death resulting from :intentional in$uries inflictedby the insured or any other person.: The inuiry was as to the uestion whether the shooting thatcaused the insured3s death was accidental or intentional4 and the #ourt found that under the facts,showing that the murderer new his victim and that he fired with intent to ill, there could be norecovery under the policy which e1cepted death from intentional in$uries inflicted by any person.

;(R9)R, the decision appealed from is reversed and the complaint dismissed, withoutpronouncement as to costs.

aldivar, !astro, /ernando and 0illamor, JJ., concur.

Ma)asiar, J., reserves his vote.

Se!r!e O/"/o"0

%ARREDO, J., concurring C

@uring the deliberations in this case, " entertained some doubts as to the correctness and validity ofthe view upheld in the main opinion penned by *ustice Maalintal. 9urther reflection has convincedme, however, that there are good reasons to support it.

t first blush, one would feel that every death not suicidal should be considered accidental, for thepurposes of an accident insurance policy or a life insurance policy with a double indemnity clause in



case death results from accident. "ndeed, it is uite logical to thin that any event whether caused byfault, negligence, intent of a third party or any unavoidable circumstance, normally unforeseen by theinsured and free from any possible connivance on his part, is an accident in the generally acceptedsense of the term. nd if " were convinced that in including in the policy the provision in uestion,both the insurer and the insured had in mind to e1clude thereby from the coverage of the policy onlysuicide whether unhelped or helped somehow by a third party, " would disregard the merican

decisions cited and uoted in the main opinion as not even persuasive authorities. But e1amining theuneuivocal language of the provision in controversy and considering that the insured accepted thepolicy without asing that it be made clear that the phrase :in$ury intentionally inflicted by a thirdparty: should be understood to refer only to in$uries inflicted by a third party without any wilfulintervention on his part <of the insured? or, in other words, without any connivance with him <theinsured? in order to augment the proceeds of the policy for his benificiaries, " am inclined to agreethat death caused by criminal assault is not covered by the policies of the ind here in uestion,specially if the assault, as a matter of fact, could have been more or less anticipated, as when theinsured happens to have violent enemies or is found in circumstances that would mae his life fairgame of third parties.

s to the rest, " have no doubt that the illing of the insured in this case is as intentional as anyintentional act can be, hence this concurrence.

TEE$AN+EE, J., dissenting

The sole issue at bar is the correctness in la1 of the lower court3s appealed decision ad$udgingdefendant insurance company liable, under its supplementary contract denominated :ccidental@eath Benefit #lause: with the deceased insured, to plaintiffs5beneficiaries <e1cluding plaintiff miliaT. Biagtan? in an additional amount of P+,000.00 <with corresponding legal interest? and ruling thatdefendant company had failed to present any evidence to substantiate its defense that the insured3sdeath came within the stipulated e1ceptions.

@efendant3s accidental death benefit clause e1pressly provides

##"@7T! @T( B79"T. <hereinafter called the benefit?. Dpon receipt andapproval of due proof that the death of the "nsured resulted directly from bodily in$uryeffected solely through e1ternal and violent means sustained in an accident, withinninety days after the date of sustaining such in$ury, and independently of all othercauses, this #ompany shall pay, in addition to the sum insured specified on the firstpage of this Policy, a further sum eual to said sum insured payable at the same timeand in the same manner as said sum insured, provided, that such death occurredduring the continuance of this #lause and of this Policy and before the si1tiethbirthday of the "nsured.: 1

long list of e1ceptions and an utomatic @iscontinuance clause immediately follow thereafter, thus

F#PT")7%. The Benefit shall not apply if the "nsured3s death shall result, eitherdirectly or indirectly, from any one of the following causes

<? %elf'destruction or self'inflicted in2uries, whether the "nsured be sane or insane4

<2? "odily or mental infirmity or disease of any ind4



<6? oisoning or infection, other than infection occurring simultaneously with and inconseuence of a cut or wound sustained in an accident4

<8? "n$uries of which there is no visible contusions or 1ound on the eterior of thebody, drowning and internal in$uries revealed by autopsy e1cepted4

<+? ny in2uries received <a? while on police duty in any military, naval or policeorgani&ation4 <b? in anyriot , civil commotion, insurrection or 1ar or any act incidentthereto4 <c? while travelling as a passenger or otherwise in any form of submarinetransportation, or while engaging in submarine operations4 <d? in any violation of thela1 by the -nsured or assault provo)ed by the -nsured 4 <e? that has beeninflictedintentionally by a third party , either with or without provocation on the part of the"nsured, and whether or not the attac or the defense by the third party was causedby a violation of the law by the "nsured4

<A? 3perating or riding in or descending from any )ind of aircraft if the "nsured is apilot, officer or member of the crew of the aircraft or is giving or receiving any ind oftraining or instruction or has any duties aboard the aircraft or reuiring descent

therefrom4 and

<=? Atomic energy eplosion of any nature whatsoever.

The #ompany, before maing any payment under this #lause, shall have the rightand opportunity to e1amine the body and mae an autopsy thereof.

DT)MT"# @"%#)7T"7D7#. This Benefit shall automatically terminate and theadditional premium therefor shall cease to be payable when and if

<? This Policy is surrendered for cash, paid5up insurance or e1tended terminsurance4 or

<2? The benefit under the Total and Permanent @isability ;aiver of Premium#ertificate is granted to the insured4 or

<6? The "nsured engages in military, naval or aeronautic service in time of 1ar 4 or

<8? The policy anniversary immediately preceding the si1tieth birthday of the "nsuredis reached. &

"t is undisputed that, as recited in the lower court3s decision, the insured met his death, as follows:that on the night of May 20, -A8 or the first hours of May 2, -A8, while the said life policy andsupplementary contract were in full force and effect, the house of insured *uan %. Biagtan was

robbed by a band of robbers who were charged in and convicted by the #ourt of 9irst "nstance ofPangasinan for robbery with homicide4 that in committing the robbery, the robbers, on reaching thestaircase landing of the second floor, rushed towards the doors of the second floor room, where theysuddenly met a person near the door of one of the rooms who turned out to be the insured *uan %.Biagtan who received thrust from their sharp5pointed instruments, causing wounds on the body ofsaid *uan %. Biagtan resulting in his death at about = a.m. on the same day, May 2, -A8.

@efendant company, while admitting the above5recited circumstances under which the insured methis death, disclaimed liability under its accidental death benefit clause under paragraph + of its



stipulated :1ceptions: on its theory that the insured3s death resulted from in$uries :intentionallyinflicted by a third party,: i.e. the robbers who broe into the insured3s house and inflicted fatalin$uries on him.

The case was submitted for decision upon the parties3 stipulation of facts that <? insurancecompanies such as the !incoln 7ational !ife "nsurance #o. and %un !ife ssurance #o. of #anada

with which the deceased insured *uan %. Biagtan was also insured for much larger sums undersimilar contracts with accidental death benefit provisions have promptly paid the benefits thereunderto plaintiffs5beneficiaries4 <2? the robbers who caused the insured3s death were charged in andconvicted by the #ourt of 9irst "nstance of Pangasinan for the crime of robbery with homicide4 and<6? the in$uries inflicted on the insured by the robbers consisted of five mortal and four non5mortalwounds. 2

The lower court thereafter rendered $udgment against defendant, as follows

There is no doubt that the insured, *uan %. Biagtan, met his death as a result of thewounds inflicted upon him by the malefactors on the early morning of May 2, -A8by means of thrusts from sharp5pointed instruments delivered upon his person, and

there is liewise no uestion that the thrusts were made on the occasion of therobbery. (owever, it is defendants3 position that the illing of the insured wasintentionally done by the malefactors, who were charged with and convicted of thecrime of robbery with homicide by the #ourt of 9irst "nstance of Pangasinan.

"t must be noted here that no evidence 1hatsoever 1as presented by the parties1ho submitted the case for resolution upon the stipulation of facts presented bythem. Thus, the court does not have before it proof that the act of receiving thrust<s?from the sharp5pointed instrument of the robbers was intended to inflict in2uries uponthe person of the insured or any other person or merely to scare a1ay any person soas to 1ard off any resistance or obstacle that might be offered in the pursuit of theirmain ob$ective which was robbery. "t was held that 1here a provision of the policyecludes intentional in2ury, it is the intention of the person inflicting the in2ury that is

controlling ... and to come 1ithin the eception, the act 1hich causes the in2ury mustbe 1holly intentional, not merely partly .

The case at bar has some similarity with the case of 0irginia !alanoc vs. !ourt of Appeals, et al ., !5>+, promulgated @ecember A, -A+, where the %upreme #ourtruled that :the shot <which illed the insured? was merely to scare away the peoplearound for his own protection and not necessarily to ill or hit the victim.:

"n the #alanoc case, one Melencio Basilio, a watchman of a certain company, tooout life insurance from the Philippine merican !ife "nsurance #ompany in theamount of P2,000.00 to which was attached a supplementary contract coveringdeath by accident. #alanoc died of gunshot wounds on the occasion of a robbery

committed in the house of a certain tty. )$eda in Manila. The insured3s widow waspaid P2,000.00, the face value of the policy, but when she demanded payment of theadditional sum of P2,000.00 representing the value of the supplemental policy, thecompany refused alleging, as main defense, that the deceased died because he wasmurdered by a person who too part in the commission of the robbery and whilemaing an arrest as an officer of the law which contingencies were <as in this case?e1pressly e1cluded in the contract and have the effect of e1empting the companyfrom liability.



The facts in the #alanoc case insofar as pertinent to this case are, as found by the#ourt of ppeals in its decision which findings of fact were adopted by the %upreme#ourt, as follows

:...that on the way to the )$eda residence <which was then beingrobbed by armed men?, the policeman and tty. )$eda passed by

Basilio <the insured? and somehow or other invited the latter to comealong4 that as the three approached the )$eda residence and stood infront of the main gate which was covered by galvani&ed iron, thefence itself being partly concrete and partly adobe stone, a shot wasfired4 ... that it turned out afterwards that the special watchmanMelencio Basilio was hit in the abdomen, the wound causing hisinstantaneous death ...:

The #ourt of ppeals arrived at the conclusion that the death of Basilio, althoughune1pected, was not caused by an accident, being a voluntary and intentional act onthe part of the one who robbed, or one of those who robbed, the house of tty.)$eda.

"n reversing this conclusion of the #ourt of ppeals, the %upreme #ourt said in part

:... 7or can it be said that the illing was intentional for there is thepossibility that the malefactors had fired the shot merely to scareaway the people around for his own protection and not necessarily toill or hit the victim. "n any event, 1hile the act may not eempt thetriggerman from ability for the damage done, the fact remains that thehappening 1as a pure accidentt on the part of the victim.:

With this ruling of the %upreme !ourt, and the utter absence of evidence in this caseas to the real intention of the malefactors in maing a thrust with their sharp5pointedinstrument on any person, the victim in particular, the case falls suarely within theruling in the #alanoc vs. #ourt of ppeals case.

"t is the considered view of this #ourt that the insured died because of anaccident which happened on the occasion of the robbery being committed in hishouse. *is death 1as not sought 4at least no evidence 1as presented to sho1 it1as5, and therefore 1as fortuitous. 6Accident6 1as defined as that 1hich happens by chance or fortuitously, 1ithout intention or design, and 1hich is unepected, unusualand unforeseen, or that 1hich ta)es place 1ithout one+s foresight or epectation Can event that proceeds from an unnown cause, or is an unusual effect of a nowncause, and therefore not e1pected. <2- m. *ur. =0A?.

There is no uestion that the defense set up by the defendant company is one of

those included among the riss e1cluded in the supplementary contract. *o1ever,there is no evidence here that the thrusts 1ith sharp'pointed instrument <which led tothe death of the insured? 1as 6intentional,6 4sic5 so as to eempt the company fromliability. -t could safely be assumed that it 1as purely accidental considering that theprincipal motive of the culprits was robbery, the thrusts being merely intended toscare away persons who might offer resistance or might obstruct them from pursuingtheir main ob$ective which was robbery. 5



"t is respectfully submitted that the lower court committed no error in law in holding defendantinsurance company liable to plaintiffs5beneficiaries under its accidental death benefit clause, byvirtue of the following considerations

. The case of !alanoc cited by the lower court is indeed controlling here. 6 This #ourt, thereconstruing a similar clause, suarely ruled that fatal in$uries inflicted upon an insured by a malefactor<s?

during the latter3s commission of a crime are deemed accidental and within the coverage of suchaccidental death benefit clauses and the burden of proving that the illing was intentional so as to have itfall within the stipulated e1ception of having resulted from in$uries :intentionally inflicted by a third party:must be discharged by the insurance company. This #ourt there clearly held that in such cases where theilling does not amount to murder, it must be held to be a :pure accident: on the part of the victim,compensable with double5indemnity, even though the malefactor is criminally liable for his act. This #ourtre$ected the insurance5company3s contrary claim, thus

Much less can it be pretended that Basilio died in the course of an assault or murderconsidering the very nature of these crimes. "n the first place, there is no proof thatthe death of Basilio is the result of either crime for the record is barren of anycircumstance sho1ing ho1 the fatal shot 1as fired . Perhaps this may be clarified inthe criminal case now pending in court a regards the incident but before that is done

anything that might be said on the point would be a mere con$ecture. 7or can it besaid that the )illing 1as intentional for there is the possibility that the malefactor hadfired the shot merely to scare a1ay the people around for his own protection and notnecessarily to ill or hit the victim. "n any event, 1hile the act may not eempt thetriggerman from liability for the damage done, the fact remains that the happening1as a pure accident on the part of the victim. The victim could have been either thepoliceman or tty. )$eda for it cannot be pretended that the malefactor aimed at thedeceased precisely because he wanted to tae his life. '

2. @efendant company patently failed to discharge its burden of proving that the fatal in$uries wereinflicted upon the deceased intentionally , i.e. deliberately . The lower court correctly held that sincethe case was submitted upon the parties3 stipulation of facts which did not cover the malefactors3

intent at all, there was an :utter absence of evidence in this case as to the real intention of themalefactors in maing a thrust with their sharp5pointed instrument<s? on any person, the victim inparticular.: 9rom the undisputed facts, supra, 8 the robbers had :rushed towards the doors of the secondfloor room, where they suddenly met a person ... who turned out to be the insured *uan %. Biagtan whoreceived thrusts from their pointed instruments.: The thrusts were indeed properly termed :purelyaccidental: since they seemed to be a refle1 action on the robbers3 part upon their being surprised by thedeceased. To argue, as defendant does, that the robbers3 intent to ill must necessarily be deduced fromthe four mortal wounds inflicted upon the deceased is to beg the uestion. @efendant must suffer theconseuences of its failure to discharge its burden of proving by competent evidence, e.g. the robbers3 oreyewitnesses3 testimony, that the fatal in$uries were intentionally inflicted upon the insured so as toe1empt itself from liability.

6. 9urthermore, plaintiffs5appellees properly assert in their brief that the sole error assigned by

defendant company, to wit, that the fatal in$uries were not accidental as held by the lower court butshould be held to have been intentionally inflicted , raises a uestion of fact C which defendant isnow barred from raising, since it e1pressly limited its appeal to this #ourt purely :on (uestions ofla1 :, per its noitice of appeal, 9 @efendant is therefore confined to :raising only uestions of law: and :noother uestions: under Rule 82, section 2 of the Rules of #ourt13 and is deemed to have conceded thefindings of fact of the trial court, since he thereby waived all uestions of facts. 11

8. "t has long been an established rule of construction of so5called contracts of adhesion such asinsurance contracts, where the insured is handed a printed insurance policy whose fine5print



language has long been selected with great care and deliberation by specialists and legal advisersemployed by and acting e1clusively in the interest of the insurance company, that the terms andphraseology of the policy, particularly of any e1ception clauses, must be clearly e1pressed so as tobe easily understood by the insured and any :ambiguous, euivocal or uncertain terms: are to be:construed strictly and most strongly against the insurer and liberally in favor of the insured so as toeffect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is

involved.

The #ourt so e1pressly held in !alanoc that

... ;hile as a general rule :the parties may limit the coverage of the policy to certainparticular accidents and riss or causes of loss, and may e1pressly e1cept other rissor causes of loss therefrom: <8+ #.*.%. =>5=>2?, however, it is to be desired that theterms and phraseology of the eception clause be clearly epressed so as to be1ithin the easy grasp and understanding of the insured , for if the terms are doubtfulor obscure the same must of necessity be interpreted or resolved against the onewho has caused the obscurity. <rticle 6==, new #ivil #ode? nd so it has beengenerally held that the :terms in an insurance policy, which are ambiguous,

euivocal, or uncertain ...are to be construed strictly and most strongly against theinsurer, and liberally in favor of the insured so as to effect the dominant purpose ofindemnity or payment to the insured, especially 1here a forfeiture is involved : <2-

M. *ur., >?, and the reason for this rule is that the 6insured usually has no voice inthe selection or arrangement of the 1ords employed and that the language of thecontract is selected with great care and deliberation by e1perts and legal advisersemployed by, and acting e1clusively in the interest of, the insurance company.: <88#.*.%., p. =8?

-nsurance is, in its nature, comple and difficult for the layman tounderstand . olicies are prepared by eperts who now and can anticipate thebearing and possible complications of every contingency.%o long as insurancecompanies insist upon the use of ambiguous, intricate and technical provisions,

1hich conceal rather than fran)ly disclose, their o1n intentions, the courts must, infairness to those 1ho purchase insurance construe every ambiguity in favor of theinsured .: <lgoe vs. Pacific Mut. !. "ns. #o., - ;ash. 628 !R -=, 26=.?

:n insurer should not be allowed, by the use of obscure phrases and eceptions, todefeat the very purpose for 1hich the policy 1as procured .: <Moore vs. etna !ife"nsurance #o., !R -+@, A8?.1&

The #ourt has but recently reiterated this doctrine in Landicho vs. 8%-% 1 and again applied theprovisions of rticle 6== of our #ivil #ode that :The interpretation of obscure words or stipulations in acontract shall not favor the party who caused the obscurity.:

+. The accidental death benefit clause assuring the insured3s beneficiaries of double indemnity, uponpayment of an e1tra premium, in the event that the insured meets violent accidental death iscontractually stipulated as follows in the policy :that the death of the insured resulted directly frombodily in2ury effected solely through eternal and violent means sustained in an accident ,: supra. Thepolicy then lists numerous e1ceptions, which may be classified as follows

C "n$uries effected through non'eternal means which are e1cepted self5destruction, bodily ormental infirmity or disease, poisoning or infection, in$uries with no visible contusions or e1teriorwounds <e1ceptions to 8 of policy clause?4



C "n$uries caused by some act of the insured 1hich is proscribed by the policy, and are thereforesimilarly e1epted in$uries received while on police duty, while travelling in any form of submarinetransportation, or in any violation of la1 by the insured or assault provo)ed by the insured , or in anyaircraft if the insured is a pilot or crew member4 Ge1ceptions + <a?, <c? and <d?, and A of the policyclauseH4 and

C ccidents epressly ecluded where death resulted in any riot, civil commotion, insurrection orwar or atomic energy e1plosion. <1ceptions +GbH and = of policy clause?.

The only e1ception which is not susceptible of classification is that provided in paragraph + <e?, thevery e1ception herein involved, which would also e1cept in$uries :inflicted intentionally by a third

party, either 1ith or 1ithout provocation on the part of the insured, and 1hether or not the attac orthe defense by the third party was caused by a violation of the la1 by the insured .:

This ambiguous clause conflicts with all the other four e1ceptions in the same paragraph +particularly that immediately preceding it in item <d? which e1cepts in$uries received where theinsured has violated the law or provoed the in$ury, while this clause, construed as the insurancecompany now claims, would seemingly e1cept also all other in2uries, intentionally inflicted by a third

party, regardless of any violation of la1 or provocation by the insured , and defeat the very purpose of the policy of giving the insured double indemnity in case of accidental death by :eternal and violentmeans: C in the very language of the policy.:

"t is obvious from the very classification of the e1ceptions and applying the rule of noscitus asociis that the double5indemnity policy covers the insured against accidental death, whether causedby fault, negligence or intent of a third party which is unforeseen and une1pected by the insured. llthe associated words and concepts in the policy plainly e1clude the accidental death from thecoverage of the policy only where the in$uries are self5inflicted or attended by some proscribed act of the insured or are incurred in some e1pressly e1cluded calamity such as riot, war or atomice1plosion.

9inally, the untenability of herein defendant insurer3s claim that the insured3s death fell within thee1ception is further heightened by the stipulated fact that two other insurance companies whichliewise covered the insured for which larger sums under similar accidental death benefit clausespromptly paid the benefits thereof to plaintiffs5beneficiaries.

" vote accordingly for the affirmance in toto of the appealed decision, with costs against defendant5appellant.

!oncepcion, !.J. and Reyes, J.".L., J., concur.

Se!r!e O/"/o"0

%ARREDO, J., concurring C

@uring the deliberations in this case, " entertained some doubts as to the correctness and validity ofthe view upheld in the main opinion penned by *ustice Maalintal. 9urther reflection has convincedme, however, that there are good reasons to support it.



t first blush, one would feel that every death not suicidal should be considered accidental, for thepurposes of an accident insurance policy or a life insurance policy with a double indemnity clause incase death results from accident. "ndeed, it is uite logical to thin that any event whether caused byfault, negligence, intent of a third party or any unavoidable circumstance, normally unforeseen by theinsured and free from any possible connivance on his part, is an accident in the generally acceptedsense of the term. nd if " were convinced that in including in the policy the provision in uestion,

both the insurer and the insured had in mind to e1clude thereby from the coverage of the policy onlysuicide whether unhelped or helped somehow by a third party, " would disregard the mericandecisions cited and uoted in the main opinion as not even persuasive authorities. But e1amining theuneuivocal language of the provision in controversy and considering that the insured accepted thepolicy without asing that it be made clear that the phrase :in$ury intentionally inflicted by a thirdparty: should be understood to refer only to in$uries inflicted by a third party without any wilfulintervention on his part <of the insured? or, in other words, without any connivance with him <theinsured? in order to augment the proceeds of the policy for his benificiaries, " am inclined to agreethat death caused by criminal assault is not covered by the policies of the ind here in uestion,specially if the assault, as a matter of fact, could have been more or less anticipated, as when theinsured happens to have violent enemies or is found in circumstances that would mae his life fairgame of third parties.

s to the rest, " have no doubt that the illing of the insured in this case is as intentional as anyintentional act can be, hence this concurrence.

TEE$AN+EE, J., dissenting

The sole issue at bar is the correctness in la1 of the lower court3s appealed decision ad$udgingdefendant insurance company liable, under its supplementary contract denominated :ccidental@eath Benefit #lause: with the deceased insured, to plaintiffs5beneficiaries <e1cluding plaintiff miliaT. Biagtan? in an additional amount of P+,000.00 <with corresponding legal interest? and ruling thatdefendant company had failed to present any evidence to substantiate its defense that the insured3sdeath came within the stipulated e1ceptions.

@efendant3s accidental death benefit clause e1pressly provides

##"@7T! @T( B79"T. <hereinafter called the benefit?. Dpon receipt andapproval of due proof that the death of the "nsured resulted directly from bodily in$uryeffected solely through e1ternal and violent means sustained in an accident, withinninety days after the date of sustaining such in$ury, and independently of all othercauses, this #ompany shall pay, in addition to the sum insured specified on the firstpage of this Policy, a further sum eual to said sum insured payable at the same timeand in the same manner as said sum insured, provided, that such death occurredduring the continuance of this #lause and of this Policy and before the si1tiethbirthday of the "nsured.: 1

long list of e1ceptions and an utomatic @iscontinuance clause immediately follow thereafter, thus

F#PT")7%. The Benefit shall not apply if the "nsured3s death shall result, eitherdirectly or indirectly, from any one of the following causes

<? %elf'destruction or self'inflicted in2uries, whether the "nsured be sane or insane4

<2? "odily or mental infirmity or disease of any ind4



<6? oisoning or infection, other than infection occurring simultaneously with and inconseuence of a cut or wound sustained in an accident4

<8? "n$uries of which there is no visible contusions or 1ound on the eterior of thebody, drowning and internal in$uries revealed by autopsy e1cepted4

<+? ny in2uries received <a? while on police duty in any military, naval or policeorgani&ation4 <b? in anyriot , civil commotion, insurrection or 1ar or any act incidentthereto4 <c? while travelling as a passenger or otherwise in any form of submarinetransportation, or while engaging in submarine operations4 <d? in any violation of thela1 by the -nsured or assault provo)ed by the -nsured 4 <e? that has beeninflictedintentionally by a third party , either with or without provocation on the part of the"nsured, and whether or not the attac or the defense by the third party was causedby a violation of the law by the "nsured4

<A? 3perating or riding in or descending from any )ind of aircraft if the "nsured is apilot, officer or member of the crew of the aircraft or is giving or receiving any ind oftraining or instruction or has any duties aboard the aircraft or reuiring descent

therefrom4 and

<=? Atomic energy eplosion of any nature whatsoever.

The #ompany, before maing any payment under this #lause, shall have the rightand opportunity to e1amine the body and mae an autopsy thereof.

DT)MT"# @"%#)7T"7D7#. This Benefit shall automatically terminate and theadditional premium therefor shall cease to be payable when and if

<? This Policy is surrendered for cash, paid5up insurance or e1tended terminsurance4 or

<2? The benefit under the Total and Permanent @isability ;aiver of Premium#ertificate is granted to the insured4 or

<6? The "nsured engages in military, naval or aeronautic service in time of 1ar 4 or

<8? The policy anniversary immediately preceding the si1tieth birthday of the "nsuredis reached. &

"t is undisputed that, as recited in the lower court3s decision, the insured met his death, as follows:that on the night of May 20, -A8 or the first hours of May 2, -A8, while the said life policy andsupplementary contract were in full force and effect, the house of insured *uan %. Biagtan was

robbed by a band of robbers who were charged in and convicted by the #ourt of 9irst "nstance ofPangasinan for robbery with homicide4 that in committing the robbery, the robbers, on reaching thestaircase landing of the second floor, rushed towards the doors of the second floor room, where theysuddenly met a person near the door of one of the rooms who turned out to be the insured *uan %.Biagtan who received thrust from their sharp5pointed instruments, causing wounds on the body ofsaid *uan %. Biagtan resulting in his death at about = a.m. on the same day, May 2, -A8.

@efendant company, while admitting the above5recited circumstances under which the insured methis death, disclaimed liability under its accidental death benefit clause under paragraph + of its



stipulated :1ceptions: on its theory that the insured3s death resulted from in$uries :intentionallyinflicted by a third party,: i.e. the robbers who broe into the insured3s house and inflicted fatalin$uries on him.

The case was submitted for decision upon the parties3 stipulation of facts that <? insurancecompanies such as the !incoln 7ational !ife "nsurance #o. and %un !ife ssurance #o. of #anada

with which the deceased insured *uan %. Biagtan was also insured for much larger sums undersimilar contracts with accidental death benefit provisions have promptly paid the benefits thereunderto plaintiffs5beneficiaries4 <2? the robbers who caused the insured3s death were charged in andconvicted by the #ourt of 9irst "nstance of Pangasinan for the crime of robbery with homicide4 and<6? the in$uries inflicted on the insured by the robbers consisted of five mortal and four non5mortalwounds. 2

The lower court thereafter rendered $udgment against defendant, as follows

There is no doubt that the insured, *uan %. Biagtan, met his death as a result of thewounds inflicted upon him by the malefactors on the early morning of May 2, -A8by means of thrusts from sharp5pointed instruments delivered upon his person, and

there is liewise no uestion that the thrusts were made on the occasion of therobbery. (owever, it is defendants3 position that the illing of the insured wasintentionally done by the malefactors, who were charged with and convicted of thecrime of robbery with homicide by the #ourt of 9irst "nstance of Pangasinan.

"t must be noted here that no evidence 1hatsoever 1as presented by the parties1ho submitted the case for resolution upon the stipulation of facts presented bythem. Thus, the court does not have before it proof that the act of receiving thrust<s?from the sharp5pointed instrument of the robbers was intended to inflict in2uries uponthe person of the insured or any other person or merely to scare a1ay any person soas to 1ard off any resistance or obstacle that might be offered in the pursuit of theirmain ob$ective which was robbery. "t was held that 1here a provision of the policyecludes intentional in2ury, it is the intention of the person inflicting the in2ury that is

controlling ... and to come 1ithin the eception, the act 1hich causes the in2ury mustbe 1holly intentional, not merely partly .

The case at bar has some similarity with the case of 0irginia !alanoc vs. !ourt of Appeals, et al ., !5>+, promulgated @ecember A, -A+, where the %upreme #ourtruled that :the shot <which illed the insured? was merely to scare away the peoplearound for his own protection and not necessarily to ill or hit the victim.:

"n the #alanoc case, one Melencio Basilio, a watchman of a certain company, tooout life insurance from the Philippine merican !ife "nsurance #ompany in theamount of P2,000.00 to which was attached a supplementary contract coveringdeath by accident. #alanoc died of gunshot wounds on the occasion of a robbery

committed in the house of a certain tty. )$eda in Manila. The insured3s widow waspaid P2,000.00, the face value of the policy, but when she demanded payment of theadditional sum of P2,000.00 representing the value of the supplemental policy, thecompany refused alleging, as main defense, that the deceased died because he wasmurdered by a person who too part in the commission of the robbery and whilemaing an arrest as an officer of the law which contingencies were <as in this case?e1pressly e1cluded in the contract and have the effect of e1empting the companyfrom liability.



The facts in the #alanoc case insofar as pertinent to this case are, as found by the#ourt of ppeals in its decision which findings of fact were adopted by the %upreme#ourt, as follows

:...that on the way to the )$eda residence <which was then beingrobbed by armed men?, the policeman and tty. )$eda passed by

Basilio <the insured? and somehow or other invited the latter to comealong4 that as the three approached the )$eda residence and stood infront of the main gate which was covered by galvani&ed iron, thefence itself being partly concrete and partly adobe stone, a shot wasfired4 ... that it turned out afterwards that the special watchmanMelencio Basilio was hit in the abdomen, the wound causing hisinstantaneous death ...:

The #ourt of ppeals arrived at the conclusion that the death of Basilio, althoughune1pected, was not caused by an accident, being a voluntary and intentional act onthe part of the one who robbed, or one of those who robbed, the house of tty.)$eda.

"n reversing this conclusion of the #ourt of ppeals, the %upreme #ourt said in part

:... 7or can it be said that the illing was intentional for there is thepossibility that the malefactors had fired the shot merely to scareaway the people around for his own protection and not necessarily toill or hit the victim. "n any event, 1hile the act may not eempt thetriggerman from ability for the damage done, the fact remains that thehappening 1as a pure accidentt on the part of the victim.:

With this ruling of the %upreme !ourt, and the utter absence of evidence in this caseas to the real intention of the malefactors in maing a thrust with their sharp5pointedinstrument on any person, the victim in particular, the case falls suarely within theruling in the #alanoc vs. #ourt of ppeals case.

"t is the considered view of this #ourt that the insured died because of anaccident which happened on the occasion of the robbery being committed in hishouse. *is death 1as not sought 4at least no evidence 1as presented to sho1 it1as5, and therefore 1as fortuitous. 6Accident6 1as defined as that 1hich happens by chance or fortuitously, 1ithout intention or design, and 1hich is unepected, unusualand unforeseen, or that 1hich ta)es place 1ithout one+s foresight or epectation Can event that proceeds from an unnown cause, or is an unusual effect of a nowncause, and therefore not e1pected. <2- m. *ur. =0A?.

There is no uestion that the defense set up by the defendant company is one of

those included among the riss e1cluded in the supplementary contract. *o1ever,there is no evidence here that the thrusts 1ith sharp'pointed instrument <which led tothe death of the insured? 1as 6intentional,6 4sic5 so as to eempt the company fromliability. -t could safely be assumed that it 1as purely accidental considering that theprincipal motive of the culprits was robbery, the thrusts being merely intended toscare away persons who might offer resistance or might obstruct them from pursuingtheir main ob$ective which was robbery. 5



"t is respectfully submitted that the lower court committed no error in law in holding defendantinsurance company liable to plaintiffs5beneficiaries under its accidental death benefit clause, byvirtue of the following considerations

. The case of !alanoc cited by the lower court is indeed controlling here. 6 This #ourt, thereconstruing a similar clause, suarely ruled that fatal in$uries inflicted upon an insured by a malefactor<s?

during the latter3s commission of a crime are deemed accidental and within the coverage of suchaccidental death benefit clauses and the burden of proving that the illing was intentional so as to have itfall within the stipulated e1ception of having resulted from in$uries :intentionally inflicted by a third party:must be discharged by the insurance company. This #ourt there clearly held that in such cases where theilling does not amount to murder, it must be held to be a :pure accident: on the part of the victim,compensable with double5indemnity, even though the malefactor is criminally liable for his act. This #ourtre$ected the insurance5company3s contrary claim, thus

Much less can it be pretended that Basilio died in the course of an assault or murderconsidering the very nature of these crimes. "n the first place, there is no proof thatthe death of Basilio is the result of either crime for the record is barren of anycircumstance sho1ing ho1 the fatal shot 1as fired . Perhaps this may be clarified inthe criminal case now pending in court a regards the incident but before that is done

anything that might be said on the point would be a mere con$ecture. 7or can it besaid that the )illing 1as intentional for there is the possibility that the malefactor hadfired the shot merely to scare a1ay the people around for his own protection and notnecessarily to ill or hit the victim. "n any event, 1hile the act may not eempt thetriggerman from liability for the damage done, the fact remains that the happening1as a pure accident on the part of the victim. The victim could have been either thepoliceman or tty. )$eda for it cannot be pretended that the malefactor aimed at thedeceased precisely because he wanted to tae his life. '

2. @efendant company patently failed to discharge its burden of proving that the fatal in$uries wereinflicted upon the deceased intentionally , i.e. deliberately . The lower court correctly held that sincethe case was submitted upon the parties3 stipulation of facts which did not cover the malefactors3

intent at all, there was an :utter absence of evidence in this case as to the real intention of themalefactors in maing a thrust with their sharp5pointed instrument<s? on any person, the victim inparticular.: 9rom the undisputed facts, supra, 8 the robbers had :rushed towards the doors of the secondfloor room, where they suddenly met a person ... who turned out to be the insured *uan %. Biagtan whoreceived thrusts from their pointed instruments.: The thrusts were indeed properly termed :purelyaccidental: since they seemed to be a refle1 action on the robbers3 part upon their being surprised by thedeceased. To argue, as defendant does, that the robbers3 intent to ill must necessarily be deduced fromthe four mortal wounds inflicted upon the deceased is to beg the uestion. @efendant must suffer theconseuences of its failure to discharge its burden of proving by competent evidence, e.g. the robbers3 oreyewitnesses3 testimony, that the fatal in$uries were intentionally inflicted upon the insured so as toe1empt itself from liability.

6. 9urthermore, plaintiffs5appellees properly assert in their brief that the sole error assigned by

defendant company, to wit, that the fatal in$uries were not accidental as held by the lower court butshould be held to have been intentionally inflicted , raises a uestion of fact C which defendant isnow barred from raising, since it e1pressly limited its appeal to this #ourt purely :on (uestions ofla1 :, per its noitice of appeal, 9 @efendant is therefore confined to :raising only uestions of law: and :noother uestions: under Rule 82, section 2 of the Rules of #ourt13 and is deemed to have conceded thefindings of fact of the trial court, since he thereby waived all uestions of facts. 11

8. "t has long been an established rule of construction of so5called contracts of adhesion such asinsurance contracts, where the insured is handed a printed insurance policy whose fine5print



language has long been selected with great care and deliberation by specialists and legal advisersemployed by and acting e1clusively in the interest of the insurance company, that the terms andphraseology of the policy, particularly of any e1ception clauses, must be clearly e1pressed so as tobe easily understood by the insured and any :ambiguous, euivocal or uncertain terms: are to be:construed strictly and most strongly against the insurer and liberally in favor of the insured so as toeffect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is

involved.

The #ourt so e1pressly held in !alanoc that

... ;hile as a general rule :the parties may limit the coverage of the policy to certainparticular accidents and riss or causes of loss, and may e1pressly e1cept other rissor causes of loss therefrom: <8+ #.*.%. =>5=>2?, however, it is to be desired that theterms and phraseology of the eception clause be clearly epressed so as to be1ithin the easy grasp and understanding of the insured , for if the terms are doubtfulor obscure the same must of necessity be interpreted or resolved against the onewho has caused the obscurity. <rticle 6==, new #ivil #ode? nd so it has beengenerally held that the :terms in an insurance policy, which are ambiguous,

euivocal, or uncertain ...are to be construed strictly and most strongly against theinsurer, and liberally in favor of the insured so as to effect the dominant purpose ofindemnity or payment to the insured, especially 1here a forfeiture is involved : <2-

M. *ur., >?, and the reason for this rule is that the 6insured usually has no voice inthe selection or arrangement of the 1ords employed and that the language of thecontract is selected with great care and deliberation by e1perts and legal advisersemployed by, and acting e1clusively in the interest of, the insurance company.: <88#.*.%., p. =8?

-nsurance is, in its nature, comple and difficult for the layman tounderstand . olicies are prepared by eperts who now and can anticipate thebearing and possible complications of every contingency.%o long as insurancecompanies insist upon the use of ambiguous, intricate and technical provisions,

1hich conceal rather than fran)ly disclose, their o1n intentions, the courts must, infairness to those 1ho purchase insurance construe every ambiguity in favor of theinsured .: <lgoe vs. Pacific Mut. !. "ns. #o., - ;ash. 628 !R -=, 26=.?

:n insurer should not be allowed, by the use of obscure phrases and eceptions, todefeat the very purpose for 1hich the policy 1as procured .: <Moore vs. etna !ife"nsurance #o., !R -+@, A8?.1&

The #ourt has but recently reiterated this doctrine in Landicho vs. 8%-% 1 and again applied theprovisions of rticle 6== of our #ivil #ode that :The interpretation of obscure words or stipulations in acontract shall not favor the party who caused the obscurity.:

+. The accidental death benefit clause assuring the insured3s beneficiaries of double indemnity, uponpayment of an e1tra premium, in the event that the insured meets violent accidental death iscontractually stipulated as follows in the policy :that the death of the insured resulted directly frombodily in2ury effected solely through eternal and violent means sustained in an accident ,: supra. Thepolicy then lists numerous e1ceptions, which may be classified as follows

C "n$uries effected through non'eternal means which are e1cepted self5destruction, bodily ormental infirmity or disease, poisoning or infection, in$uries with no visible contusions or e1teriorwounds <e1ceptions to 8 of policy clause?4



C "n$uries caused by some act of the insured 1hich is proscribed by the policy, and are thereforesimilarly e1epted in$uries received while on police duty, while travelling in any form of submarinetransportation, or in any violation of la1 by the insured or assault provo)ed by the insured , or in anyaircraft if the insured is a pilot or crew member4 Ge1ceptions + <a?, <c? and <d?, and A of the policyclauseH4 and

C ccidents epressly ecluded where death resulted in any riot, civil commotion, insurrection orwar or atomic energy e1plosion. <1ceptions +GbH and = of policy clause?.

The only e1ception which is not susceptible of classification is that provided in paragraph + <e?, thevery e1ception herein involved, which would also e1cept in$uries :inflicted intentionally by a third

party, either 1ith or 1ithout provocation on the part of the insured, and 1hether or not the attac orthe defense by the third party was caused by a violation of the la1 by the insured .:

This ambiguous clause conflicts with all the other four e1ceptions in the same paragraph +particularly that immediately preceding it in item <d? which e1cepts in$uries received where theinsured has violated the law or provoed the in$ury, while this clause, construed as the insurancecompany now claims, would seemingly e1cept also all other in2uries, intentionally inflicted by a third

party, regardless of any violation of la1 or provocation by the insured , and defeat the very purpose of the policy of giving the insured double indemnity in case of accidental death by :eternal and violentmeans: C in the very language of the policy.:

"t is obvious from the very classification of the e1ceptions and applying the rule of noscitus asociis that the double5indemnity policy covers the insured against accidental death, whether causedby fault, negligence or intent of a third party which is unforeseen and une1pected by the insured. llthe associated words and concepts in the policy plainly e1clude the accidental death from thecoverage of the policy only where the in$uries are self5inflicted or attended by some proscribed act of the insured or are incurred in some e1pressly e1cluded calamity such as riot, war or atomice1plosion.

9inally, the untenability of herein defendant insurer3s claim that the insured3s death fell within thee1ception is further heightened by the stipulated fact that two other insurance companies whichliewise covered the insured for which larger sums under similar accidental death benefit clausespromptly paid the benefits thereof to plaintiffs5beneficiaries.

" vote accordingly for the affirmance in toto of the appealed decision, with costs against defendant5appellant.

!oncepcion, !.J. and Reyes, J.".L., J., concur.



G.R. No. 1339'3 Seember &, 199&

INMAN GENERAL ASSURANCE CORPORATION, petitioner,vs.T$E $ONORA%LE COURT O APPEALS !"# )ULIA SURPOSA, respondents.

A(uino and Associates for petitioner.

ublic Attorney+s 3ffice for private respondent.

NOCON, J.:

This is a petition for certiorari with a prayer for the issuance of a restraining order and preliminarymandatory in$unction to annul and set aside the decision of the #ourt of ppeals dated *uly ,--, 1 affirming the decision dated March 20, --0 of the "nsurance #ommission & in ordering petitioner9inman Ieneral ssurance #orporation to pay private respondent *ulia %urposa the proceeds of the

personal accident "nsurance policy with interest.

"t appears on record that on )ctober 22, ->A, deceased, #arlie %urposa was insured with petitioner 9inman Ieneral ssurance #orporation under 9inman Ieneral Teachers Protection Plan MasterPolicy 7o. 200+ and "ndividual Policy 7o. 0>-28 with his parents, spouses *ulia and #arlos %urposa,and brothers #hristopher, #harles, #hester and #lifton, all surnamed, %urposa, as beneficiaries.

;hile said insurance policy was in full force and effect, the insured, #arlie %urposa, died on )ctober>, ->> as a result of a stab wound inflicted by one of the three <6? unidentified men withoutprovocation and warning on the part of the former as he and his cousin, ;inston %urposa, werewaiting for a ride on their way home along Ri&al5!ocsin %treets, Bacolod #ity after attending thecelebration of the :Masarra nnual 9estival.:

Thereafter, private respondent and the other beneficiaries of said insurance policy filed a writtennotice of claim with the petitioner insurance company which denied said claim contending thatmurder and assault are not within the scope of the coverage of the insurance policy.

)n 9ebruary 28, ->-, private respondent filed a complaint with the "nsurance #ommission whichsubseuently rendered a decision, the pertinent portion of which reads

"n the light of the foregoing. we find respondent liable to pay complainant the sum ofP+,000.00 representing the proceeds of the policy with interest. s no evidence wassubmitted to prove the claim for mortuary aid in the sum of P,000.00, the samecannot be entertained.

;(R9)R, $udgment is hereby rendered ordering respondent to pay complainantthe sum of P+,000.00 with legal interest from the date of the filing of the complaintuntil fully satisfied. ;ith costs.2

)n *uly , --, the appellate court affirmed said decision.

(ence, petitioner filed this petition alleging grove abuse of discretion on the part of the appellatecourt in applying the principle of :epresso unius eclusio alterius: in a personal accident insurance



policy since death resulting from murder andJor assault are impliedly e1cluded in said insurancepolicy considering that the cause of death of the insured was not accidental but rather a deliberateand intentional act of the assailant in illing the former as indicated by the location of the lone stabwound on the insured. Therefore, said death was committed with deliberate intent which, by the verynature of a personal accident insurance policy, cannot be indemnified.

;e do not agree.

The terms :accident: and :accidental: as used in insurance contracts have notacuired any technical meaning, and are construed by the courts in their ordinaryand common acceptation. Thus, the terms have been taen to mean that whichhappen by chance or fortuitously, without intention and design, and which isune1pected, unusual, and unforeseen. n accident is an event that taes placewithout one3s foresight or e1pectation C an event that proceeds from an unnowncause, or is an unusual effect of a nown cause and, therefore, not e1pected.

. . . The generally accepted rule is that, death or in$ury does not result from accidentor accidental means within the terms of an accident5policy if it is the natural result of

the insured3s voluntary act, unaccompanied by anything unforeseen e1cept the deathor in$ury. There is no accident when a deliberate act is performed unless someadditional, une1pected, independent, and unforeseen happening occurs whichproduces or brings about the result of in$ury or death. "n other words, where thedeath or in$ury is not the natural or probable result of the insured3s voluntary act, or ifsomething unforeseen occurs in the doing of the act which produces the in$ury, theresulting death is within the protection of the policies insuring against death or in$uryfrom accident. 5

s correctly pointed out by the respondent appellate court in its decision

"n the case at bar, it cannot be pretended that #arlie %urposa died in the course of anassault or murder as a result of his voluntary act considering the very nature of thesecrimes. "n the first place, the insured and his companion were on their way homefrom attending a festival. They were confronted by unidentified persons. The recordis barren of any circumstance showing how the stab wound was inflicted. 7or can itbe pretended that the malefactor aimed at the insured precisely because the illerwanted to tae his life. "n any event, while the act may not e1empt the unnownperpetrator from criminal liability, the fact remains that the happening was a pureaccident on the part of the victim. The insured died from an event that too placewithout his foresight or e1pectation, an event that proceeded from an unusual effectof a nown cause and, therefore, not e1pected. 7either can it be said that where wasa capricious desire on the part of the accused to e1pose his life to dangerconsidering that he was $ust going home after attending a festival. 6

9urthermore, the personal accident insurance policy involved herein specifically enumerated only ten<0? circumstances wherein no liability attaches to petitioner insurance company for any in$ury,disability or loss suffered by the insured as a result of any of the stimulated causes. The principle of: epresso unius eclusio alterius: C the mention of one thing implies the e1clusion of another thingC is therefore applicable in the instant case since murder and assault, not having been e1presslyincluded in the enumeration of the circumstances that would negate liability in said insurance policycannot be considered by implication to discharge the petitioner insurance company from liability for,any in$ury, disability or loss suffered by the insured. Thus, the failure of the petitioner insurance



company to include death resulting from murder or assault among the prohibited riss leadsinevitably to the conclusion that it did not intend to limit or e1empt itself from liability for such death.

rticle 6== of the #ivil #ode of the Philippines provides that

The interpretation of obscure words or stipulations in a contract shall not favor the

party who caused the obscurity.

Moreover,

it is well settled that contracts of insurance are to be construed liberally in favor of theinsured and strictly against the insurer. Thus ambiguity in the words of an insurancecontract should be interpreted in favor of its beneficiary. '

;(R9)R, finding no irreversible error in the decision of the respondent #ourt of ppeals, thepetition for certiorari with restraining order and preliminary in$unction is hereby @7"@ for lac ofmerit.

%) )R@R@.




Manila

9"R%T @"/"%")7

G.R. No. 85&96 M!4 12, 1993

ENIT$ INSURANCE CORPORATION, petitioner,vs.COURT O APPEALS !"# LARENCE ERNANDE, respondents.

0icente R. Laya1en for petitioner.

La1rence L. /ernande# 9 Associates for private respondent.

MEDIALDEA, J.:

ssailed in this petition is the decision of the #ourt of ppeals in #5I.R. #./. 7o. 68-> entitled,:!awrence !. 9ernande&, plaintiff5appellee v. 'enith "nsurance #orp., defendant5appellant: whichaffirmed in toto the decision of the Regional Trial #ourt of #ebu, Branch FF in #ivil #ase 7o. #B52+ and the denial of petitioner3s Motion for Reconsideration.

The antecedent facts are as follows

)n *anuary 2+, ->6, private respondent !awrence 9ernande& insured his car for :own damage:under private car Policy 7o. +08+- with petitioner 'enith "nsurance #orporation. )n *uly A, ->6, thecar figured in an accident and suffered actual damages in the amount of P6,A80.00. fter allegedlybeing given a run around by 'enith for two <2? months, 9ernande& filed a complaint with theRegional Trial #ourt of #ebu for sum of money and damages resulting from the refusal of 'enith topay the amount claimed. The complaint was doceted as #ivil #ase 7o. #B52+. side fromactual damages and interests, 9ernande& also prayed for moral damages in the amount ofP0,000.00, e1emplary damages of P+,000.00, attorney3s fees of P6,000.00 and litigation e1pensesof P6,000.00.

)n %eptember 2>, ->6, 'enith filed an answer alleging that it offered to pay the claim of 9ernande&pursuant to the terms and conditions of the contract which, the private respondent re$ected. fter theissues had been $oined, the pre5trial was scheduled on )ctober =, ->6 but the same was moved

to 7ovember 8, ->6 upon petitioner3s motion, allegedly to e1plore ways to settle the case althoughat an amount lower than private respondent3s claim. )n 7ovember 8, ->6, the trial courtterminated the pre5trial. %ubseuently, 9ernande& presented his evidence. Petitioner 'enith,however, failed to present its evidence in view of its failure to appear in court, without $ustifiablereason, on the day scheduled for the purpose. The trial court issued an order on ugust 26, ->8submitting the case for decision without 'enith3s evidence <pp. 05, Rollo?. Petitioner filed apetition for certiorari with the #ourt of ppeals assailing the order of the trial court submitting thecase for decision without petitioner3s evidence. The petition was doceted as #..5I.R. 7o. 08A88.(owever, the petition was denied due course on pril 2-, ->A <p. +A, Rollo?.



)n *une 8, ->A, a decision was rendered by the trial court in favor of private respondent9ernande&. The dispositive portion of the trial court3s decision provides

;(R9)R, defendant is hereby ordered to pay to the plaintiff

. The amount of P6,A80.00 representing the damage incurred plus interest at the

rate of twice the prevailing interest rates4

2. The amount of P20,000.00 by way of moral damages4

6. The amount of P20,000.00 by way of e1emplary damages4

8. The amount of P+,000.00 as attorney3s fees4

+. The amount of P6,000.00 as litigation e1penses4 and

A. #osts. <p. -, Rollo?

Dpon motion of 9ernande& and before the e1piration of the period to appeal, the trial court, on *une20, ->A, ordered the e1ecution of the decision pending appeal. The order was assailed bypetitioner in a petition for certiorari with the #ourt of ppeals on )ctober 26, ->A in #.. I.R. 7o.0820 but which petition was also dismissed on @ecember 28, ->A <p. A-, Rollo?.

)n *une 0, ->A, petitioner filed a notice of appeal before the trial court. The notice of appeal wasgranted in the same order granting private respondent3s motion for e1ecution pending appeal. Theappeal to respondent court assigned the following errors

". The lower court erred in denying defendant appellant to adduce evidence in itsbehalf.

"". The lower court erred in ordering 'enith "nsurance #orporation to pay the amountof P6,A80.00 in its decision.

""". The lower court erred in awarding moral damages, attorneys fees and e1emplarydamages, the worst is that, the court awarded damages more than what are prayedfor in the complaint. <p. 2,Rollo?

)n ugust =, ->>, the #ourt of ppeals rendered its decision affirming in toto the decision of thetrial court. "t also ruled that the matter of the trial court3s denial of 9ernande&3s right to adduceevidence is a closed matter in view of its <#? ruling in #5I.R. 08A88 wherein 'enith3s petitionuestioning the trial court3s order submitting the case for decision without 'enith3s evidence, wasdismissed.

The Motion for Reconsideration of the decision of the #ourt of ppeals dated ugust =, ->> wasdenied on %eptember 2-, ->>, for lac of merit. (ence, the instant petition was filed by 'enith on)ctober >, ->> on the allegation that respondent #ourt of ppeals3 decision and resolution rancounter to applicable decisions of this #ourt and that they were rendered without or in e1cess of

$urisdiction. The issues raised by petitioners in this petition are



a? The legal basis of respondent #ourt of ppeals in awarding moral damages,e1emplary damages and attomey3s fees in an amount more than that prayed for inthe complaint.

b? The award of actual damages of P6,8A0.00 instead of only P,-2=.+0 which wasarrived at after deducting P2+0.00 and P2=8.00 as deductible franchise and 20K

depreciation on parts as agreed upon in the contract of insurance.

Petitioner contends that while the complaint of private respondent prayed for P0,000.00 moraldamages, the lower court awarded twice the amount, or P20,000.00 without factual or legal basis4while private respondent prayed for P+,000.00 e1emplary damages, the trial court awardedP20,000.004 and while private respondent prayed for P6,000.00 attorney3s fees, the trial courtawarded P+,000.00.

The propriety of the award of moral damages, e1emplary damages and attorney3s fees is the mainissue raised herein by petitioner.

The award of damages in case of unreasonable delay in the payment of insurance claims is

governed by the Philippine "nsurance #ode, which provides

%ec. 288. "n case of any litigation for the enforcement of any policy or contract ofinsurance, it shall be the duty of the #ommissioner or the #ourt, as the case may be,to mae a finding as to whether the payment of the claim of the insured has beenunreasonably denied or withheld4 and in the affirmative case, the insurance companyshall be ad$udged to pay damages which shall consist of attomey3s fees and othere1penses incurred by the insured person by reason of such unreasonable denial orwithholding of payment plus interest of twice the ceiling prescribed by the MonetaryBoard of the amount of the claim due the insured, from the date following the timeprescribed in section two hundred forty5two or in section two hundred forty5three, asthe case may be, until the claim is fully satisfied4 rovided , That the failure to pay anysuch claim within the time prescribed in said sections shall be considered primafacie evidence of unreasonable delay in payment.

"t is clear that under the "nsurance #ode, in case of unreasonable delay in the payment of theproceeds of an insurance policy, the damages that may be awarded are ? attorney3s fees4 2? othere1penses incurred by the insured person by reason of such unreasonable denial or withholding ofpayment4 6? interest at twice the ceiling prescribed by the Monetary Board of the amount of the claimdue the in$ured4 and 8? the amount of the claim.

s regards the award of moral and e1emplary damages, the rules under the #ivil #ode of thePhilippines shall govern.

:The purpose of moral damages is essentially indemnity or reparation, not punishment or correction.

Moral damages are emphatically not intended to enrich a complainant at the e1pense of adefendant, they are awarded only to enable the in$ured party to obtain means, diversions oramusements that will serve to alleviate the moral suffering he has undergone by reason of thedefendant3s culpable action.: <*. #e&ar %. %angco, Philippine !aw on Torts and @amages, Reviseddition, p. +6-? <%ee also R and B %urety L "nsurance #o., "nc. v. "#, I.R. 7o. A8++, *une 22,->84 2- %#R =8+?. ;hile it is true that no proof of pecuniary loss is necessary in order that moraldamages may be ad$udicated, the assessment of which is left to the discretion of the court accordingto the circumstances of each case <rt. 22A, 7ew #ivil #ode?, it is eually true that in awardingmoral damages in case of breach of contract, there must be a showing that the breach was wanton



and deliberately in$urious or the one responsible acted fraudently or in bad faith <Pere& v. #ourt of ppeals, I.R. 7o. !52026>, *anuary 60,-A+4 6 %#R 6=4 %olis v. %alvador, I.R. 7o. !5=022, ugust 8, -A+4 8 %#R >>=?. "n the instant case, there was a finding that private respondent wasgiven a :run5around: for two months, which is the basis for the award of the damages granted underthe "nsurance #ode for unreasonable delay in the payment of the claim. (owever, the act ofpetitioner of delaying payment for two months cannot be considered as so wanton or malevolent to

$ustify an award of P20,000.00 as moral damages, taing into consideration also the fact that theactual damage on the car was only P6,8A0. "n the pre5trial of the case, it was shown that there wasno total disclaimer by respondent. The reason for petitioner3s failure to indemnify private respondentwithin the two5month period was that the parties could not come to an agreement as regards theamount of the actual damage on the car. The amount of P0,000.00 prayed for by privaterespondent as moral damages is euitable.

)n the other hand, e1emplary or corrective damages are imposed by way of e1ample or correctionfor the public good <rt. 222-, 7ew #ivil #ode of the Philippines?. "n the case of 7oda v. !ru#'

Arnaldo, I.R. 7o. +=622, *une 22,->=4 + %#R 22=, e1emplary damages were not awarded asthe insurance company had not acted in wanton, oppressive or malevolent manner. The same is truein the case at bar.

The amount of P+,000.00 awarded as attomey3s fees is $ustified under the circumstances of thiscase considering that there were other petitions filed and defended by private respondent inconnection with this case.

s regards the actual damages incurred by private respondent, the amount of P6,A80.00 had beenestablished before the trial court and affirmed by the appellate court. Respondent appellate courtcorrectly ruled that the deductions of P2+0.00 and P2=8.00 as deductible franchise and 20Kdepreciation on parts, respectively claimed by petitioners as agreed upon in the contract, had nobasis. Respondent court ruled

Dnder its second assigned error, defendant5appellant puts forward two arguments,both of which are entirely without merit. "t is contented that the amount recoverable

under the insurance policy defendant5appellant issued over the car of plaintiff5appellee is sub$ect to deductible franchise, and . . . .

The policy <1hibit I, pp. 85-, Record?, does not mntion any deductible franchise, . . .<p. 6, Rollo?

Therefore, the award of moral damages is reduced to P0,000.00 and the award of e1emplarydamages is hereby deleted. The awards due to private respondent 9ernande& are as follows

? P6,A80.00 as actual claim plus interest of twice the ceiling prescribed by theMonetary Board computed from the time of submission of proof of loss4

2? P0,000.00 as moral damages4

6? P+,000.00 as attorney3s fees4

8? P6,000.00 as litigation e1penses4 and

+? #osts.



##)R@"7I!, the appealed decision is M)@"9"@ as above stated.

%) )R@R@.




Manila

9"R%T @"/"%")7

G.R. No. 9&8 )74 1', 199&

SUN INSURANCE OICE, LTD., petitioner,vs.T$E $ON. COURT O APPEALS !"# NERISSA LIM, respondents.

CRU, J.:

The petitioner issued Personal ccident Policy 7o. 0+A>= to 9eli1 !im, *r. with a face value ofP200,000.00. Two months later, he was dead with a bullet wound in his head. s beneficiary, his wife7erissa !im sought payment on the policy but her claim was re$ected. The petitioner agreed thatthere was no suicide. "t argued, however that there was no accident either.

Pilar 7alagon, !im3s secretary, was the only eyewitness to his death. "t happened on )ctober A,->2, at about 0 o3cloc in the evening, after his mother3s birthday party. ccording to 7alagon, !imwas in a happy mood <but not drun? and was playing with his handgun, from which he hadpreviously removed the maga&ine. s she watched television, he stood in front of her and pointedthe gun at her. %he pushed it aside and said it might he loaded. (e assured her it was not and thenpointed it to his temple. The ne1t moment there was an e1plosion and !im slumped to the floor. (ewas dead before he fell. 1

The widow sued the petitioner in the Regional Trial #ourt of 'amboanga #ity and wassustained. & The petitioner was sentenced to pay her P200,000.00, representing the face value of thepolicy, with interest at the legal rate4 P0,000.00 as moral damages4 P+,000.00 as e1emplary damages4P+,000.00 as actual and compensatory damages4 and P+,000.00 as attorney3s fees, plus the costs of thesuit. This decision was affirmed on appeal, and the motion for reconsideration was denied. Thepetitioner then came to this #ourt to fault the #ourt of ppeals for approving the payment of the claim andthe award of damages.

The term :accident: has been defined as follows

The words :accident: and :accidental: have never acuired any technical signification in law, andwhen used in an insurance contract are to be construed and considered according to the ordinaryunderstanding and common usage and speech of people generally. "n5substance, the courts arepractically agreed that the words :accident: and :accidental: mean that which happens by chance orfortuitously, without intention or design, and which is une1pected, unusual, and unforeseen. Thedefinition that has usually been adopted by the courts is that an accident is an event that taes placewithout one3s foresight or e1pectation C an event that proceeds from an unnown cause, or is anunusual effect of a nown case, and therefore not e1pected. 2



n accident is an event which happens without any human agency or, if happening through humanagency, an event which, under the circumstances, is unusual to and not e1pected by the person towhom it happens. "t has also been defined as an in$ury which happens by reason of some violenceor casualty to the in$ured without his design, consent, or voluntary co5operation. 5

"n light of these definitions, the #ourt is convinced that the incident that resulted in !im3s death was

indeed an accident. The petitioner, invoing the case of :e la !ru# v. !apital -nsurance, 6 says that:there is no accident when a deliberate act is performed unless some additional, une1pected,independent and unforeseen happening occurs which produces or brings about their in$ury or death.:There was such a happening. This was the firing of the gun, which was the additional une1pected andindependent and unforeseen occurrence that led to the insured person3s death.

The petitioner also cites one of the four e1ceptions provided for in the insurance contract andcontends that the private petitioner3s claim is barred by such provision. "t is there stated

1ceptions C

The company shall not be liable in respect of

. Bodily in$ury

111 111 111

b. conseuent upon

i? The insured person attempting to commit suicide or willfully e1posing himself toneedless peril e1cept in an attempt to save human life.

To repeat, the parties agree that !im did not commit suicide. 7evertheless, the petitioner contendsthat the insured willfully e1posed himself to needless peril and thus removed himself from the

coverage of the insurance policy.

"t should be noted at the outset that suicide and willful e1posure to needless peril are in parimateria because they both signify a disregard for one3s life. The only difference is in degree, assuicide imports a positive act of ending such life whereas the second act indicates a recless risingof it that is almost suicidal in intent. To illustrate, a person who wals a tightrope one thousandmeters above the ground and without any safety device may not actually be intending to commitsuicide, but his act is nonetheless suicidal. (e would thus be considered as :willfully e1posinghimself to needless peril: within the meaning of the e1ception in uestion.

The petitioner maintains that by the mere act of pointing the gun to hip temple, !im had willfullye1posed himself to needless peril and so came under the e1ception. The theory is that a gun is perse dangerous and should therefore be handled cautiously in every case.

That posture is arguable. But what is not is that, as the secretary testified, !im had removed themaga&ine from the gun and believed it was no longer dangerous. (e e1pressly assured her that thegun was not loaded. "t is submitted that !im did not willfully e1pose himself to needless peril when hepointed the gun to his temple because the fact is that he thought it was not unsafe to do so. The actwas precisely intended to assure 7alagon that the gun was indeed harmless.

The contrary view is e1pressed by the petitioner thus



ccident insurance policies were never intended to reward the insured for histendency to show off or for his miscalculations. They were intended to provide forcontingencies. (ence, when " miscalculate and $ump from the Nue&on Bridge into thePasig River in the belief that " can overcome the current, " have wilfully e1posedmyself to peril and must accept the conseuences of my act. "f " drown " cannot go tothe insurance company to as them to compensate me for my failure to swim as well

as " thought " could. The insured in the case at bar deliberately put the gun to hishead and pulled the trigger. (e wilfully e1posed himself to peril.

The #ourt certainly agrees that a drowned man cannot go to the insurance company to as forcompensation. That might frighten the insurance people to death. ;e also agree that under thecircumstances narrated, his beneficiary would not be able to collect on the insurance policy for it isclear that when he braved the currents below, he deliberately e1posed himself to a )no1n peril.

The private respondent maintains that !im did not. That is where she says the analogy fails. Thepetitioner3s hypothetical swimmer new when he dived off the Nue&on Bridge that the currents belowwere dangerous. By contrast, !im did not now that the gun he put to his head was loaded.

!im was unuestionably negligent and that negligence cost him his own life. But it should notprevent his widow from recovering from the insurance policy he obtained precisely against accident.There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnityagreed upon if the insured is shown to have contributed to his own accident. "ndeed, most accidentsare caused by negligence. There are only four e1ceptions e1pressly made in the contract to relievethe insurer from liability, and none of these e1ceptions is applicable in the case at bar.

"t bears noting that insurance contracts are as a rule supposed to be interpreted liberally in favor ofthe assured. There is no reason to deviate from this rule, especially in view of the circumstances ofthis case as above analy&ed.

)n the second assigned error, however, the #ourt must rule in favor of the petitioner. The basicissue raised in this case is, as the petitioner correctly observed, one of first impression. "t is evidentthat the petitioner was acting in good faith then it resisted the private respondent3s claim on theground that the death of the insured was covered by the e1ception. The issue was indeed debatableand was clearly not raised only for the purpose of evading a legitimate obligation. ;e hold thereforethat the award of moral and e1emplary damages and of attorney3s fees is un$ust and so must bedisapproved.

"n order that a person may be made liable to the payment of moral damages, the lawreuires that his act be wrongful. The adverse result of an action does not perse mae the act wrongful and sub$ect the act or to the payment of moral damages.The law could not have meant to impose a penalty on the right to litigate4 such rightis so precious that moral damages may not be charged on those who may e1ercise iterroneously. 9or these the law ta1es costs. '

The fact that the results of the trial were adverse to Barreto did not alone mae his act inbringing the action wrongful because in most cases one party will lose4 we would beimposing an un$ust condition or limitation on the right to litigate. ;e hold that the award of moral damages in the case at bar is not $ustified by the facts had circumstances as wellas the law.

"f a party wins, he cannot, as a rule, recover attorney3s fees and litigation e1penses,since it is not the fact of winning alone that entitles him to recover such damages of



the e1ceptional circumstances enumerated in rt. 220>. )therwise, every time adefendant wins, automatically the plaintiff must pay attorney3s fees thereby putting apremium on the right to litigate which should not be so. 9or those e1penses, the lawdeems the award of costs as sufficient. 8

;(R9)R, the challenged decision of the #ourt of ppeals is 99"RM@ in so far as it holds

the petitioner liable to the private respondent in the sum of P200,000.00 representing the face valueof the insurance contract, with interest at the legal rate from the date of the filing of the complaintuntil the full amount is paid, but M)@"9"@ with the deletion of all awards for damages, includingattorney3s fees, e1cept the costs of the suit.

%) )R@R@.




Manila

9"R%T @"/"%")7

G.R. No. L-521'1 Ocober &8, 1983

)EEL VILLACORTA, !00/0e# b4 (er (70b!"#, GUERRERO VILLACORTA, petitioner,vs.T$E INSURANCE COMMISSION !"# EMPIRE INSURANCE COMPAN*, respondents.

TEE$AN+EE, Acting C.J.:

The #ourt sets aside respondent "nsurance #ommission3s dismissal of petitioner3s complaint andholds that where the insured3s car is wrongfully taen without the insured3s consent from the car

service and repair shop to whom it had been entrusted for chec5up and repairs <assuming that suchtaing was for a $oy ride, in the course of which it was totally smashed in an accident?, respondentinsurer is liable and must pay insured for the total loss of the insured vehicle under the theft clauseof the policy.

The undisputed facts of the case as found in the appealed decision of pril 8, ->0 of respondentinsurance commission are as follows

#omplainant GpetitionerH was the owner of a #olt !ancer, Model -=A, insured withrespondent company under Private #ar Policy 7o. MB"JP#50=08 for P6+,000.00 C)wn @amage4 P60,000.00 C Theft4 and P60,000.00 C Third Party !iability, effectiveMay A, -== to May A, -=>. )n May -, -=>, the vehicle was brought to the

%unday Machine ;ors, "nc., for general chec5up and repairs. )n May , -=>,while it was in the custody of the %unday Machine ;ors, the car was allegedlytaen by si1 <A? persons and driven out to Montalban, Ri&al. ;hile travelling alongMabini %t., %itio Palyasan, Barrio Burgos, going 7orth at Montalban, Ri&al, the carfigured in an accident, hitting and bumping a gravel and sand truc pared at theright side of the road going south. s a conseuence, the gravel and sand trucveered to the right side of the pavement going south and the car veered to the rightside of the pavement going north. The driver, Benito Mabasa, and one of thepassengers died and the other four sustained physical in$uries. The car, as well,suffered e1tensive damage. #omplainant, thereafter, filed a claim for total loss withthe respondent company but claim was denied. (ence, complainant, was compelledto institute the present action.

The comprehensive motor car insurance policy for P6+,000.00 issued by respondent mpire"nsurance #ompany admittedly undertoo to indemnify the petitioner5insured against loss or damageto the car <a? by accidental collision or overturning, or collision or overturning conseuent uponmechanical breadown or conseuent upon wear and tear4 <b? by fire, e1ternal e1plosion, self5ignition or lightning or burglary, housebreaing or theft4 and <c? by malicious act.

Respondent insurance commission, however, dismissed petitioner3s complaint for recovery of thetotal loss of the vehicle against private respondent, sustaining respondent insurer3s contention that



the accident did not fall within the provisions of the policy either for the )wn @amage or Theftcoverage, invoing the policy provision on :uthori&ed @river: clause. 1

Respondent commission upheld private respondent3s contention on the :uthori&ed @river: clause inthis wise :"t must be observed that under the above5uoted provisions, the policy limits the use ofthe insured vehicle to two <2? persons only, namely the insured himself or any person on his

<insured3s? permission. Dnder the second category, it is to be noted that the words :any person3 isualified by the phrase

... on the insured3s order or with his permission.3 "t is therefore clear that if the persondriving is other than the insured, he must have been duly authori&ed by the insured,to drive the vehicle to mae the insurance company liable for the driver3s negligence.#omplainant admitted that she did not now the person who drove her vehicle at thetime of the accident, much less consented to the use of the same <par. + of thecomplaint?. (er husband liewise admitted that he neither new this driver BenitoMabasa <1hibit 383?. ;ith these declarations of complainant and her husband, wehold that the person who drove the vehicle, in the person of Benito Mabasa, is not anauthori&ed driver of the complainant. pparently, this is a violation of the 3uthori&ed

@river3 clause of the policy.

Respondent commission liewise upheld private respondent3s assertion that the car was not stolenand therefore not covered by the Theft clause, ruling that :The element of 3taing3 in rticle 60> of theRevised Penal #ode means that the act of depriving another of the possession and dominion of amovable thing is coupled ... with the intention. at the time of the 3taing3, of withholding it with thecharacter of permanency <People vs. Ialang, = ppt. #t. Rep. 6?. "n other words, there must havebeen shown a felonious intent upon the part of the taer of the car, and the intent must be an intentpermanently to deprive the insured of his car,: and that :%uch was not the case in this instance. Thefact that the car was taen by one of the residents of the %unday Machine ;ors, and thewithholding of the same, for a $oy ride should not be construed to mean 3taing3 under rt. 60> of theRevised Penal #ode. "f at all there was a 3taing3, the same was merely temporary in nature. temporary taing is held not a taing insured against <8> !R 2d., page +?.:

The #ourt finds respondent commission3s dismissal of the complaint to be contrary to the evidenceand the law.

9irst, respondent commission3s ruling that the person who drove the vehicle in the person of BenitoMabasa, who, according to its finding, was one of the residents of the %unday Machine ;ors, "nc.to whom the car had been entrusted for general chec5up and repairs was not an :authori&ed driver:of petitioner5complainant is too restrictive and contrary to the established principle that insurancecontracts, being contracts of adhesion where the only participation of the other party is the signing of his signature or his :adhesion: thereto, :obviously call for greater strictness and vigilance on the partof courts of $ustice with a view of protecting the weaer party from abuse and imposition, and preventtheir becoming traps for the unwary. &

The main purpose of the :authori&ed driver: clause, as may be seen from its te1t, supra, is that aperson other than the insured owner, who drives the car on the insured3s order, such as his regulardriver, or with his permission, such as a friend or member of the family or the employees of a carservice or repair shop must be duly licensed drivers and have no disualification to drive a motorvehicle.

car owner who entrusts his car to an established car service and repair shop necessarily entrustshis car ey to the shop owner and employees who are presumed to have the insured3s permission to



drive the car for legitimate purposes of checing or road5testing the car. The mere happenstancethat the employee<s? of the shop owner diverts the use of the car to his own illicit or unauthori&edpurpose in violation of the trust reposed in the shop by the insured car owner does not mean that the:authori&ed driver: clause has been violated such as to bar recovery, provided that such employee isduly ualified to drive under a valid driver3s license.

The situation is no different from the regular or family driver, who instead of carrying out the owner3sorder to fetch the children from school taes out his girl friend instead for a $oy ride and insteadwrecs the car. There is no uestion of his being an :authori&ed driver: which allows recovery of theloss although his trip was for a personal or illicit purpose without the owner3s authori&ation.

%econdly, and independently of the foregoing <since when a car is unlawfully taen, it is the theftclause, not the :authori&ed driver: clause, that applies?, where a car is admittedly as in this caseunlawfully and wrongfully taen by some people, be they employees of the car shop or not to whomit had been entrusted, and taen on a long trip to Montalban without the owner3s consent ornowledge, such taing constitutes or partaes of the nature of theft as defined in rticle 60> of theRevised Penal #ode, vi&. :;ho are liable for theft. C Theft is committed by any person who, withintent to gain but without violence against or intimidation of persons nor force upon things, shall tae

personal property of another without the latter3s consent,: for purposes of recovering the loss underthe policy in uestion.

The #ourt re$ects respondent commission3s premise that there must be an intent on the part of thetaer of the car :permanently to deprive the insured of his car: and that since the taing here was for a :$oy ride: and :merely temporary in nature,: a :temporary taing is held not a taing insuredagainst.:

The evidence does not warrant respondent commission3s findings that it was a mere :$oy ride:. 9romthe very investigator3s report cited in its comment, the police found from the waist of the car driverBenito Mabasa Bartolome who smashed the car and was found dead right after the incident :one cal. 8+#olt. and one apple type grenade,: hardly the materials one would bring along on a :$oy ride:. Then,again, it is eually evident that the taing proved to be uite permanent rather than temporary, for the car

was totally smashed in the fatal accident and was never returned in serviceable and useful condition topetitioner5owner.

ssuming, despite the totally inadeuate evidence, that the taing was :temporary: and for a :$oyride:, the #ourt sustains as the better view that which holds that when a person, either with theob$ect of going to a certain place, or learning how to drive, or en$oying a free ride, taes possessionof a vehicle belonging to another, without the consent of its owner, he is guilty of theft because bytaing possession of the personal property belonging to another and using it, his intent to gain isevident since he derives therefrom utility, satisfaction, en$oyment and pleasure. *ustice Ramon #.

uino cites in his wor Iroi&ard who holds that the use of a thing constitutes gain and #uello #alonwho calls it :hurt de uso. : 2

The insurer must therefore indemnify the petitioner5owner for the total loss of the insured car in thesum of P6+,000.00 under the theft clause of the policy, sub$ect to the filing of such claim forreimbursement or payment as it may have as subrogee against the %unday Machine ;ors, "nc.

##)R@"7I!, the appealed decision is set aside and $udgment is hereby rendered sentencingprivate respondent to pay petitioner the sum of P6+,000.00 with legal interest from the filing of thecomplaint until full payment is made and to pay the costs of suit.

%) )R@R@.




Manila

T("R@ @"/"%")7

G.R. No. 63536 A7:70 6, 199&

IGURACION VDA. DE MAGLANA, EDIT$A M. CRU, ERLINDA M. MASESAR, LEONILA M.MALLARI, GILDA ANTONIO !"# (e m/"or0 LEA$, LOPE, )R., !"# ELVIRA, ! 07r"!me#MAGLANA, (ere/" rere0e"e# b4 (e/r mo(er, IGURACION VDA. DE MAGLANA, petitioners,vs.$ONORA%LE RANCISCO . CONSOLACION, Pre0/#/": )7#:e o; D!<!o C/4, %r!"c( II, !"#AISCO INSURANCE CORPORATION, respondents.

Jose ". 8uyo for petitioners.

Angel E. /ernande# for private respondent.

ROMERO, J.:

The nature of the liability of an insurer sued together with the insuredJoperator5owner of a commoncarrier which figured in an accident causing the death of a third person is sought to be defined in thispetition for certiorari .

The facts as found by the trial court are as follows

. . . !ope Maglana was an employee of the Bureau of #ustoms whose wor stationwas at !asa, here in @avao #ity. )n @ecember 20, -=>, early morning, !opeMaglana was on his way to his wor station, driving a motorcycle owned by theBureau of #ustoms. t Em. =, !anang, he met an accident that resulted in his death.(e died on the spot. The PD* $eep that bumped the deceased was driven by Pepito"nto, operated and owned by defendant @estra$o. 9rom the investigation conductedby the traffic investigator, the PD* $eep was overtaing another passenger $eep thatwas going towards the city poblacion. ;hile overtaing, the PD* $eep of defendant@estra$o running abreast with the overtaen $eep, bumped the motorcycle driven bythe deceased who was going towards the direction of !asa, @avao #ity. The point ofimpact was on the lane of the motorcycle and the deceased was thrown from the

road and met his untimely death.1

#onseuently, the heirs of !ope Maglana, %r., here petitioners, filed an action for damages andattorney3s fees against operator Patricio @estra$o and the fisco "nsurance #orporation <9"%#) forbrevity? before the then #ourt of 9irst "nstance of @avao, Branch "". n information for homicide thrurecless imprudence was also filed against Pepito "nto.

@uring the pendency of the civil case, "nto was sentenced to suffer an indeterminate penalty of one<? year, eight <>? months and one <? day of prision correccional, as minimum, to four <8? years, nine



<-? months and eleven <? days of prision correccional , as ma1imum, with all the accessorypenalties provided by law, and to indemnify the heirs of !ope Maglana, %r. in the amount of twelvethousand pesos <P2,000.00? with subsidiary imprisonment in case of insolvency, plus five thousandpesos <P+,000.00? in the concept of moral and e1emplary damages with costs. 7o appeal wasinterposed by accused who later applied for probation. &

)n @ecember 8, ->, the lower court rendered a decision finding that @estra$o had not e1ercisedsufficient diligence as the operator of the $eepney. The dispositive portion of the decision reads

;(R9)R, the #ourt finds $udgment in favor of the plaintiffs against defendant@estra$o, ordering him to pay plaintiffs the sum of P2>,000.00 for loss of income4 topay plaintiffs the sum of P2,000.00 which amount shall be deducted in the event

$udgment in #riminal #ase 7o. 6+2=5@ against the driver, accused "nto, shall havebeen enforced4 to pay plaintiffs the sum of P+,-0.=0 representing funeral and buriale1penses of the deceased4 to pay plaintiffs the sum of P+,000.00 as moral damageswhich shall be deducted in the event $udgment <sic ? in #riminal #ase 7o. 6+2=5@against the driver, accused "nto4 to pay plaintiffs the sum of P6,000.00 as attorney3sfees and to pay the costs of suit.

The defendant insurance company is ordered to reimburse defendant @estra$owhatever amounts the latter shall have paid only up to the e1tent of its insurancecoverage.

%) )R@R@.

Petitioners filed a motion for the reconsideration of the second paragraph of the dispositive portion of the decision contending that 9"%#) should not merely be held secondarily liable because the"nsurance #ode provides that the insurer3s liability is :direct and primary andJor $ointly and severallywith the operator of the vehicle, although only up to the e1tent of the insurance coverage.: 2 (ence,they argued that the P20,000.00 coverage of the insurance policy issued by 9"%#), should have beenawarded in their favor.

"n its comment on the motion for reconsideration, 9"%#) argued that since the "nsurance #odedoes not e1pressly provide for a solidary obligation, the presumption is that the obligation is $oint.

"n its )rder of 9ebruary -, ->2, the lower court denied the motion for reconsideration ruling thatsince the insurance contract :is in the nature of suretyship, then the liability of the insurer issecondary only up to the e1tent of the insurance coverage.: 5

Petitioners filed a second motion for reconsideration reiterating that the liability of the insurer isdirect, primary and solidary with the $eepney operator because the petitioners became directbeneficiaries under the provision of the policy which, in effect, is a stipulation pour autrui . 6 Thismotion was liewise denied for lac of merit.

(ence, petitioners filed the instant petition for certiorari which, although it does not see the reversalof the lower court3s decision in its entirety, prays for the setting aside or modification of the secondparagraph of the dispositive portion of said decision. Petitioners reassert their position that theinsurance company is directly and solidarily liable with the negligent operator up to the e1tent of itsinsurance coverage.

;e grant the petition.



The particular provision of the insurance policy on which petitioners base their claim is as follows

%ec. C !"B"!"T T) T( PDB!"#

. The #ompany will, sub$ect to the !imits of !iability, pay all sums necessary todischarge liability of the insured in respect of

<a? death of or bodily in$ury to any T("R@ PRT

<b? . . . .

2. . . . .

6. "n the event of the death of any person entitled to indemnity under this Policy, the#ompany will, in respect of the liability incurred to such person indemnify hispersonal representatives in terms of, and sub$ect to the terms and conditionshereof. '

The above5uoted provision leads to no other conclusion but that 9"%#) can be held directly liableby petitioners. s this #ourt ruled in %hafer vs. Judge, R$! of 3longapo !ity, "r. ;< , :GwHhere aninsurance policy insures directly against liability, the insurer3s liability accrues immediately upon theoccurrence of the in$ury or even upon which the liability depends, and does not depend on therecovery of $udgment by the in$ured party against the insured.: 8 The underlying reason behind the third party

liability <TP!? of the #ompulsory Motor /ehicle !iability "nsurance is :to protect in$ured persons against the insolvency of the insured who

causes such in$ury, and to give such in$ured person a certain beneficial interest in the proceeds of the policy . . .:9 %ince petitioners

had received from 9"%#) the sum of P+,000.00 under the no5fault clause, 9"%#)3s liability is nowlimited to P+,000.00.

(owever, we cannot agree that 9"%#) is liewise solidarily liable with @estra$o. "n Malayan-nsurance !o., -nc. v. !ourt of Appeals, 13 this #ourt had the opportunity to resolve the issue as to thenature of the liability of the insurer and the insured vis'a'vis the third party in$ured in an accident. ;ecategorically ruled thus

;hile it is true that where the insurance contract provides for indemnity againstliability to third persons, such third persons can directly sue the insurer, however, thedirect liability of the insurer under indemnity contracts against third party liability doesnot mean that the insurer can be held solidarily liable 1ith the insured and=or theother parties found at fault . $he liability of the insurer is based on contract> that of theinsured is based on tort .

"n the case at bar, petitioner as insurer of %io #hoy, is liable to respondent /alle$os

<the in$ured third party?, but it cannot, as incorrectly held by the trial court, be made:solidarily: liable with the two principal tortfeasors, namely respondents %io #hoy and%an !eon Rice Mill, "nc. /or if petitioner'insurer 1ere solidarily liable 1ith said, t1o4?5 respondents by reason of the indemnity contract against third party liability Cunder which an insurer can be directly sued by a third party C this 1ill result in aviolation of the principles underlying solidary obligation and insurance contracts.<emphasis supplied?



The #ourt then proceeded to distinguish the e1tent of the liability and manner of enforcing the samein ordinary contracts from that of insurance contracts. ;hile in solidary obligations, the creditor mayenforce the entire obligation against one of the solidary debtors, in an insurance contract, the insurer undertaes for a consideration to indemnify the insured against loss, damage or liability arising froman unnown or contingent event. 11 Thus, petitioner therein, which, under the insurance contract is liableonly up to P20,000.00, can not be made solidarily liable with the insured for the entire obligation of

P2-,06.00 otherwise there would result :an evident breach of the concept of solidary obligation.:

%imilarly, petitioners herein cannot validly claim that 9"%#), whose liability under the insurancepolicy is also P20,000.00, can be held solidarily liable with @estra$o for the total amount ofP+6,-0.=0 in accordance with the decision of the lower court. %ince under both the law and theinsurance policy, 9"%#)3s liability is only up to P20,000.00, the second paragraph of the dispositiveportion of the decision in uestion may have unwittingly sown confusion among the petitioners andtheir counsel. ;hat should have been clearly stressed as to leave no room for doubt was the liabilityof 9"%#) under the e1plicit terms of the insurance contract.

"n fine, we conclude that the liability of 9"%#) based on the insurance contract is direct, but notsolidary with that of @estra$o which is based on rticle 2>0 of the #ivil #ode. 1& s such, petitionershave the option either to claim the P+,000 from 9"%#) and the balance from @estra$o or enforce theentire $udgment from @estra$o sub$ect to reimbursement from 9"%#) to the e1tent of the insurancecoverage.

;hile the petition sees a definitive ruling only on the nature of 9"%#)3s liability, we noticed that thelower court erred in the computation of the probable loss of income. Dsing the formula 2J6 of <>05+A?1 P2,000.00, it awarded P2>,>00.00. 1 Dpon recomputation, the correct amount is P-2,000.00. Beinga :plain error,: we opt to correct the same.12 9urthermore, in accordance with prevailing $urisprudence, thedeath indemnity is hereby increased to P+0,000.00. 15

;(R9)R, premises considered, the present petition is hereby IR7T@. The award ofP2>,>00.00 representing loss of income is "7#R%@ to P-2,000.00 and the death indemnity ofP2,000.00 to P+0,000.00.

%) )R@R@.



Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 9625& M!4 ', 199&

PERLA COMPANIA DE SEGUROS, INC. petitioner,vs.T$E COURT O APPEALS, $ERMINIO LIM !"# EVEL*N LIM, respondents.

G.R. No. 9629 M!4 ', 199&

CP CREDIT CORPORATION, petitioner,

vs.

T$E COURT O APPEALS, Sec/! T(/r# D/</0/o", $ERMINIO LIM !"# EVEL*N LIM, respondents.

Yolanda @uisumbing'Javellana and 7elson A. Loyola for petitioner.

Wilson L. $ee for respondents *erminio and Evelyn Lim.

NOCON, J.:

These are two petitions for review on certiorari , one filed by Perla #ompania de %eguros, "nc. in I.R. 7o. -A8+2, and the other by 9#P

#redit #orporation in I.R. 7o. -A8-6, both seeing to annul and set aside the decision dated *uly 60, --01 of the #ourt of ppeals

in #5I.R. 7o. 606=, which reversed the decision of the Regional Trial #ourt of Manila, Branch /""" in#ivil #ase 7o. >65-0-> for replevin and damages. The dispositive portion of the decision of the #ourt of ppeals reads, as follows

;(R9)R, the decision appealed from is reversed4 and appellee Perla #ompania de%eguros, "nc. is ordered to indemnify appellants (erminio and velyn !im for the loss oftheir insured vehicle4 while said appellants are ordered to pay appellee 9#P #redit#orporation all the unpaid installments that were due and payable before the date saidvehicle was carnapped4 and appellee Perla #ompania de %eguros, "nc. is also ordered topay appellants moral damages of P2,000.00 for the latter3s mental sufferings, e1emplarydamages of P20,000.00 for appellee Perla #ompania de %eguros, "nc.3s unreasonablerefusal on sham grounds to honor the $ust insurance claim of appellants by way ofe1ample and correction for public good, and attorney3s fees of P0,000.00 as a $ust and

euitable reimbursement for the e1penses incurred therefor by appellants, and the costsof suit both in the lower court and in this appeal. &

The facts as found by the trial court are as follows

)n @ecember 28, ->, private respondents spouses (erminio and velyn !im e1ecuted a promissorynote in favor %upercars, "nc. in the sum of P==,-80.00, payable in monthly installments according to theschedule of payment indicated in said note, and secured by a chattel mortgage over a brand new red9ord !aser 600 +@R (atchbac -> model with motor and serial 7o. %DP*E506=>0, which is



registered under the name of private respondent (erminio !im 2 and insured with the petitioner Perla#ompania de %eguros, "nc. <Perla for brevity? for comprehensive coverage under Policy 7o. P#J8PP5N#B5866>6. 5

)n the same date, %upercars, "nc., with notice to private respondents spouses, assigned to petitioner9#P #redit #orporation <9#P for brevity? its rights, title and interest on said promissory note and chattel

mortgage as shown by the @eed of ssignment.6

t around 260 P.M. of 7ovember -, ->2, said vehicle was carnapped while pared at the bac ofBroadway #entrum along 7. @omingo %treet, Nue&on #ity. Private respondent velyn !im, who wasdriving said car before it was carnapped, immediately called up the nti5#arnapping Dnit of the Philippine#onstabulary to report said incident and thereafter, went to the nearest police substation at raneta,#ubao to mae a police report regarding said incident, as shown by the certification issued by the Nue&on#ity police. '

)n 7ovember 0, ->2, private respondent velyn !im reported said incident to the !and Transportation#ommission in Nue&on #ity, as shown by the letter of her counsel to said office, 8 in compliance with the

insurance reuirement. %he also filed a complaint with the (eaduarters, #onstabulary (ighway Patrol Iroup.9

)n 7ovember , ->2, private respondent filed a claim for loss with the petitioner Perla but said claimwas denied on 7ovember >, ->2 13 on the ground that velyn !im, who was using the vehicle before itwas carnapped, was in possession of an e1pired driver3s license at the time of the loss of said vehiclewhich is in violation of the authori&ed driver clause of the insurance policy, which states, to wit

DT()R"'@ @R"/R

ny of the following <a? The "nsured <b? ny person driving on the "nsured3s order, or withhis permission.rovided that the person driving is permitted, in accordance with thelicensing or other laws or regulations, to drive the %cheduled /ehicle, or has beenpermitted and is not disualified by order of a #ourt of !aw or by reason of anyenactment or regulation in that behalf. 11

)n 7ovember =, ->2, private respondents reuests from petitioner 9#P for a suspension of paymenton the monthly amorti&ation agreed upon due to the loss of the vehicle and, since the carnapped vehicleinsured with petitioner Perla, said insurance company should be made to pay the remaining balance ofthe promissory note and the chattel mortgage contract.

Perla, however, denied private respondents3 claim. #onseuently, petitioner 9#P demanded that privaterespondents pay the whole balance of the promissory note or to return the vehicle 1& but the latter refused.

)n *uly 2+, ->6, petitioner 9#P filed a complaint against private respondents, who in turn filed anamended third party complaint against petitioner Perla on @ecember >, ->6. fter trial on the merits, thetrial court rendered a decision, the dispositive portion which reads

;(R9)R, in view of the foregoing, $udgment is hereby rendered as follows

. )rdering defendants (erminio !im and velyn !im to pay, $ointly and severally, plaintiff the sum of P++,0++.-6 plus interest thereon at the rate of 28K per annum from *uly 2,->6 until fully paid4

2. )rdering defendants to pay plaintiff P+0,000.00 as and for attorney3s fees4 and thecosts of suit.



Dpon the other hand, liewise, ordering the @"%M"%%! of the Third5Party #omplaint filedagainst Third5Party @efendant. 1

7ot satisfied with said decision, private respondents appealed the same to the #ourt of ppeals, whichreversed said decision.

fter petitioners3 separate motions for reconsideration were denied by the #ourt of ppeals in itsresolution of @ecember 0, --0, petitioners filed these separate petitions for review on certiorari .

Petitioner Perla alleged that there was grave abuse of discretion on the part of the appellate court inholding that private respondents did not violate the insurance contract because the authori&ed driverclause is not applicable to the :Theft: clause of said #ontract.

9or its part, petitioner 9#P raised the issue of whether or not the loss of the collateral e1empted thedebtor from his admitted obligations under the promissory note particularly the payment of interest,litigation e1penses and attorney3s fees.

;e find no merit in Perla3s petition.

The comprehensive motor car insurance policy issued by petitioner Perla undertoo to indemnify theprivate respondents against loss or damage to the car <a? by accidental collision or overturning, orcollision or overturning conseuent upon mechanical breadown or conseuent upon wear and tear4 <b?by fire, e1ternal e1plosion, self5ignition or lightning or burglary, housebreaing or theft> and <c? bymalicious act. 12

;here a car is admittedly, as in this case, unlawfully and wrongfully taen without the owner3s consent ornowledge, such taing constitutes theft, and, therefore, it is the :T(9T:3 clause, and not the:DT()R"'@ @R"/R: clause that should apply. s correctly stated by the respondent court in itsdecision

. . . 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 thedoer3s will. )n the other hand, accident, although it may proceed or result fromnegligence, is the happening of an event without the concurrence of the will of the personby whose agency it was caused. <Bouvier3s !aw @ictionary, /ol. ", -8 ed., p. 0?.

#learly, the ris against accident is distinct from the ris against theft. The :authori&eddriver clause: in a typical insurance policy is in contemplation or anticipation of accidentin the legal sense in which it should be understood, and not in contemplation oranticipation of an event such as theft. The distinction C often sei&ed upon by insurancecompanies in resisting claims from their assureds C between death occurring as a resultof accident and death occurring as a result of intent may, by analogy, apply to the case atbar. Thus, if the insured vehicle had figured in an accident at the time she drove it with ane1pired license, then, appellee Perla #ompania could properly resist appellants3 claim for

indemnification for the loss or destruction of the vehicle resulting from the accident. But inthe present case. The loss of the insured vehicle did not result from an accident whereintent was involved4 the loss in the present case was caused by theft, the commission ofwhich was attended by intent. 15

"t is worthy to note that there is no causal connection between the possession of a valid driver3s licenseand the loss of a vehicle. To rule otherwise would render car insurance practically a sham since aninsurance company can easily escape liability by citing restrictions which are not applicable or germane tothe claim, thereby reducing indemnity to a shadow.



;e however find the petition of 9#P meritorious.

This #ourt agrees with petitioner 9#P that private respondents are not relieved of their obligation to paythe former the installments due on the promissory note on account of the loss of the automobile. Thechattel mortgage constituted over the automobile is merely an accessory contract to the promissory note.Being the principal contract, the promissory note is unaffected by whatever befalls the sub$ect matter of

the accessory contract. Therefore, the unpaid balance on the promissory note should be paid, and not $ust the installments due and payable before the automobile was carnapped, as erronously held by the#ourt of ppeals.

(owever, this does not mean that private respondents are bound to pay the interest, litigation e1pensesand attorney3s fees stipulated in the promissory note. Because of the peculiar relationship between thethree contracts in this case, i .e., the promissory note, the chattel mortgage contract and the insurancepolicy, this #ourt is compelled to construe all three contracts as intimately interrelated to each other,despite the fact that at first glance there is no relationship whatsoever between the parties thereto.

Dnder the promissory note, private respondents are obliged to pay %upercars, "nc. the amount statedtherein in accordance with the schedule provided for. To secure said promissory note, private respondentsconstituted a chattel mortgage in favor of %upercars, "nc. over the automobile the former purchased from

the latter. The chattel mortgage, in turn, reuired private respondents to insure the automobile and tomae the proceeds thereof payable to %upercars, "nc. The promissory note and chattel mortgage wereassigned by %upercars, "nc. to petitioner 9#P, with the nowledge of private respondents. Privaterespondents were able to secure an insurance policy from petitioner Perla, and the same was madespecifically payable to petitioner 9#P. 16

The insurance policy was therefore meant to be an additional security to the principal contract, that is, toinsure that the promissory note will still be paid in case the automobile is lost through accident or theft.The #hattel Mortgage #ontract provided that

T( %"@ M)RTII)R #)/77T% 7@ IR% T(T (J"T ;"!! #D% T(PR)PRTJ"% (R"75B)/ M)RTII@ T) B "7%DR@ I"7%T !)%% )R@MI B ##"@7T, T(9T 7@ 9"R 9)R PR")@ )9 )7 R 9R)M

@T (R)9 7@ /R R T(R9TR D7T"! T( M)RTII)B!"IT")7 "% 9D!! P"@ ;"T( 7 "7%DR7# #)MP7 )R #)MP7"%

##PTB! T) T( M)RTII "7 7 M)D7T 7)T !%% T(7 T()DT%T7@"7I B!7# )9 T( M)RTII )B!"IT")74 $*A$ *E=-$ W-LLMAE ALL L3%%, -/ A7Y, B7:ER %B!* 3L-!Y 3R 3L-!-E%, AYA"LE $3 $*EM3R$8A8E 3R -$% A%%-87% A% -$% -7$ERE%$% MAY AEAR A7: /3R$*W-$*:EL-0ER %B!* 3L-!Y 3R 3L-!-E% $3 $*E M3R$8A8EE, . . . . 1'

"t is clear from the abovementioned provision that upon the loss of the insured vehicle, the insurancecompany Perla undertaes to pay directly to the mortgagor or to their assignee, 9#P, the outstandingbalance of the mortgage at the time of said loss under the mortgage contract. "f the claim on theinsurance policy had been approved by petitioner Perla, it would have paid the proceeds thereof directlyto petitioner 9#P, and this would have had the effect of e1tinguishing private respondents3 obligation to

petitioner 9#P. Therefore, private respondents were $ustified in asing petitioner 9#P to demand theunpaid installments from petitioner Perla.

Because petitioner Perla had unreasonably denied their valid claim, private respondents should not bemade to pay the interest, liuidated damages and attorney3s fees as stipulated in the promissory note. smentioned above, the contract of indemnity was procured to insure the return of the money loaned frompetitioner 9#P, and the un$ustified refusal of petitioner Perla to recogni&e the valid claim of the privaterespondents should not in any way pre$udice the latter.



Private respondents can not be said to have unduly enriched themselves at the e1pense of petitioner 9#Psince they will be reuired to pay the latter the unpaid balance of its obligation under the promissory note.

"n view of the foregoing discussion, ;e hold that the #ourt of ppeals did not err in reuiring petitionerPerla to indemnify private respondents for the loss of their insured vehicle. (owever, the latter should beordered to pay petitioner 9#P the amount of P++,0++.-6, representing the unpaid installments from

@ecember 60, ->2 up to *uly , ->6, as shown in the statement of account prepared by petitioner9#P, 18 plus legal interest from *uly 2, ->6 until fully paid.

s to the award of moral damages, e1emplary damages and attorney3s fees, private respondents arelegally entitled to the same since petitioner Perla had acted in bad faith by unreasonably refusing to honor the insurance claim of the private respondents. Besides, awards for moral and e1emplary damages, aswell as attorney3s fees are left to the sound discretion of the #ourt. %uch discretion, if well e1ercised, willnot be disturbed on appeal. 19

;(R9)R, the assailed decision of the #ourt of ppeals is hereby M)@"9"@ to reuire privaterespondents to pay petitioner 9#P the amount of P++,0++.-6, with legal interest from *uly 2, ->6 untilfully paid. The decision appealed from is hereby affirmed as to all other respects. 7o pronouncement asto costs.

%) )R@R@.




Manila

9"R%T @"/"%")7

G.R. No. 1122&' ebr7!r4 6, 1995

ARMANDO GEAGONIA, petitioner,vs.COURT O APPEALS !"# COUNTR* %AN+ERS INSURANCE CORPORATION, respondents.

DAVIDE, )R., J.:

9our our review under Rule 8+ of the Rules of #ourt is the decision 1 of the #ourt of ppeals in #5I.R. %P 7o. 6-A, entitled :#ountry Baners "nsurance #orporation versus rmando Ieagonia,:reversing the decision of the "nsurance #ommission in ".#. #ase 7o. 6680 which awarded the claim ofpetitioner rmando Ieagonia against private respondent #ountry Baners "nsurance #orporation.

The petitioner is the owner of 7orman3s Mart located in the public maret of %an 9rancisco, gusandel %ur. )n 22 @ecember ->-, he obtained from the private respondent fire insurance policy 7o. 958A22 & for P00,000.00. The period of the policy was from 22 @ecember ->- to 22 @ecember --0 andcovered the following :%toc5in5trade consisting principally of dry goods such as RT;3s for men andwomen wear and other usual to assured3s business.:

The petitioner declared in the policy under the subheading entitled #)5"7%DR7# that Mercantile"nsurance #o., "nc. was the co5insurer for P+0,000.00. 9rom ->- to --0, the petitioner had in hisinventory stocs amounting to P6-2,60.+0, itemi&ed as follows

'enco %ales, "nc. P++,A->.00

9. !egaspi Ien. Merchandise >A,862.+0

#ebu Tesing Te1tiles 2+0,000.00 <on credit?

CCCCC

P6-2,60.+0



The policy contained the following condition

6. The insured shall give notice to the #ompany of any insurance or insurancesalready affected, or which may subseuently be effected, covering any of theproperty or properties consisting of stocs in trade, goods in process andJorinventories only hereby insured, and unless such notice be given and the particulars

of such insurance or insurances be stated therein or endorsed in this policy pursuantto %ection +0 of the "nsurance #ode, by or on behalf of the #ompany before theoccurrence of any loss or damage, all benefits under this policy shall be deemedforfeited, provided ho1ever , that this condition shall not apply when the totalinsurance or insurances in force at the time of the loss or damage is not more thanP200,000.00.

)n 2= May --0, fire of accidental origin broe out at around =60 p.m. at the public maret of %an9rancisco, gusan del %ur. The petitioner3s insured stoc5in5trade were completely destroyedprompting him to file with the private respondent a claim under the policy. )n 2> @ecember --0,the private respondent denied the claim because it found that at the time of the loss the petitioner3sstocs5in5trade were liewise covered by fire insurance policies 7o. I52>8A and 7o. I52>88,

for P00,000.00 each, issued by the #ebu Branch of the Philippines 9irst "nsurance #o., "nc.<hereinafter /-!5. These policies indicate that the insured was :Messrs. @iscount Mart <Mr. rmandoIeagonia, Prop.?: with a mortgage clause reading

M)RTII !oss, if any shall be payable to Messrs. #ebu Tesing Te1tiles, #ebu#ity as their interest may appear sub$ect to the terms of this policy. #)5"7%DR7#@#!R@ P00,000. C Phils. 9irst #BJ9 28=+>. 2

The basis of the private respondent3s denial was the petitioner3s alleged violation of #ondition 6 ofthe policy.

The petitioner then filed a complaint 5 against the private respondent with the "nsurance #ommission<#ase 7o. 6680? for the recovery of P00,000.00 under fire insurance policy 7o. 958A22 and for

attorney3s fees and costs of litigation. (e attached as nne1 :M: 6 thereof his letter of > *anuary --which ased for the reconsideration of the denial. (e admitted in the said letter that at the time heobtained the private respondent3s fire insurance policy he new that the two policies issued by the P9"#were already in e1istence4 however, he had no nowledge of the provision in the private respondent3spolicy reuiring him to inform it of the prior policies4 this reuirement was not mentioned to him by theprivate respondent3s agent4 and had it been mentioned, he would not have withheld such information. (efurther asserted that the total of the amounts claimed under the three policies was below the actual valueof his stocs at the time of loss, which was P,000,000.00.

"n its answer, ' the private respondent specifically denied the allegations in the complaint and set up as itsprincipal defense the violation of #ondition 6 of the policy.

"n its decision of 2 *une --6, 8 the "nsurance #ommission found that the petitioner did not violate#ondition 6 as he had no nowledge of the e1istence of the two fire insurance policies obtained from theP9"#4 that it was #ebu Tesing Te1tiles which procured the P9"# policies without informing him or securinghis consent4 and that #ebu Tesing Te1tile, as his creditor, had insurable interest on the stocs. Thesefindings were based on the petitioner3s testimony that he came to now of the P9"# policies only when hefiled his claim with the private respondent and that #ebu Tesing Te1tile obtained them and paid for theirpremiums without informing him thereof. The "nsurance #ommission then decreed

;(R9)R, $udgment is hereby rendered ordering the respondent company topay complainant the sum of P00,000.00 with legal interest from the time the



complaint was filed until fully satisfied plus the amount of P0,000.00 as attorney3sfees. ;ith costs. The compulsory counterclaim of respondent is hereby dismissed.

"ts motion for the reconsideration of the decision 9 having been denied by the "nsurance #ommission inits resolution of 20 ugust --6, 13 the private respondent appealed to the #ourt of ppeals by way of apetition for review. The petition was doceted as #5I.R. %P 7o. 6-A.

"n its decision of 2- @ecember --6, 11 the #ourt of ppeals reversed the decision of the "nsurance#ommission because it found that the petitioner new of the e1istence of the two other policies issued bythe P9"#. "t said

"t is apparent from the face of 9ire Policy I 2>8AJ9ire Policy 7o. 2>88 that theinsurance was taen in the name of private respondent Gpetitioner hereinH. The policystates that :@"%#)D7T MRT <MR. RM7@) II)7", PR)P?: was theassured and that :T%"7I TFT"!%: GwasH only the mortgagee of the goods.

"n addition, the premiums on both policies were paid for by private respondent, not bythe Tesing Te1tiles which is alleged to have taen out the other insurance without the

nowledge of private respondent. This is shown by Premium "nvoices nos. 8AA62and 8AA60. <nne1es M and 7?. "n both invoices, Tesing Te1tiles is indicated to beonly the mortgagee of the goods insured but the party to which they were issuedwere the :@"%#)D7T MRT <MR. RM7@) II)7"?.:

"n is clear that it was the private respondent Gpetitioner hereinH who too out thepolicies on the same property sub$ect of the insurance with petitioner. (ence, infailing to disclose the e1istence of these insurances private respondent violated#ondition 7o. 6 of 9ire Policy 7o. 8A2. . . .

"ndeed private respondent3s allegation of lac of nowledge of the provisionsinsurances is belied by his letter to petitioner Gof > *anuary --. The body of theletter reads as follows4H

111 111 111

Please be informed that " have no nowledge of the provisionreuiring me to inform your office about myprior insurance under 9I52>8A and 95#B528=+>. ourrepresentative did not mention about said reuirement at the time hewas convincing me to insure with you. "f he only die or even inuiredif " had other e1isting policies covering my establishment, " wouldhave told him so. ou will note that at the time he taled to me until "decided to insure with your company the two policies aforementionedwere already in effect. Therefore " would have no reason to withhold

such information and " would have desisted to part with my hardearned peso to pay the insurance premiums GifH " now " could notrecover anything.

%ir, " am only an ordinary businessman interested in protecting myinvestments. The actual value of my stocs damaged by the fire wasestimated by the Police @epartment to be P,000,000.00 <Please see1ero1 copy of Police Report nne1 ::?. My "ncome %tatement as of@ecember 6, ->- or five months before the fire, shows my



merchandise inventory was already some P+-+,8++.=+. . . . Thesewill support my claim that the amount claimed under the threepolicies are much below the value of my stocs lost.

111 111 111

The letter contradicts private respondent3s pretension that he did not now that therewere other insurances taen on the stoc5in5trade and seriously puts in uestion hiscredibility.

(is motion to reconsider the adverse decision having been denied, the petitioner filed the instantpetition. (e contends therein that the #ourt of ppeals acted with grave abuse of discretionamounting to lac or e1cess of $urisdiction

C . . . ;(7 "T R/R%@ T( 9"7@"7I% )9 9#T% )9 T( "7%DR7##)MM"%%")7, ND%"5*D@"#"! B)@ #(RI@ ;"T( T( @DT )9@TRM"7"7I "7%DR7# #!"M 7@ ;()% @#"%")7 "% ##)R@@R%P#T 7@ /7 9"7!"T B T( #)DRT%4

B C . . . ;(7 "T #)7%"@R@ % /"@7# MTTR% ;("#( ;R 7)TPR%7T@ % /"@7# @DR"7I T( (R"7I )R TR"!4 7@

# C . . . ;(7 "T @"%M"%%@ T( #!"M )9 T( PT"T")7R (R"7 I"7%T T( PR"/T R%P)7@7T.

The chief issues that crop up from the first and third grounds are <a? whether the petitioner had priornowledge of the two insurance policies issued by the P9"# when he obtained the fire insurancepolicy from the private respondent, thereby, for not disclosing such fact, violating #ondition 6 of thepolicy, and <b? if he had, whether he is precluded from recovering therefrom.

The second ground, which is based on the #ourt of ppeals3 reliance on the petitioner3s letter ofreconsideration of > *anuary --, is without merit. The petitioner claims that the said letter wasnot offered in evidence and thus should not have been considered in deciding the case. (owever, ascorrectly pointed out by the #ourt of ppeals, a copy of this letter was attached to the petitioner3scomplaint in ".#. #ase 7o. 6880 as nne1 :M: thereof and made integral part of the complaint. 1& "thas attained the status of a $udicial admission and since its due e1ecution and authenticity was not deniedby the other party, the petitioner is bound by it even if it were not introduced as an independentevidence. 1

s to the first issue, the "nsurance #ommission found that the petitioner had no nowledge of theprevious two policies. The #ourt of ppeals disagreed and found otherwise in view of the e1plicitadmission by the petitioner in his letter to the private respondent of > *anuary --, which wasuoted in the challenged decision of the #ourt of ppeals. These divergent findings of fact constitute

an e1ception to the general rule that in petitions for review under Rule 8+, only uestions of law areinvolved and findings of fact by the #ourt of ppeals are conclusive and binding upon this #ourt. 12

;e agree with the #ourt of ppeals that the petitioner new of the prior policies issued by the P9"#.(is letter of > *anuary -- to the private respondent conclusively proves this nowledge. (istestimony to the contrary before the "nsurance #ommissioner and which the latter relied upon cannotprevail over a written admission made ante litem motam. "t was, indeed, incredible that he did notnow about the prior policies since these policies were not new or original. Policy 7o. I52>88 was



a renewal of Policy 7o. 9528=+>, while Policy 7o. I52>8A had been renewed twice, the previouspolicy being 9528=-2.

#ondition 6 of the private respondent3s Policy 7o. 958A22 is a condition which is not proscribed bylaw. "ts incorporation in the policy is allowed by %ection =+ of the "nsurance #ode 15 which providesthat :GaH policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the

breach of an immaterial provision does not avoid the policy.: %uch a condition is a provision whichinvariably appears in fire insurance policies and is intended to prevent an increase in the moral ha&ard. "tis commonly nown as the additional or :other insurance: clause and has been upheld as valid and as awarranty that no other insurance e1ists. "ts violation would thus avoid thepolicy. 16 (owever, in order to constitute a violation, the other insurance must be upon same sub$ectmatter, the same interest therein, and the same ris. 1'

s to a mortgaged property, the mortgagor and the mortgagee have each an independent insurableinterest therein and both interests may be one policy, or each may tae out a separate policycovering his interest, either at the same or at separate times. 18 The mortgagor3s insurable interestcovers the full value of the mortgaged property, even though the mortgage debt is euivalent to the fullvalue of the property. 19 The mortgagee3s insurable interest is to the e1tent of the debt, since the propertyis relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien

thereon. (is insurable interest is prima facie the value mortgaged and e1tends only to the amount of thedebt, not e1ceeding the value of the mortgaged property. &3 Thus, separate insurances covering differentinsurable interests may be obtained by the mortgagor and the mortgagee.

mortgagor may, however, tae out insurance for the benefit of the mortgagee, which is the usualpractice. The mortgagee may be made the beneficial payee in several ways. (e may become theassignee of the policy with the consent of the insurer4 or the mere pledgee without such consent4 orthe original policy may contain a mortgage clause4 or a rider maing the policy payable to themortgagee :as his interest may appear: may be attached4 or a :standard mortgage clause,:containing a collateral independent contract between the mortgagee and insurer, may be attached4or the policy, though by its terms payable absolutely to the mortgagor, may have been procured by amortgagor under a contract duty to insure for the mortgagee3s benefit, in which case the mortgageeacuires an euitable lien upon the proceeds. &1

"n the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as hisinterest may appear, the mortgagee is only a beneficiary under the contract, and recogni&ed as suchby the insurer but not made a party to the contract himself. (ence, any act of the mortgagor whichdefeats his right will also defeat the right of the mortgagee. && This ind of policy covers only suchinterest as the mortgagee has at the issuing of the policy. &

)n the other hand, a mortgagee may also procure a policy as a contracting party in accordance withthe terms of an agreement by which the mortgagor is to pay the premiums upon such insurance. &2 "thas been noted, however, that although the mortgagee is himself the insured, as where he applies for apolicy, fully informs the authori&ed agent of his interest, pays the premiums, and obtains on the assurancethat it insures him, the policy is in fact in the form used to insure a mortgagor with loss payable clause. &5

The fire insurance policies issued by the P9"# name the petitioner as the assured and contain amortgage clause which reads

!oss, if any, shall be payable to M%%R%. T%"7I TFT"!%, #ebu #ity as theirinterest may appear sub$ect to the terms of this policy.

This is clearly a simple loss payable clause, not a standard mortgage clause.



"t must, however, be underscored that unlie the :other insurance: clauses involved in 8eneral-nsurance and %urety !orp. vs. 7g *ua &6 or in ioneer -nsurance 9 %urety !orp. vs. Yap, &' which read

The insured shall give notice to the company of any insurance or insurances alreadyeffected, or which may subseuently be effected covering any of the property herebyinsured, and unless such notice be given and the particulars of such insurance or

insurances be stated in or endorsed on this Policy by or on behalf of the #ompanybefore the occurrence of any loss or damage, all benefits under this Policy shall beforfeited.

or in the -60 case of %anta Ana vs. !ommercial Bnion Assurance!o. &8 which provided :that any outstanding insurance upon the whole or a portion of the ob$ectsthereby assured must be declared by the insured in writing and he must cause the company toadd or insert it in the policy, without which such policy shall be null and void, and the insured willnot be entitled to indemnity in case of loss,: !ondition C in the private respondent3s policy 7o. 958A22 does not absolutely declare void any violation thereof. "t e1pressly provides that thecondition :shall not apply when the total insurance or insurances in force at the time of the loss ordamage is not more than P200,000.00.:

"t is a cardinal rule on insurance that a policy or insurance contract is to be interpreted liberally infavor of the insured and strictly against the company, the reason being, undoubtedly, to afford thegreatest protection which the insured was endeavoring to secure when he applied for insurance. "t isalso a cardinal principle of law that forfeitures are not favored and that any construction which wouldresult in the forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it ispossible to construe the policy in a manner which would permit recovery, as, for e1ample, by findinga waiver for such forfeiture. &9 %tated differently, provisions, conditions or e1ceptions in policies whichtend to wor a forfeiture of insurance policies should be construed most strictly against those for whosebenefits they are inserted, and most favorably toward those against whom they are intended tooperate. 3 The reason for this is that, e1cept for riders which may later be inserted, the insured sees thecontract already in its final form and has had no voice in the selection or arrangement of the wordsemployed therein. )n the other hand, the language of the contract was carefully chosen and deliberatedupon by e1perts and legal advisers who had acted e1clusively in the interest of the insurers and thetechnical language employed therein is rarely understood by ordinary laymen. 1

;ith these principles in mind, we are of the opinion that #ondition 6 of the sub$ect policy is not totallyfree from ambiguity and must, perforce, be meticulously analy&ed. %uch analysis leads us toconclude that <a? the prohibition applies only to double insurance, and <b? the nullity of the policyshall only be to the e1tent e1ceeding P200,000.00 of the total policies obtained.

The first conclusion is supported by the portion of the condition referring to other insurance :coveringany of the property or properties consisting of stocs in trade, goods in process andJor inventoriesonly hereby insured,: and the portion regarding the insured3s declaration on the subheading #)5"7%DR7# that the co5insurer is Mercantile "nsurance #o., "nc. in the sum of P+0,000.00. double insurance e1ists where the same person is insured by several insurers separately in respect

of the same sub$ect and interest. s earlier stated, the insurable interests of a mortgagor and amortgagee on the mortgaged property are distinct and separate. %ince the two policies of the P9"#do not cover the same interest as that covered by the policy of the private respondent, no doubleinsurance e1ists. The non5disclosure then of the former policies was not fatal to the petitioner3s rightto recover on the private respondent3s policy.

9urthermore, by stating within #ondition 6 itself that such condition shall not apply if the totalinsurance in force at the time of loss does not e1ceed P200,000.00, the private respondent wasamenable to assume a co5insurer3s liability up to a loss not e1ceeding P200,000.00. ;hat it had in



mind was to discourage over5insurance. "ndeed, the rationale behind the incorporation of :otherinsurance: clause in fire policies is to prevent over5insurance and thus avert the perpetration offraud. ;hen a property owner obtains insurance policies from two or more insurers in a total amountthat e1ceeds the property3s value, the insured may have an inducement to destroy the property forthe purpose of collecting the insurance. The public as well as the insurer is interested in preventing asituation in which a fire would be profitable to the insured. &

;(R9)R, the instant petition is hereby IR7T@. The decision of the #ourt of ppeals in #5I.R. %P 7o. 6-A is %T %"@ and the decision of the "nsurance #ommission in #ase 7o. 6680is R"7%TT@.

#osts against private respondent #ountry Baners "nsurance #orporation.

%) )R@R@.



Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 115&'8 M!4 &, 1995

ORTUNE INSURANCE AND SURET* CO., INC., petitioner,vs.COURT O APPEALS !"# PRODUCERS %AN+ O T$E P$ILIPPINES, respondents.

DAVIDE, )R., J.:

The fundamental legal issue raised in this petition for review on certiorari is whether the petitioner is liable under the Money, %ecurity, and

Payroll Robbery policy it issued to the private respondent or whether recovery thereunder is precluded under the general e1ceptions clausethereof. Both the trial court and the #ourt of ppeals held that there should be recovery. The petitioner contends otherwise.

This case began with the filing with the Regional Trial #ourt <RT#? of Maati, Metro Manila, by private respondent Producers Ban of thePhilippines <hereinafter Producers? against petitioner 9ortune "nsurance and %urety #o., "nc. <hereinafter 9ortune? of a complaint for recoveryof the sum of P=2+,000.00 under the policy issued by 9ortune. The sum was allegedly lost during a robbery of Producer3s armored vehiclewhile it was in transit to transfer the money from its Pasay #ity Branch to its head office in Maati. The case was doceted as #ivil #ase 7o.>= and assigned to Branch 8A thereof.

fter $oinder of issues, the parties ased the trial court to render $udgment based on the following stipulation of facts

. The plaintiff was insured by the defendants and an insurance policy was issued, the duplicateoriginal of which is hereto attached as 1hibit ::4

2. n armored car of the plaintiff, whi le in the process of transferring cash in the sum of

P=2+,000.00 under the custody of its teller, Maribeth lampay, from its Pasay Branch to its (ead)ffice at >=6= Paseo de Ro1as, Maati, Metro Manila on *une 2-, ->=, was robbed of the saidcash. The robbery too place while the armored car was traveling along Taft venue in Pasay#ity4

6. The said armored car was driven by Ben$amin Magalong de /era, escorted by %ecurityIuard %aturnino tiga Rosete. @river Magalong was assigned by PR# Management %ystemswith the plaintiff by virtue of an greement e1ecuted on ugust =, ->6, a duplicate original copyof which is hereto attached as 1hibit :B:4

8. The %ecurity Iuard tiga was assigned by Dnicorn %ecurity %ervices, "nc. with the plaintiff byvirtue of a contract of %ecurity %ervice e1ecuted on )ctober 2+, ->2, a duplicate original copy of which is hereto attached as 1hibit :#:4

+. fter an investigation conducted by the Pasay police authorities, the driver Magalong andguard tiga were charged, together with delmer Bantigue ulalio, Reynaldo uino and *ohn

@oe, with violation of P.@. +62 <nti5(ighway Robbery !aw? before the 9iscal of Pasay #ity. copy of the complaint is hereto attached as 1hibit :@:4

A. The 9iscal of Pasay #ity then filed an information charging the aforesaid persons with the saidcrime before Branch 2 of the Regional Trial #ourt of Pasay #ity. copy of the said informationis hereto attached as 1hibit :.: The case is still being tried as of this date4

=. @emands were made by the plaintiff upon the defendant to pay the amount of the loss ofP=2+,000.00, but the latter refused to pay as the loss is e1cluded from the coverage of theinsurance policy, attached hereto as 1hibit :,: specifically under page thereof, :Ieneral

1ceptions: %ection <b?, which is mared as 1hibit :5,: and which reads as follows



I7R! F#PT")7%

The company shall not be liable under this policy in report of

111 111 111

<b? any loss caused by any dishonest, fraudulent or criminal act of the

insured or any officer, employee, partner, director, trustee or authori#edrepresentative of the "nsured whether acting alone or in con$unction withothers. . . .

>. The plaintiff opposes the contention of the defendant and contends that tiga and Magalongare not its :officer, employee, . . . trustee or authori&ed representative . . . at the time of the

robbery. 1

)n 2A pril --0, the trial court rendered its decision in favor of Producers. The dispositive portion thereof reads as follows

;(R9)R, premises considered, the #ourt finds for plaintiff and against defendant,and

<a? orders defendant to pay plaintiff the net amount ofP+80,000.00 as liability under Policy 7o. 020= <asmitigated by the P80,000.00 special clause deductionand by the recovered sum of P8+,000.00?, with interestthereon at the legal rate, until fully paid4

<b? orders defendant to pay plaintiff the sum ofP60,000.00 as and for attorney3s fees4 and

<c? orders defendant to pay costs of suit.

ll other claims and counterclaims are accordingly dismissed forthwith.

%) )R@R@. &

The trial court ruled that Magalong and tiga were not employees or representatives of Producers. "t %aid

The #ourt is satisfied that plaintiff may not be said to have selected and engagedMagalong and tiga, their services as armored car driver and as security guard havingbeen merely offered by PR# Management and by Dnicorn %ecurity and which latter firmsassigned them to plaintiff. The wages and salaries of both Magalong and tiga arepresumably paid by their respective firms, which alone wields the power to dismiss them.Magalong and tiga are assigned to plaintiff in fulfillment of agreements to provide drivingservices and property protection as such C in a conte1t which does not impress the#ourt as translating into plaintiff3s power to control the conduct of any assigned driver or

security guard, beyond perhaps entitling plaintiff to reuest are replacement for suchdriver guard. The finding is accordingly compelled that neither Magalong nor tiga wereplaintiff3s :employees: in avoidance of defendant3s liability under the policy, particularlythe general e1ceptions therein embodied.

7either is the #ourt prepared to accept the proposition that driver Magalong and guard tiga were the :authori&ed representatives: of plaintiff. They were merely an assignedarmored car driver and security guard, respectively, for the *une 2-, ->= money transfer from plaintiff3s Pasay Branch to its Maati (ead )ffice. Nuite plainly C it was teller



Maribeth lampay who had :custody: of the P=2+,000.00 cash being transferred along aspecified money route, and hence plaintiff3s then designated :messenger: adverted to inthe policy.

9ortune appealed this decision to the #ourt of ppeals which doceted the case as #5I.R. #/ 7o.62-8A. "n its decision 2promulgated on 6 May --8, it affirmed in toto the appealed decision.

The #ourt of ppeals agreed with the conclusion of the trial court that Magalong and tiga were neitheremployees nor authori&ed representatives of Producers and ratiocinated as follows

policy or contract of insurance is to be construed liberally in favor of the insured andstrictly against the insurance company <7ew !ife nterprises vs. #ourt of ppeals, 20=%#R AA-4 %un "nsurance )ffice, !td. vs. #ourt of ppeals, 2 %#R ++8?. #ontracts of insurance, lie other contracts, are to be construed according to the sense and meaningof the terms which the parties themselves have used. "f such terms are clear andunambiguous, they must be taen and understood in their plain, ordinary and popularsense <7ew !ife nterprises #ase, supra, p. A=A4 %un "nsurance )ffice, !td. vs. #ourt of

ppeals, -+ %#R -6?.

The language used by defendant5appellant in the above uoted stipulation is plain,ordinary and simple. 7o other interpretation is necessary. The word :employee: must betaen to mean in the ordinary sense.

The !abor #ode is a special law specifically dealing withJand specifically designed toprotect labor and therefore its definition as to employer5employee relationships insofar asthe applicationJenforcement of said #ode is concerned must necessarily be inapplicableto an insurance contract which defendant5appellant itself had formulated. (ad it intendedto apply the !abor #ode in defining what the word :employee: refers to, it mustJshouldhave so stated e1pressly in the insurance policy.

%aid driver and security guard cannot be considered as employees of plaintiff5appelleeban because it has no power to hire or to dismiss said driver and security guard under

the contracts <1hs. > and #? e1cept only to as for their replacements from thecontractors. 5

)n 20 *une --8, 9ortune filed this petition for review on certiorari . "t alleges that the trial court and the#ourt of ppeals erred in holding it liable under the insurance policy because the loss falls within thegeneral e1ceptions clause considering that driver Magalong and security guard tiga were Producers3authori&ed representatives or employees in the transfer of the money and payroll from its branch office inPasay #ity to its head office in Maati.

ccording to 9ortune, when Producers commissioned a guard and a driver to transfer its funds from onebranch to another, they effectively and necessarily became its authori&ed representatives in the care andcustody of the money. ssuming that they could not be considered authori&ed representatives, they were,nevertheless, employees of Producers. "t asserts that the e1istence of an employer5employee relationship:is determined by law and being such, it cannot be the sub$ect of agreement.: Thus, if there was in realityan employer5employee relationship between Producers, on the one hand, and Magalong and tiga, onthe other, the provisions in the contracts of Producers with PR# Management %ystem for Magalong andwith Dnicorn %ecurity %ervices for tiga which state that Producers is not their employer and that it isabsolved from any liability as an employer, would not obliterate the relationship.

9ortune points out that an employer5employee relationship depends upon four standards <? the mannerof selection and engagement of the putative employee4 <2? the mode of payment of wages4 <6? thepresence or absence of a power to dismiss4 and <8? the presence and absence of a power to control the



putative employee3s conduct. )f the four, the right5of5control test has been held to be the decisivefactor. 6 "t asserts that the power of control over Magalong and tiga was vested in and e1ercised byProducers. 9ortune further insists that PR# Management %ystem and Dnicorn %ecurity %ervices are but:labor5only: contractors under rticle 0A of the !abor #ode which provides

rt. 0A. !ontractor or subcontractor . C There is :labor5only: contracting where the

person supplying worers to an employer does not have substantial capital or investmentin the form of tools, euipment, machineries, wor premises, among others, and theworers recruited and placed by such persons are performing activities which are directlyrelated to the principal business of such employer. "n such cases, the person orintermediary shall be considered merely as an agent of the employer who shall beresponsible to the worers in the same manner and e1tent as if the latter were directlyemployed by him.

9ortune thus contends that Magalong and tiga were employees of Producers, following the rulingin -nternational $imber !orp. vs. 7LR! ' that a finding that a contractor is a :labor5only: contractor iseuivalent to a finding that there is an employer5employee relationship between the owner of the pro$ectand the employees of the :labor5only: contractor.

)n the other hand, Producers contends that Magalong and tiga were not its employees since it hadnothing to do with their selection and engagement, the payment of their wages, their dismissal, and thecontrol of their conduct. Producers argued that the rule in -nternational $imber !orp. is not applicable toall cases but only when it becomes necessary to prevent any violation or circumvention of the !abor#ode, a social legislation whose provisions may set aside contracts entered into by parties in order togive protection to the woring man.

Producers further asseverates that what should be applied is the rule in American resident Lines vs.!lave, 8 to wit

"n determining the e1istence of employer5employee relationship, the following elementsare generally considered, namely <? the selection and engagement of the employee4 <2?the payment of wages4 <6? the power of dismissal4 and <8? the power to control the

employee3s conduct.

%ince under Producers3 contract with PR# Management %ystems it is the latter which assigned Magalongas the driver of Producers3 armored car and was responsible for his faithful discharge of his duties andresponsibilities, and since Producers paid the monthly compensation of P,800.00 per driver to PR#Management %ystems and not to Magalong, it is clear that Magalong was not Producers3 employee. s to

tiga, Producers relies on the provision of its contract with Dnicorn %ecurity %ervices which provides thatthe guards of the latter :are in no sense employees of the #!"7T.:

There is merit in this petition.

"t should be noted that the insurance policy entered into by the parties is a theft or robbery insurancepolicy which is a form of casualty insurance. %ection =8 of the "nsurance #ode provides

%ec. =8. #asualty insurance is insurance covering loss or liability arising from accidentor mishap, e1cluding certain types of loss which by law or custom are considered asfalling e1clusively within the scope of insurance such as fire or marine. "t includes, but isnot limited to, employer3s liability insurance, public liability insurance, motor vehicleliability insurance, plate glass insurance, burglary and theft insurance, personal accidentand health insurance as written by non5life insurance companies, and other substantiallysimilar )inds of insurance. <emphases supplied?



1cept with respect to compulsory motor vehicle liability insurance, the "nsurance #ode contains no otherprovisions 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. )utside of these, therights and obligations of the parties must be determined by the terms of their contract, taing intoconsideration its purpose and always in accordance with the general principles of insurance law. 9

"t has been aptly observed that in burglary, robbery, and theft insurance, :the opportunity to defraud theinsurer C the moral ha&ard C is so great that insurers have found it necessary to fill up their policies withcountless restrictions, many designed to reduce this ha&ard. %eldom does the insurer assume the ris ofall losses due to the ha&ards insured against.: 13 Persons freuently e1cluded under such provisions arethose in the insured3s service and employment. 11 The purpose of the e1ception is to guard against liabilityshould the theft be committed by one having unrestricted access to the property. 1& "n such cases, theterms specifying the e1cluded classes are to be given their meaning as understood in commonspeech. 1The terms :service: and :employment: are generally associated with the idea of selection,control, and compensation. 12

contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved againstthe insurer, 15 or it should be construed liberally in favor of the insured and strictly against theinsurer. 16 !imitations of liability should be regarded with e1treme $ealousy and must be construed

in such a way, as to preclude the insurer from non5compliance with its obligation.1'

"t goes without sayingthen that if the terms of the contract are clear and unambiguous, there is no room for construction andsuch terms cannot be enlarged or diminished by $udicial construction. 18

n insurance contract is a contract of indemnity upon the terms and conditions specified therein. 19 "t issettled that the terms of the policy constitute the measure of the insurer3s liability. &3 "n the absence ofstatutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent withpublic policy.

;ith the foregoing principles in mind, it may now be ased whether Magalong and tiga ualify asemployees or authori&ed representatives of Producers under paragraph <b? of the general e1ceptionsclause of the policy which, for easy reference, is again uoted

I7R! F#PT")7%

The company shall not be liable under this policy in respect of

111 111 111

<b? any loss caused by any dishonest, fraudulent or criminal act of theinsured or any officer,employee, partner, director, trustee or authori#edrepresentative of the "nsured whether acting alone or in con$unction withothers. . . . <emphases supplied?

There is mared disagreement between the parties on the correct meaning of the terms :employee: and:authori&ed representatives.:

"t is clear to us that insofar as 9ortune is concerned, it was its intention to e1clude and e1empt fromprotection and coverage losses arising from dishonest, fraudulent, or criminal acts of persons granted orhaving unrestricted access to Producers3 money or payroll. ;hen it used then the term :employee,: itmust have had in mind any person who ualifies as such as generally and universally understood, or

$urisprudentially established in the light of the four standards in the determination of the employer5employee relationship, &1 or as statutorily declared even in a limited sense as in the case of rticle 0A of



the !abor #ode which considers the employees under a :labor5only: contract as employees of the partyemploying them and not of the party who supplied them to the employer. &&

9ortune claims that Producers3 contracts with PR# Management %ystems and Dnicorn %ecurity %ervicesare :labor5only: contracts.

Producers, however, insists that by the e1press terms thereof, it is not the employer of Magalong.7otwithstanding such e1press assumption of PR# Management %ystems and Dnicorn %ecurity%ervices that the drivers and the security guards each shall supply to Producers are not thelatter3s employees, it may, in fact, be that it is because the contracts are, indeed, :labor5only:contracts. ;hether they are is, in the light of the criteria provided for in rticle 0A of the !abor#ode, a uestion of fact. %ince the parties opted to submit the case for $udgment on the basis oftheir stipulation of facts which are strictly limited to the insurance policy, the contracts with PR#Management %ystems and Dnicorn %ecurity %ervices, the complaint for violation of P.@. 7o. +62,and the information therefor filed by the #ity 9iscal of Pasay #ity, there is a paucity of evidenceas to whether the contracts between Producers and PR# Management %ystems and Dnicorn%ecurity %ervices are :labor5only: contracts.

But even granting for the sae of argument that these contracts were not :labor5only: contracts, and PR#

Management %ystems and Dnicorn %ecurity %ervices were truly independent contractors, we are satisfiedthat Magalong and tiga were, in respect of the transfer of Producer3s money from its Pasay #ity branchto its head office in Maati, its :authori&ed representatives: who served as such with its teller Maribeth

lampay. (owsoever viewed, Producers entrusted the three with the specific duty to safely transfer themoney to its head office, with lampay to be responsible for its custody in transit4 Magalong to drive thearmored vehicle which would carry the money4 and tiga to provide the needed security for the money,the vehicle, and his two other companions. "n short, for these particular tass, the three acted as agentsof Producers. :representative: is defined as one who represents or stands in the place of another4 onewho represents others or another in a special capacity, as an agent, and is interchangeable with:agent.: &

"n view of the foregoing, 9ortune is e1empt from liability under the general e1ceptions clause of theinsurance policy.

;(R9)R , the instant petition is hereby IR7T@. The decision of the #ourt of ppeals in #5I.R.#/ 7o. 62-8A dated 6 May --8 as well as that of Branch 8A of the Regional Trial #ourt of Maati in#ivil #ase 7o. >= are R/R%@ and %T %"@. The complaint in #ivil #ase 7o. >= is@"%M"%%@.

7o pronouncement as to costs.

%) )R@R@.

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