Insurance Oct 24

INSURANCE | Oct.
24 |1
G.R. No. L-8151
December 16, 1955
VIRGINIA
CALANOC, petitioner,
vs.
COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE
CO., respondents.
Lucio
Javillonar
for
petitioner.
J. A. Wolfson, Manuel Y. Mecias, Emilio Abello and Anselmo A. Reyes for respondents.
BAUTISTA 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 American Life Insurance Company. The case originated in the Municipal Court
of Manila and judgment being favorable to the plaintiff it was appealed to the court of
first instance. The latter court affirmed the judgment but on appeal to the Court of
Appeals the judgment was reversed and the case is now before us on a petition for
review.
Melencio Basilio was a watchman of the Manila Auto Supply located at the corner of
Avenida Rizal and Zurbaran. He secured a life insurance policy from the Philippine
American Life Insurance Company in the amount of P2,000 to which was attached a
supplementary contract covering death by accident. On January 25, 1951, he died of a
gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at
the corner of Oroquieta and Zurbaan streets. Virginia Calanoc, 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, the
company refused alleging, as main defense, that the deceased died because he was
murdered by a person who took part in the commission of the robbery and while
making an arrest as an officer of the law which contingencies were expressly excluded
in the contract and have the effect of exempting the company from liability.
The pertinent facts which need to be considered for the determination of the questions
raised are those reproduced in the decision of the Court of Appeals as follows:
The circumstances surrounding the death of Melencio Basilio show that when
he was killed at about seven o'clock in the night of January 25, 1951, he was
on duty as watchman of the Manila Auto Supply at the corner of Avenida Rizal
and Zurbaran; that it turned out that Atty. Antonio Ojeda who had his
residence at the corner of Zurbaran and Oroquieta, a block away from
Basilio's station, had come home that night and found that his house was
well-lighted, but with the windows closed; that getting suspicious that there
were culprits in his house, Atty. Ojeda retreated to look for a policeman and
finding Basilio in khaki uniform, asked him to accompany him to the house
with the latter refusing on the ground that he was not a policeman, but
suggesting that Atty. Ojeda should ask the traffic policeman on duty at the
corner of Rizal Avenue and Zurbaran; that Atty. Ojeda went to the traffic
policeman at said corner and reported the matter, asking the policeman to
come along with him, to which the policeman agreed; that on the way to the
Ojeda residence, the policeman and Atty. Ojeda passed by Basilio and
somehow or other invited the latter to come along; that as the tree
approached the Ojeda residence and stood in front of the main gate which
was covered with galvanized iron, the fence itself being partly concrete and
partly adobe stone, a shot was fired; that immediately after the shot, Atty.
Ojeda and the policeman sought cover; that the policeman, at the request of
Atty. Ojeda, left the premises to look for reinforcement; that it turned out
afterwards that the special watchman Melencio Basilio was hit in the
abdomen, the wound causing his instantaneous death; that the shot must
have come from inside the yard of Atty. Ojeda, the bullet passing through a
hole waist-high in the galvanized iron gate; that upon inquiry Atty. Ojeda
found out that the savings of his children in the amount of P30 in coins kept in
his aparador contained in stockings were taken away, the aparador having
been ransacked; that a month thereafter the corresponding investigation
conducted by the police authorities led to the arrest and prosecution of four
persons in Criminal Case No. 15104 of the Court of First Instance of Manila for
'Robbery in an Inhabited House and in Band with Murder'.
It is contended in behalf of the company that Basilio was killed which "making an
arrest as an officer of the law" or as a result of an "assault or murder" committed in
the place and therefore his death was caused by one of the risks excluded by the
supplementary contract which exempts the company from liability. This contention was
upheld by the Court of Appeals and, in reaching this conclusion, made the following
comment:
From the foregoing testimonies, we find that the deceased was a watchman of
the Manila Auto Supply, and, as such, he was not boud to leave his place and
go with Atty. Ojeda and Policeman Magsanoc to see the trouble, or robbery,
that occurred in the house of Atty. Ojeda. In fact, according to the finding of
the lower court, Atty. Ojeda finding Basilio in uniform asked him to accompany
him to his house, but the latter refused on the ground that he was not a
policeman and suggested to Atty. Ojeda to ask help from the traffic policeman
on duty at the corner of Rizal Avenue and Zurbaran, but after Atty. Ojeda
secured the help of the traffic policeman, the deceased went with Ojeda and
said traffic policeman to the residence of Ojeda, and while the deceased was
standing in front of the main gate of said residence, he was shot and thus
died. The death, therefore, of Basilio, although unexpected, was not caused
by an accident, being a voluntary and intentional act on the part of the one
INSURANCE | Oct. 24 |2
wh robbed, or one of those who robbed, the house of Atty. Ojeda. Hence, it is
out considered opinion that the death of Basilio, though unexpected, cannot
be considered accidental, for his death occurred because he left his post and
joined policeman Magsanoc and Atty. Ojeda to repair to the latter's residence
to see what happened thereat. Certainly, when Basilio joined Patrolman
Magsanoc and Atty. Ojeda, he should have realized the danger to which he
was exposing himself, yet, instead of remaining in his place, he went with
Atty. Ojeda and Patrolman Magsanoc to see what was the trouble in Atty.
Ojeda's house and thus he was fatally shot.
We dissent from the above findings of the Court of Appeals. For one thing, Basilio was
a watchman of the Manila Auto Supply which was a block away from the house of Atty.
Ojeda where something suspicious was happening which caused the latter to ask for
help. While at first he declied the invitation of Atty. Ojeda to go with him to his
residence to inquire into what was going on because he was 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 he
was a mere watchman and had no duty to heed the call of Atty. Ojeda should not be
taken as a capricious desire on his part to expose his life to danger considering the fact
that the place he was in duty-bound to guard was only a block away. In volunteering to
extend help under the situation, he might have thought, rightly or wrongly, that to
know the truth was in the interest of his employer it being a matter that affects the
security of the neighborhood. No doubt there was some risk coming to him in pursuing
that errand, but that risk always existed it being inherent in the position he was
holding. He cannot therefore be blamed solely for doing what he believed was in
keeping with his duty as a watchman and as a citizen. And he cannot be considered as
making an arrest as an officer of the law, as contended, simply because he went with
the traffic policeman, for certainly he did not go there for that purpose nor was he
asked to do so by the policeman.
Much less can it be pretended that Basilio died in the course of an assault or murder
considering the very nature of these crimes. In the first place, there is no proof that
the death of Basilio is the result of either crime for the record is barren of any
circumstance showing how the fatal shot was fired. Perhaps this may be clarified in the
criminal case now pending in court as regards the incident but before that is done
anything that might be said on the point would be a mere conjecture. Nor can it be
said that the killing was intentional for there is the possibility that the malefactor had
fired the shot merely to scare away the people around for his own protection and not
necessarily to kill or hit the victim. In any event, while the act may not excempt the
triggerman from liability for the damage done, the fact remains that the happening
was a pure accident on the part of the victim. The victim could have been either the
policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed at the
deceased precisely because he wanted to take his life.
We take note that these defenses are included among the risks exluded in the
supplementary contract which enumerates the cases which may exempt the company
from liability. While as a general rule "the parties may limit the coverage of the policy
to certain particular accidents and risks or causes of loss, and may expressly except
other risks or causes of loss therefrom" (45 C. J. S. 781-782), however, it is to be
desired that the terms and phraseology of the exception clause be clearly expressed so
as to be within the easy grasp and understanding of the insured, for if the terms are
doubtful or obscure the same must of necessity be interpreted or resolved aganst the
one who has caused the obscurity. (Article 1377, new Civil Code) And so it has bene
generally held that the "terms in an insurance policy, which are ambiguous, equivacal,
or uncertain . . . are to be construed strictly and most strongly against the insurer, and
liberally in favor of the insured so as to effect the dominant purpose of indemnity or
payment to the insured, especially where a forfeiture is involved" (29 Am. Jur., 181),
and the reason for this rule is that he "insured usually has no voice in the selection or
arrangement of the words employed and that the language of the contract is selected
with great care and deliberation by experts and legal advisers employed by, and acting
exclusively in the interest of, the insurance company." (44 C. J. S., p. 1174.)
Insurance is, in its nature, complex and difficult for the layman to understand.
Policies are prepared by experts who know and can anticipate the bearings
and possible complications of every contingency. So long as insurance
companies insist upon the use of ambiguous, intricate and technical
provisions, which conceal rather than frankly disclose, their own intentions,
the courts must, in fairness to those who purchase insurance, construe every
ambiguity in favor of the insured. (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash.
324, LRA 1917A, 1237.)lawphi1.net
An insurer should not be allowed, by the use of obscure phrases and
exceptions, to defeat the very purpose for which the policy was procured.
(Moore vs. Aetna Life Insurance Co., LRA 1915D, 264.)
We are therefore persuaded to conclude that the circumstances unfolded in the present
case do not warrant the finding that the death of the unfortunate victim comes within
the purview of the exception clause of the supplementary policy and, hence, do not
exempt the company from liability.
Wherefore, reversing the decision appealed from, we hereby order the company to pay
petitioner-appellant the amount of P2,000, with legal interest from January 26, 1951
until fully paid, with costs.
supplementary contract denominated "Accidental Death Benefit Clause, for an
additional sum of P5,000.00 if "the death of the Insured resulted directly from bodily
injury effected solely through external and violent means sustained in an accident ...
and independently of all other causes." The clause, however,expressly provided that it
would not apply where death resulted from an injury"intentionally inflicted by another
party."
On the night of May 20, 1964, or during the first hours of the following day a band of
robbers entered the house of the insured Juan S. Biagtan. What happened then is
related in the decision of the trial court as follows:
...; that on the night of May 20, 1964 or the first hours of May 21,
1964, while the said life policy and supplementary contract were in
full force and effect, the house of insured Juan S. Biagtan was robbed
by a band of robbers who were charged in and convicted by the
Court of First Instance of Pangasinan for robbery with homicide; that
in committing the robbery, the robbers, on reaching the staircase
landing on the second floor, rushed towards the door of the second
floor room, where they suddenly met a person near the door of oneof
the rooms who turned out to be the insured Juan S. Biagtan who
received thrusts from their sharp-pointed instruments, causing
wounds on the body of said Juan S. Biagtan resulting in his death at
about 7 a.m. on the same day, May 21, 1964;
G.R. No. L-25579 March 29, 1972
EMILIA T. BIAGTAN, JUAN T. BIAGTAN, JR., MIGUEL T. BIAGTAN, GIL T.
BIAGTAN
and
GRACIA
T.
BIAGTAN, plaintiffs-appellees,
vs.
THE INSULAR LIFE ASSURANCE COMPANY, LTD., defendant-appellant.
Tanopo, Millora, Serafica, and Saez for plaintiff-appellees.
Araneta, Mendoza and Papa for defendant-appellant.
MAKALINTAL, J.:p
This is an appeal from the decision of the Court of First Instance of Pangasinan in its
Civil Case No. D-1700.
The facts are stipulated. Juan S. Biagtan was insured with defendant InsularLife
Assurance Company under Policy No. 398075 for the sum of P5,000.00 and, under a
Plaintiffs, as beneficiaries of the insured, filed a claim under the policy. The insurance
company paid the basic amount of P5,000.00 but refused to pay the additional sum of
P5,000.00 under the accidental death benefit clause, on the ground that the insured's
death resulted from injuries intentionally inflicted by third parties and therefore was
not covered. Plaintiffs filed suit to recover, and after due hearing the court a
quo rendered judgment in their favor. Hence the present appeal by the 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 nine in all, five
of them mortal and four non-mortal were inflicted intentionally. The court, in ruling
negatively on the issue, stated that since the parties presented no evidence and
submitted the case upon stipulation, there was no "proof that the act of receiving
thrust (sic) from the sharp-pointed instrument of the robbers was intended to inflict
injuries upon the person of the insured or any other person or merely to scare away
any person so as to ward off any resistance or obstacle that might be offered in the
pursuit of their main objective which was robbery."
The trial court committed a plain error in drawing the conclusion it did from the
admitted facts. Nine wounds were inflicted upon the deceased, all by means of thrusts
with sharp-pointed instruments wielded by the robbers. This is a physical fact as to
which there is no dispute. So is the fact that five of those wounds caused the death of
the insured. Whether the robbers had the intent to kill or merely to scare the victim or
to ward off any defense he might offer, it cannot be denied that the act itself of
inflicting the injuries was intentional. It should be noted that the exception in the
accidental benefit clause invoked by the appellant does not speak of the purpose
whether homicidal or not of a third party in causing the injuries, but only of the fact
that such injuries have been "intentionally" inflicted this obviously to distinguish
them from injuries which, although received at the hands of a third party, are purely
accidental. This construction is the basic idea expressed in the coverage of the clause
itself, namely, that "the death of the insured resulted directly from bodily injury
effected solely through external and violent means sustained in an accident ... and
independently of all other causes." A gun which discharges while being cleaned and
kills a bystander; a hunter who shoots at his prey and hits a person instead; an athlete
in a competitive game involving physical effort who collides with an opponent and
fatally injures him as a result: these are instances where the infliction of the injury is
unintentional and therefore would be within the coverage of an accidental death benefit
clause such as thatin question in this case. But where a gang of robbers enter a house
and coming face to face with the owner, even if unexpectedly, stab him repeatedly, it is
contrary to all reason and logic to say that his injuries are not intentionally inflicted,
regardless of whether they prove fatal or not. As it was, in the present case they did
prove fatal, and the robbers have been accused and convicted of the crime of robbery
with homicide.
The case of Calanoc vs. Court of Appeals, 98 Phil. 79, is relied upon by the trial court in
support of its decision. The facts in that case, however, are different from those
obtaining here. The insured there was a watchman in a certain company, who
happened to be invited by a policeman to come along as the latter was on his way to
investigate a reported robbery going on in a private house. As the two of them,
together with the owner of the house, approached and stood in front of the main gate,
a shot was fired and it turned out afterwards that the watchman was hit in the
abdomen, the wound causing his death. Under those circumstances this Court held
that it could not be said that the killing was intentional for there was the possibility
that the malefactor had fired the shot to scare people around for his own protection
and not necessarrily to kill or hit the victim. A similar possibility is clearly ruled out by
the facts in the case now before Us. For while a single shot fired from a distance, and
by a person who was not even seen aiming at the victim, could indeed have been fired
without intent to kill or injure, nine wounds inflicted with bladed weapons at close
range cannot conceivably be considered as innocent insofar as such intent is
concerned. The manner of execution of the crime permits no other conclusion.
Court decisions in the American jurisdiction, where similar provisions in accidental
death benefit clauses in insurance policies have been construed, may shed light on the
issue before Us. Thus, it has been held that "intentional" as used in an accident policy
excepting intentional injuries inflicted by the insured or any other person, etc., implies
the exercise of the reasoning faculties, consciousness and volition. 1 Where a provision
of the policy excludes intentional injury, it is the intention of the person inflicting the
injury that is controlling. 2 If the injuries suffered by the insured clearly resulted from
the intentional act of a third person the insurer is relieved from liability as stipulated. 3
In the case of Hutchcraft's Ex'r v. Travelers' Ins. Co., 87 Ky. 300, 8 S.W. 570, 12 Am.
St. Rep. 484, the insured was waylaid and assassinated for the purpose of robbery.
Two (2) defenses were interposed to the action to recover indemnity, namely: (1) that
the insured having been killed by intentional means, his death was not accidental, and
(2) that the proviso in the policy expressly exempted the insurer from liability in case
the insured died from injuries intentionally inflicted by another person. In rendering
judgment for the insurance company the Court held that while the assassination of the
insured was as to him an unforeseen event and therefore accidental, "the clause of the
proviso that excludes the (insurer's) liability, in case death or injury is intentionally
inflicted by another person, applies to this case."
In Butero v. Travelers' Acc. Ins. Co., 96 Wis. 536, 65 Am. St. Rep. 61, 71 S.W. 811,
the insured was shot three times by a person unknown late on a dark and stormy
night, while working in the coal shed of a railroad company. The policy did not cover
death resulting from "intentional injuries inflicted by the insured or any other person."
The inquiry was as to the question whether the shooting that caused the insured's
death was accidental or intentional; and the Court found that under the facts, showing
that the murderer knew his victim and that he fired with intent to kill, there could be
no recovery under the policy which excepted death from intentional injuries inflicted by
any person.
WHEREFORE, the decision appealed from is reversed and the complaint dismissed,
without pronouncement as to costs.
Zaldivar, Castro, Fernando and Villamor, JJ., concur.
Makasiar, J., reserves his vote.
SHERMAN
SHAFER, petitioner,
vs.
HON. JUDGE, REGIONAL TRIAL COURT OF OLONGAPO CITY, BRANCH 75, and
MAKATI INSURANCE COMPANY, INC., respondents.
R.M. Blanco for petitioner.
Camacho and Associates for respondents.
PADILLA, J.:
This is a petition for review on certiorari of the Order * of the Regional Trial Court,
Olongapo City, Branch 75, dated 24 April 1986 dismissing petitioner's third party
complaint filed in Criminal Case No. 381-85, a prosecution for reckless imprudence
resulting in damage to property and serious physical injuries. 1
On 2 January 1985, petitioner Sherman Shafer obtained a private car policy, GA No.
0889, 2 over his Ford Laser car with Plate No. CFN-361 from Makati Insurance
Company, Inc., for third party liability (TPL).<re||an1w> During the effectivity of
the policy, an information 3 for reckless imprudence resulting in damage to property
and serious physical injuries was filed against petitioner. The information reads as
follows:
That on or about the seventeeth (17th) day of May 1985, in the City
of Olongapo, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, being then the driver and in actual
physical control of a Ford Laser car bearing Plate No. CFN-361, did
then and there wilfully, unlawfully and criminally drive, operate and
manage the said Ford Laser car in a careless, reckless and imprudent
manner without exercising reasonable caution, diligence and due
care to avoid accident to persons and damage to property and in
disregard of existing traffic rules and regulations, causing by such
carelessness, recklessness and imprudence the said Ford Laser car to
hit and bump a Volkswagen car bearing Plate No. NJE-338 owned and
driven by Felino llano y Legaspi, thereby causing damage in the total
amount of P12,345.00 Pesos, Philippine Currency, and as a result
thereof one Jovencio Poblete, Sr. who was on board of the said
Volkswagen car sustained physical injuries, to wit:
1. 2 cm. laceration of left side of tongue.
G.R. No. 78848 November 14, 1988
2. 6 cm. laceration with partial transection of muscle (almost full
thickness) left side of face.
3. Full thickness laceration of lower lip and adjacent skin.
which injuries causing [sic] deformity on the face.
The owner of the damaged Volkswagen car filed a separate civil action against
petitioner for damages, while Jovencio Poblete, Sr., who was a passenger in the
Volkswagen car when allegedly hit and bumped by the car driven by petitioner, did not
reserve his right to file a separate civil action for damages. Instead, in the course of
the trial in the criminal case, Poblete, Sr. testified on his claim for damages for the
serious physical injuries which he claimed to have sustained as a result of the accident.
Upon motion, petitioner was granted leave by the former presiding judge of the trail
court to file a third party complaint against the herein private respondent, Makati
Insurance Company, Inc. Said insurance company, however, moved to vacate the order
granting leave to petitioner to file a third party complaint against it and/or to dismiss
the same. 5
On 24 April 1987, the court a quo issued an order dismissing the third party complaint
on the ground that it was premature, based on the premise that unless the accused
(herein petitioner) is found guilty and sentenced to pay the offended party (Poblete Sr.)
indemnity or damages, the third party complaint is without cause of action. The court
further stated that the better procedure is for the accused (petitioner) to wait for the
outcome of the criminal aspect of the case to determine whether or not the accused,
also the third party plaintiff, has a cause of action against the third party defendant for
the enforcement of its third party liability (TPL) under the insurance
contract.6 Petitioner moved for reconsideration of said order, but the motion was
denied; 7 hence, this petition.
It is the contention of herein petitioner that the dismissal of the third party complaint
amounts to a denial or curtailment of his right to defend himself in the civil aspect of
the case. Petitioner further raises the legal question of whether the accused in a
criminal action for reckless imprudence, where the civil action is jointly prosecuted, can
legally implead the insurance company as third party defendant under its private car
insurance policy, as one of his modes of defense in the civil aspect of said proceedings.
On the other hand, the insurance company submits that a third party complaint is,
under the rules, available only if the defendant has a right to demand contribution,
indemnity, subrogation or any other relief in respect of plaintiff's claim, to minimize the
number of lawsuits and avoid the necessity of bringing two (2) or more suits involving
the same subject matter. The insurance company further contends that the contract of
motor vehicle insurance, the damages and attorney's fees claimed by accused/third
party plaintiff are matters entirely different from his criminal liability in the reckless
imprudence case, and that petitioner has no cause of action against the insurer until
petitioner's liability shall have been determined by final judgment, as stipulated in the
contract of insurance. 8
Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is primarily
intended to provide compensation for the death or bodily injuries suffered by innocent
third parties or passengers as a result of a negligent operation and use of motor
vehicles. 9 The victims and/or their dependents are assured of immediate financial
assistance, regardless of the financial capacity of motor vehicle owners.
The liability of the insurance company under the Compulsory Motor Vehicle Liability
Insurance is for loss or damage. Where an insurance policy insures directly against
liability, the insurer's liability accrues immediately upon the occurrence of the injury or
event upon which the liability depends, and does not depend on the recovery of
judgment by the injured party against the insured. 10
The injured for whom the contract of insurance is intended can sue directly the insurer.
The general purpose of statutes enabling an injured person to proceed directly against
the insurer is to protect injured persons against the insolvency of the insured who
causes such injury, and to give such injured person a certain beneficial interest in the
proceeds of the policy, and statutes are to be liberally construed so that their intended
purpose may be accomplished. It has even been held that such a provision creates a
contractual relation which inures to the benefit of any and every person who may be
negligently injured by the named insured as if such injured person were specifically
named in the policy. 11
In the event that the injured fails or refuses to include the insurer as party defendant
in his claim for indemnity against the insured, the latter is not prevented by law to
avail of the procedural rules intended to avoid multiplicity of suits. Not even a "no
action" clause under the policy-which requires that a final judgment be first obtained
against the insured and that only thereafter can the person insured recover on the
policy can prevail over the Rules of Court provisions aimed at avoiding multiplicity of
suits. 12
In the instant case, the court a quo erred in dismissing petitioner's third party
complaint on the ground that petitioner had no cause of action yet against the
insurance company (third party defendant). There is no need on the part of the insured
to wait for the decision of the trial court finding him guilty of reckless imprudence. The
occurrence of the injury to the third party immediately gave rise to the liability of the
insurer under its policy.
A third party complaint is a device allowed by the rules of procedure by which the
defendant can bring into the original suit a party against whom he will have a claim for
indemnity or remuneration as a result of a liability established against him in the
original suit. 13 Third party complaints are allowed to minimize the number of lawsuits
and avoid the necessity of bringing two (2) or more actions involving the same subject
matter. They are predicated on the need for expediency and the avoidance of
unnecessary lawsuits. If it appears probable that a second action will result if the
plaintiff prevails, and that this result can be avoided by allowing the third party
complaint to remain, then the motion to dismiss the third party complaint should be
denied. 14
Respondent insurance company's contention that the third party complaint involves
extraneous matter which will only clutter, complicate and delay the criminal case is
without merit. An offense causes two (2) classes of injuries the first is the social injury
produced by the criminal act which is sought to be repaired thru the imposition of the
corresponding penalty, and the second is the personal injury caused to the victim of
the crime, which injury is sought to be compensated thru indemnity, which is civil in
nature. 15
In the instant case, the civil aspect of the offense charged, i.e., serious physical
injuries allegedly suffered by Jovencio Poblete, Sr., was impliedly instituted with the
criminal case. Petitioner may thus raise all defenses available to him insofar as the
criminal and civil aspects of the case are concerned. The claim of petitioner for
payment of indemnity to the injured third party, under the insurance policy, for the
alleged bodily injuries caused to said third party, arose from the offense charged in the
criminal case, from which the injured (Jovencio Poblete, Sr.) has sought to recover civil
damages. Hence, such claim of petitioner against the insurance company cannot be
regarded as not related to the criminal action.
WHEREFORE, the instant petition is GRANTED. The questioned order dated 24 April
1987 is SET ASIDE and a new one entered admitting petitioner's third party complaint
against the private respondent Makati Insurance Company, Inc.
SO ORDERED.
G.R. No. 60506 August 6, 1992

FIGURACION VDA. DE MAGLANA, EDITHA M. CRUZ, ERLINDA M. MASESAR,
LEONILA M. MALLARI, GILDA ANTONIO and the minors LEAH, LOPE, JR., and
ELVIRA, all surnamed MAGLANA, herein represented by their mother,
FIGURACION
VDA.
DE
MAGLANA, petitioners,
vs.
HONORABLE FRANCISCO Z. CONSOLACION, Presiding Judge of Davao City,
Branch II, and AFISCO INSURANCE CORPORATION, respondents.
Jose B. Guyo for petitioners.
Angel E. Fernandez for private respondent.
ROMERO, J.:
The nature of the liability of an insurer sued together with the insured/operator-owner
of a common carrier which figured in an accident causing the death of a third person is
sought to be defined in this petition for certiorari.
The facts as found by the trial court are as follows:
. . . Lope Maglana was an employee of the Bureau of Customs whose
work station was at Lasa, here in Davao City. On December 20,
1978, early morning, Lope Maglana was on his way to his work
station, driving a motorcycle owned by the Bureau of Customs. At
Km. 7, Lanang, he met an accident that resulted in his death. He
died on the spot. The PUJ jeep that bumped the deceased was driven
by Pepito Into, operated and owned by defendant Destrajo. From the
investigation conducted by the traffic investigator, the PUJ jeep was
overtaking another passenger jeep that was going towards the city
poblacion. While overtaking, the PUJ jeep of defendant Destrajo
running abreast with the overtaken jeep, bumped the motorcycle
driven by the deceased who was going towards the direction of Lasa,
Davao City. The point of impact was on the lane of the motorcycle
and the deceased was thrown from the road and met his untimely
death. 1
Consequently, the heirs of Lope Maglana, Sr., here petitioners, filed an action for
damages and attorney's fees against operator Patricio Destrajo and the Afisco
Insurance Corporation (AFISCO for brevity) before the then Court of First Instance of
Davao, Branch II. An information for homicide thru reckless imprudence was also filed
against Pepito Into.
During the pendency of the civil case, Into was sentenced to suffer an indeterminate
penalty of one (1) year, eight (8) months and one (1) day of prision correccional, as
minimum, to four (4) years, nine (9) months and eleven (11) days of prision
correccional, as maximum, with all the accessory penalties provided by law, and to
indemnify the heirs of Lope Maglana, Sr. in the amount of twelve thousand pesos
(P12,000.00) with subsidiary imprisonment in case of insolvency, plus five thousand
pesos (P5,000.00) in the concept of moral and exemplary damages with costs. No
appeal was interposed by accused who later applied for probation. 2
On December 14, 1981, the lower court rendered a decision finding that Destrajo had
not exercised sufficient diligence as the operator of the jeepney. The dispositive portion
of the decision reads:
WHEREFORE, the Court finds judgment in favor of the plaintiffs
against defendant Destrajo, ordering him to pay plaintiffs the sum of
P28,000.00 for loss of income; to pay plaintiffs the sum of
P12,000.00 which amount shall be deducted in the event judgment in
Criminal Case No. 3527-D against the driver, accused Into, shall have
been enforced; to pay plaintiffs the sum of P5,901.70 representing
funeral and burial expenses of the deceased; to pay plaintiffs the
sum of P5,000.00 as moral damages which shall be deducted in the
event judgment (sic) in Criminal Case No. 3527-D against the driver,
accused Into; to pay plaintiffs the sum of P3,000.00 as attorney's
fees and to pay the costs of suit.
The defendant insurance company is ordered to reimburse defendant

Destrajo whatever amounts the latter shall have paid only up to the
extent of its insurance coverage.
SO ORDERED.
Petitioners filed a motion for the reconsideration of the second paragraph of the
dispositive portion of the decision contending that AFISCO should not merely be held
secondarily liable because the Insurance Code provides that the insurer's liability is
"direct and primary and/or jointly and severally with the operator of the vehicle,
although only up to the extent of the insurance coverage." 4 Hence, they argued that
the P20,000.00 coverage of the insurance policy issued by AFISCO, should have been
awarded in their favor.
In its comment on the motion for reconsideration, AFISCO argued that since the
Insurance Code does not expressly provide for a solidary obligation, the presumption is
that the obligation is joint.
In its Order of February 9, 1982, the lower court denied the motion for reconsideration
ruling that since the insurance contract "is in the nature of suretyship, then the liability
of the insurer is secondary only up to the extent of the insurance coverage." 5
Petitioners filed a second motion for reconsideration reiterating that the liability of the
insurer is direct, primary and solidary with the jeepney operator because the
petitioners became direct beneficiaries under the provision of the policy which, in
effect, is a stipulation pour autrui. 6 This motion was likewise denied for lack of merit.
Hence, petitioners filed the instant petition for certiorari which, although it does not
seek the reversal of the lower court's decision in its entirety, prays for the setting aside
or modification of the second paragraph of the dispositive portion of said decision.
Petitioners reassert their position that the insurance company is directly and solidarily
liable with the negligent operator up to the extent of its insurance coverage.
We grant the petition.
The particular provision of the insurance policy on which petitioners base their claim is
as follows:
Sec. 1 LIABILITY TO THE PUBLIC
1. The Company will, subject to the Limits of Liability, pay all sums
necessary to discharge liability of the insured in respect of
two (2) respondents by reason of the indemnity contract against

third party liability under which an insurer can be directly sued by
a third party this will result in a violation of the principles
underlying solidary obligation and insurance contracts. (emphasis
supplied)
(a) death of or bodily injury to any THIRD PARTY

(b) . . . .
2. . . . .
3. In the event of the death of any person entitled to indemnity
under this Policy, the Company will, in respect of the liability incurred
to such person indemnify his personal representatives in terms of,
and subject to the terms and conditions hereof. 7
The above-quoted provision leads to no other conclusion but that AFISCO can be held
directly liable by petitioners. As this Court ruled in Shafer vs. Judge, RTC of Olongapo
City, Br. 75, "[w]here an insurance policy insures directly against liability, the insurer's
liability accrues immediately upon the occurrence of the injury or even upon which the
liability depends, and does not depend on the recovery of judgment by the injured
party against the insured." 8 The underlying reason behind the third party liability
(TPL) of the Compulsory Motor Vehicle Liability Insurance is "to protect injured persons
against the insolvency of the insured who causes such injury, and to give such injured
person a certain beneficial interest in the proceeds of the policy . . ." 9 Since petitioners
had received from AFISCO the sum of P5,000.00 under the no-fault clause, AFISCO's
liability is now limited to P15,000.00.
However, we cannot agree that AFISCO is likewise solidarily liable with Destrajo.
In Malayan Insurance Co., Inc. v. Court of Appeals, 10 this Court had the opportunity to
resolve the issue as to the nature of the liability of the insurer and the insured vis-avis the third party injured in an accident. We categorically ruled thus:
While it is true that where the insurance contract provides for
indemnity against liability to third persons, such third persons can
directly sue the insurer, however, the direct liability of the insurer
under indemnity contracts against third party liability does not mean
that the insurer can be held solidarily liable with the insured and/or
the other parties found at fault. The liability of the insurer is based
on contract; that of the insured is based on tort.
In the case at bar, petitioner as insurer of Sio Choy, is liable to
respondent Vallejos (the injured third party), but it cannot, as
incorrectly held by the trial court, be made "solidarily" liable with the
two principal tortfeasors, namely respondents Sio Choy and San Leon
Rice Mill, Inc. For if petitioner-insurer were solidarily liable with said,
The Court then proceeded to distinguish the extent of the liability and manner of
enforcing the same in ordinary contracts from that of insurance contracts. While in
solidary obligations, the creditor may enforce the entire obligation against one of the
solidary debtors, in an insurance contract, the insurer undertakes for a consideration to
indemnify the insured against loss, damage or liability arising from an unknown or
contingent event. 11 Thus, petitioner therein, which, under the insurance contract is
liable only up to P20,000.00, can not be made solidarily liable with the insured for the
entire obligation of P29,013.00 otherwise there would result "an evident breach of the
concept of solidary obligation."
Similarly, petitioners herein cannot validly claim that AFISCO, whose liability under the
insurance policy is also P20,000.00, can be held solidarily liable with Destrajo for the
total amount of P53,901.70 in accordance with the decision of the lower court. Since
under both the law and the insurance policy, AFISCO's liability is only up to
P20,000.00, the second paragraph of the dispositive portion of the decision in question
may have unwittingly sown confusion among the petitioners and their counsel. What
should have been clearly stressed as to leave no room for doubt was the liability of
AFISCO under the explicit terms of the insurance contract.
In fine, we conclude that the liability of AFISCO based on the insurance contract is
direct, but not solidary with that of Destrajo which is based on Article 2180 of the Civil
Code. 12 As such, petitioners have the option either to claim the P15,000 from AFISCO
and the balance from Destrajo or enforce the entire judgment from Destrajo subject to
reimbursement from AFISCO to the extent of the insurance coverage.
While the petition seeks a definitive ruling only on the nature of AFISCO's liability, we
noticed that the lower court erred in the computation of the probable loss of income.
Using the formula: 2/3 of (80-56) x P12,000.00, it awarded P28,800.00. 13 Upon
recomputation, the correct amount is P192,000.00. Being a "plain error," we opt to
correct the same. 14 Furthermore, in accordance with prevailing jurisprudence, the
death indemnity is hereby increased to P50,000.00. 15
WHEREFORE, premises considered, the present petition is hereby GRANTED. The award
of P28,800.00 representing loss of income is INCREASED to P192,000.00 and the
death indemnity of P12,000.00 to P50,000.00.
SO ORDERED.
G.R. No. L-49699 August 8, 1988

PERLA
COMPANIA
de
SEGUROS,
INC., petitioner,
vs.
HON. CONSTANTE A. ANCHETA, Presiding Judge of the Court of First instance
of Camarines Norte, Branch III, ERNESTO A. RAMOS and GOYENA ZENAROSARAMOS, for themselves and as Guardian Ad Litem for Minors JOBET, BANJO,
DAVID and GRACE all surnamed RAMOS, FERNANDO M. ABCEDE, SR., for
himself and Guardian Ad Litem for minor FERNANDO G. ABCEDE, JR., MIGUEL
JEREZ MAGO as Guardian Ad Litem for minors ARLEEN R. MAGO, and
ANACLETA J. ZENAROSA., respondents.
Petitioner held the position that under Sec. 378 of the Insurance Code, the insurer
liable to pay the P5,000.00 is the insurer of the vehicle in which private respondents
were riding, not petitioner, as the provision states that "[i]n the case of an occupant of
a vehicle, claim shall lie against the insurer of the vehicle in which the occupant is
riding, mounting or dismounting from." Respondent judge, however, denied
reconsideration. A second motion for reconsideration was filed by petitioner. However,
in an order dated January 3, 1979, respondent judge denied the second motion for
reconsideration and ordered the issuance of a writ of execution [Rollo, p. 69.] Hence,
the instant petition praying principally for the annulment and setting aside of
respondent judge's orders dated March 1, 1978 and January 3, 1979.
Jose B. Sanez for petitioner.

The Court issued a temporary restraining order on January 24,1979 [Rollo pp. 73-74.]
James B. Pajares for private respondents.
The sole issue raised in this petition is whether or not petitioner is the insurer liable to
indemnify private respondents under Sec. 378 of the Insurance Code.
The key to the resolution of the issue is of courts e Sec. 378, which provides:
CORTES, J.:
The instant petition for certiorari and prohibition with preliminary injunction concerns
the ability of insurers under the "no fault indemnity" provision of the Insurance Code. *
On December 27, 1977, in a collision between the IH Scout in which private
respondents were riding and a Superlines bus along the national highway in Sta. Elena,
Camarines Norte, private respondents sustained physics injuries in varying degrees of
gravity. Thus, they filed with the Court of First Instance of Camarines Norte on
February 23,1978 a complaint for damages against Superlines, the bus driver and
petitioner, the insurer of the bus [Rollo, pp. 27-39.] The bus was insured with
petitioner for the amount of P50,000.00 as and for passenger liability and P50,000.00
as and for third party liability. The vehicle in which private respondents were riding was
insured with Malayan Insurance Co.
Sec. 378. Any claim for death or injury to any passenger or third
party pursuant to the provision of this chapter shall be paid without
the necessity of proving fault or negligence of any kind. Provided,
That for purposes of this section
(i) The indemnity in respect of any one person shall not exceed five
thousand pesos;
(ii) The following proofs of loss, when submitted under oath, shall be
sufficient evidence to substantiate the claim:
(a) Police report of accident, and
Even before summons could be served, respondent judge issued an order dated March
1, 1978 [Rollo, pp. 40-41], the pertinent portion of which stated:
(b) Death certificate and evidence sufficient to

establish the proper payee, or
The second incident is the prayer for an order of this court for the
Insurance Company, Perla Compania de Seguros, Inc., to pay
immediately the P5,000.00 under the "no fault clause" as provided
for under Section 378 of the Insurance Code, and finding that the
requisite documents to be attached in the record, the said Insurance
Company is therefore directed to pay the plaintiffs (private
respondents herein) within five (5) days from receipt of this order.
(c) Medical report and evidence of medical or

hospital disbursement in respect of which refund is
claimed;
Petitioner denied in its Answer its alleged liability under the "no fault indemnity"
provision [Rollo, p. 44] and likewise moved for the reconsideration of the order.
(iii) Claim may be made against one motor vehicle only. In the case
of an occupant of a vehicle, claim shall lie against the insurer of the
vehicle in which the occupant is riding, mounting or dismounting
from. In any other case, claim shall lie against the insurer of the
directly offending vehicle. In all cases, the right of the party paying

the claim to recover against the owner of the vehicle responsible for
the accident shall be maintained. [Emphasis supplied.]
respondent judge gravely abused his discretion in a manner that amounts to lack of
jurisdiction. The issuance of the corrective writ of certiorari is therefore warranted.
From a reading of the provision, which is couched in straight-forward and unambiguous

language, the following rules on claims under the "no fault indemnity" provision, where
proof of fault or negligence is not necessary for payment of any claim for death Or
injury to a passenger or a third party, are established:
WHEREFORE, the petition is GRANTED and respondent judge's order dated March 1,
1978, requiring petitioner to pay private respondents the amount of P5,000.00 as "no
fault indemnity' under Sec. 378 of the Insurance Code, and that of January 3, 1979,
denying the second motion for reconsideration and issuing a writ of execution, are
ANNULLED and SET ASIDE. The temporary restraining order issued by the Court on
January 24, 1979 is made permanent.
1. A claim may be made against one motor vehicle only.

2. If the victim is an occupant of a vehicle, the claim shall lie against the insurer of the
vehicle. in which he is riding, mounting or dismounting from.
3. In any other case (i.e. if the victim is not an occupant of a vehicle), the claim shall
lie against the insurer of the directly offending vehicle.
4. In all cases, the right of the party paying the claim to recover against the owner of
the vehicle responsible for the accident shall be maintained.
The law is very clear the claim shall lie against the insurer of the vehicle in which the
"occupant" ** is riding, and no other. The claimant is not free to choose from which
insurer he will claim the "no fault indemnity," as the law, by using the word "shall,
makes it mandatory that the claim be made against the insurer of the vehicle in which
the occupant is riding, mounting or dismounting from.
That said vehicle might not be the one that caused the accident is of no moment since
the law itself provides that the party paying the claim under Sec. 378 may recover
against the owner of the vehicle responsible for the accident. This is precisely the
essence of "no fault indemnity" insurance which was introduced to and made part of
our laws in order to provide victims of vehicular accidents or their heirs immediate
compensation, although in a limited amount, pending final determination of who is
responsible for the accident and liable for the victims'injuries or death. In turn, the "no
fault indemnity" provision is part and parcel of the Insurance Code provisions on
compulsory motor vehicle ability insurance [Sec. 373-389] and should be read together
with the requirement for compulsory passenger and/or third party liability insurance
[Sec. 377] which was mandated in order to ensure ready compensation for victims of
vehicular accidents.
Irrespective of whether or not fault or negligence lies with the driver of the Superlines
bus, as private respondents were not occupants of the bus, they cannot claim the "no
fault indemnity" provided in Sec. 378 from petitioner. The claim should be made
against the insurer of the vehicle they were riding. This is very clear from the law.
Undoubtedly, in ordering petitioner to pay private respondents the 'no fault indemnity,'
SO ORDERED.

license. He was therefore not an "authorized driver" under the terms of the insurance
policy in question, and MALAYAN was right in denying the claim of the insured.
3. ID.; ID.; ACCEPTANCE OF PREMIUM WITHIN THE STIPULATED PERIOD FOR
PAYMENT DOES NOT ESTOP INSURER FROM INTERPOSING ANY VALID DEFENSE.
Acceptance of premium within the stipulated period for payment thereof, including the
agreed period of grace, merely assures continued effectivity of the insurance policy in
accordance with its terms. Such acceptance does not estop the insurer from
interposing any valid defense under the terms of the insurance policy.
4. CIVIL LAW; PRINCIPLE OF ESTOPPEL, DEFINED; NOT APPLICABLE TO CASE AT BAR.
The principle of estoppel is an equitable principle rooted upon natural justice which
prevents a person from going back on his own acts and representations to the
prejudice of another whom he has led to rely upon them. The principle does not apply
to the instant case. In accepting the premium payment of the insured, MALAYAN was
not guilty of any inequitable act or representation. There is nothing inconsistent
between acceptance of premium due under an insurance policy and the enforcement of
its terms.
FIRST
[G.R.
DIVISION
No.
L-34768.
February
24,
1984.]
JAMES STOKES, as Attorney-in-Fact of Daniel Stephen Adolfson and DANIEL

STEPHEN ADOLFSON, Plaintiffs-Appellees, v. MALAYAN INSURANCE CO.,
INC., Defendant-Appellant.
Rodrigo
M.
Nera
for Plaintiffs-Appellees.
Pio B. Salomon, Jr., for Defendant-Appellant.
SYLLABUS
1. MERCANTILE LAW; INSURANCE CONTRACT; COMPLIANCE WITH TERMS THEREOF, A

CONDITION PRECEDENT TO RECOVERY. A contract of insurance is a contract of
indemnity upon the terms and conditions specified therein. When the insurer is called
upon to pay in case of loss or damage, he has the right to insist upon compliance with
the terms of the contract. If the insured cannot bring himself within the terms and
conditions of the contract, he is not entitled as a rule to recover for the loss or damage
suffered. For the terms of the contract constitute the measure of the insurers liability,
and compliance therewith is a condition precedent to the right of recovery. (Young v.
Midland
Textile
Insurance
Co.,
30
Phil.
617.)
2. ID.; ID.; ID.; "AUTHORIZED DRIVER" CLAUSE, MEANING. Under the "authorized
driver" clause, an authorized driver must not only be permitted to drive by the insured.
It is also essential that he is permitted under the law and regulations to drive the
motor vehicle and is not disqualified from so doing under any enactment or regulation.
At the time of the accident, Stokes had been in the Philippines for more than 90 days.
Hence, under the law, he could not drive a motor vehicle without a Philippine drivers
DECISION
PLANA, J.:
This is an appeal by Malayan Insurance Company, Inc. (MALAYAN) from a decision of

Court of First Instance of Manila ordering it to pay the insured under a car insurance
policy issued by MALAYAN to Daniel Stephen Adolfson against own damage as well as
third party liability.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
The facts are not in dispute, Adolfson had a subsisting MALAYAN car insurance policy
with the above coverage on November 23, 1969 when his car collided with a car owned
by Cesar Poblete, resulting in damage to both vehicles. At the time of the accident,
Adolfsons car was being driven by James Stokes, who was authorized to do so by
Adolfson. Stokes, an Irish citizen who had been in the Philippines as a tourist for more
than ninety days, had a valid and subsisting Irish drivers license but without a
Philippine
drivers
license.
After the collision, Adolfson filed a claim with MALAYAN but the latter refused to pay,
contending that Stokes was not an authorized driver under the "Authorized Driver"
clause of the insurance policy in relation to Section 21 of the Land Transportation and
Traffic
Code.
Under
the
insurance
policy,
"(a)
"(b)
"authorized
driver"
refers
The
Any
person
driving
on
the
insureds
to
insured
order
or
with
his
permission.
"PROVIDED that the person driving is permitted in accordance with the licensing or
other laws or regulations to drive the motor vehicle and is not disqualified from driving

such motor vehicle by order of a court of law or by reason of any enactment or
regulation
in
that
behalf."cralaw
virtua1aw
library
The
cited
Section
21
of
provides:jgc:chanrobles.com.ph
the
Land
Transportation
and
Traffic
Code
"Operation of motor vehicles by tourists. Bona fide tourists and similar transients
who are duly licensed to operate motor vehicles in their respective countries may be
allowed to operate motor vehicles during but not after ninety days of their sojourn in
the Philippines.
x
617.)
Under the "authorized driver" clause, an authorized driver must not only be permitted
to drive by the insured. It is also essential that he is permitted under the law and
regulations to drive the motor vehicle and is not disqualified from so doing under any
enactment
or
regulation.chanrobles
virtual
lawlibrary
At the time of the accident, Stokes had been in the Philippines for more than 90 days.
Hence, under the law, he could not drive a motor vehicle without a Philippine drivers
license. He was therefore not an "authorized driver" under the terms of the insurance
policy in question, and MALAYAN was right in denying the claim of the
insured.cralawnad
"After ninety days, any tourist or transient desiring to operate motor vehicles shall pay
fees and obtain and carry a license as hereinafter provided." (Emphasis supplied.)
2. Acceptance of premium within the stipulated period for payment thereof, including
the agreed period of grace, merely assures continued effectivity of the insurance policy
in accordance with its terms. Such acceptance does not estop the insurer from
interposing any valid defense under the terms of the insurance policy.
Unable to convince MALAYAN to pay, Stokes and Adolfson brought suit before the Court
of First Instance of Manila and succeeded in getting a favorable judgment, although
Stokes had ceased to be authorized to drive a motor vehicle in the Philippines at the
time of the accident, he having stayed therein as a tourist for over 90 days without
having obtained a Philippine drivers license. The Court held that Stokes lack of a
Philippine drivers license was not fatal to the enforcement of the insurance policy; and
the MALAYAN was estopped from denying liability under the insurance policy because it
accepted premium payment made by the insured one day after the accident. It
said:jgc:chanrobles.com.ph
The principle of estoppel is an equitable principle rooted upon natural justice which
prevents a person from going back on his own acts and representations to the
prejudice of another whom he has led to rely upon them. The principle does not apply
to the instant case. In accepting the premium payment of the insured, MALAYAN was
not guilty of any inequitable act or representation. There is nothing inconsistent
between acceptance of premium due under an insurance policy and the enforcement of
its
terms.chanroblesvirtualawlibrary
"Defendant cannot evade liability under the policy by virtue of the above provision of
the Land Transportation and Traffic Code. This is an insurance case. The basis of
insurance contracts is good faith and trust between the insurer and the insured. The
matter of the failure on the part of Stokes to have a Philippine drivers license is not
such a defect that can be considered as fatal to the contract of insurance, because the
fact is that Stokes still had a valid and unexpired Irish license. As a matter of fact, the
traffic officer who investigated the incident gave Stokes a traffic violation receipt and
not
a
ticket
for
driving
without
license.
"Then the Court believes that defendant is in estoppel in this case because it allowed
the plaintiff to pay the insurance premium even after the accident occurred. Admitting
for the sake of argument that there was a violation of the terms of the policy before
the incident, the admission or acceptance by the insurance company of the premium
should be considered as a waiver on its part to contest the claim of the
plaintiffs."cralaw
virtua1aw
library
In this appeal, the two issues resolved by the court a quo are raised anew. We find the
appeal
meritorious.
1. A contract of insurance is a contract of indemnity upon the terms and conditions
specified therein. When the insurer is called upon to pay in case of loss or damage, he
has the right to insist upon compliance with the terms of the contract. If the insured
cannot bring himself within the terms and conditions of the contract, he is not entitled
as a rule to recover for the loss or damage suffered. For the terms of the contract
constitute the measure of the insurers liability, and compliance therewith is a condition
precedent to the right of recovery. (Young v. Midland Textile Insurance Co., 30 Phil.
WHEREFORE, the appealed judgment is reversed. The complaint is dismissed. Costs

against
the
appellees.
SO ORDERED.

Decision4 and declared respondent Mitsubishi Motors Philippines Corporation (MMPC) to
be under no legal obligation to pay its covered employees dependents hospitalization
expenses which were already shouldered by other health insurance companies.
Factual Antecedents
The parties CBA5 covering the period August 1, 1996 to July 31, 1999 provides for the
hospitalization insurance benefits for the covered dependents, thus:
SECTION 4. DEPENDENTS GROUP HOSPITALIZATION INSURANCE The COMPANY
shall obtain group hospitalization insurance coverage or assume under a self-insurance
basis hospitalization for the dependents of regular employees up to a maximum
amount of forty thousand pesos (P40,000.00) per confinement subject to the
following:
G.R. No. 175773
June 17, 2013
MITSUBISHI
MOTORS
PHILIPPINES
SALARIED
EMPLOYEES
(MMPSEU), Petitioner,
vs.
MITSUBISHI MOTORS PHILIPPINES CORPORATION, Respondent.
UNION
DECISION
DEL CASTILLO, J.:
The Collective Bargaining Agreement (CBA) of the parties in this case provides that the
company shoulder the hospitalization expenses of the dependents of covered
employees subject to certain limitations and restrictions. Accordingly, covered
employees pay part of the hospitalization insurance premium through monthly salary
deduction while the company, upon hospitalization of the covered employees'
dependents, shall pay the hospitalization expenses incurred for the same. The conflict
arose when a portion of the hospitalization expenses of the covered employees'
dependents were paid/shouldered by the dependent's own health insurance. While the
company refused to pay the portion of the hospital expenses already shouldered by the
dependents' own health insurance, the union insists that the covered employees are
entitled to the whole and undiminished amount of said hospital expenses.
By this Petition for Review on Certiorari, 1 petitioner Mitsubishi Motors Philippines
Salaried Employees Union (MMPSEU) assails the March 31, 2006 Decision 2 and
December 5, 2006 Resolution 3 of the Court of Appeals (CA) in CA-G.R. SP No. 75630,
which reversed and set aside the Voluntary Arbitrators December 3, 2002
a. The room and board must not exceed three hundred pesos (P300.00) per
day up to a maximum of thirty-one (31) days. Similarly, Doctors Call fees
must not exceed three hundred pesos (P300.00) per day for a maximum of
thirty-one (31) days. Any excess of this amount shall be borne by the
employee.
b. Confinement must be in a hospital designated by the COMPANY. For this
purpose, the COMPANY shall designate hospitals in different convenient places
to be availed of by the dependents of employees. In cases of emergency
where the dependent is confined without the recommendation of the company
doctor or in a hospital not designated by the COMPANY, the COMPANY shall
look into the circumstances of such confinement and arrange for the payment
of the amount to the extent of the hospitalization benefit.
c. The limitations and restrictions listed in Annex "B" must be observed.
d. Payment shall be direct to the hospital and doctor and must be covered by
actual billings.
Each employee shall pay one hundred pesos (P100.00) per month through salary
deduction as his share in the payment of the insurance premium for the above
coverage with the balance of the premium to be paid by the COMPANY. If the COMPANY
is self-insured the one hundred pesos (P100.00) per employee monthly contribution
shall be given to the COMPANY which shall shoulder the expenses subject to the above
level of benefits and subject to the same limitations and restrictions provided for in
Annex "B" hereof.

The hospitalization expenses must be covered by actual hospital and doctors bills and
any amount in excess of the above mentioned level of benefits will be for the account
of the employee.
For purposes of this provision, eligible dependents are the covered employees natural
parents, legal spouse and legitimate or legally adopted or step children who are
unmarried, unemployed who have not attained twenty-one (21) years of age and
wholly dependent upon the employee for support.
This provision applies only in cases of actual confinement in the hospital for at least six
(6) hours.
Maternity cases are not covered by this section but will be under the next succeeding
section on maternity benefits.6
When the CBA expired on July 31, 1999, the parties executed another CBA 7 effective
August 1, 1999 to July 31, 2002 incorporating the same provisions on dependents
hospitalization insurance benefits but in the increased amount of P50,000.00. The
room and board expenses, as well as the doctors call fees, were also increased
to P375.00.
the amounts paid by MEDICard and by Prosper, Calida, Oabel and Martin asked for
reimbursement from MMPC. However, MMPC denied the claims contending that double
insurance would result if the said employees would receive from the company the full
amount of hospitalization expenses despite having already received payment of
portions thereof from other health insurance providers.
This prompted the MMPSEU President to write the MMPC President 17 demanding full
payment of the hospitalization benefits. Alleging discrimination against MMPSEU union
members, she pointed out that full reimbursement was given in a similar claim filed by
Luisito Cruz (Cruz), a member of the Hourly Union. In a letter-reply,18 MMPC, through
its Vice-President for Industrial Relations Division, clarified that the claims of the said
MMPSEU members have already been paid on the basis of official receipts submitted. It
also denied the charge of discrimination and explained that the case of Cruz involved
an entirely different matter since it concerned the admissibility of certified true copies
of documents for reimbursement purposes, which case had been settled through
voluntary arbitration.
On August 28, 2000, MMPSEU referred the dispute to the National Conciliation and
Mediation Board and requested for preventive mediation.19
Proceedings before the Voluntary Arbitrator
On separate occasions, three members of MMPSEU, namely, Ernesto Calida (Calida),

Hermie Juan Oabel (Oabel) and Jocelyn Martin (Martin), filed claims for reimbursement
of hospitalization expenses of their dependents.
On October 3, 2000, the case was referred to Voluntary Arbitrator Rolando Capocyan
for resolution of the issue involving the interpretation of the subject CBA provision. 20
MMPC paid only a portion of their hospitalization insurance claims, not the full amount.
In the case of Calida, his wife, Lanie, was confined at Sto. Tomas University Hospital
from September 4 to 9, 1998 due to Thyroidectomy. The medical expenses incurred
totalled P29,967.10. Of this amount, P9,000.00 representing professional fees was paid
by MEDICard Philippines, Inc. (MEDICard) which provides health maintenance to
Lanie.8 MMPC only paid P12,148.63.9 It did not pay the P9,000.00 already paid by
MEDICard and the P6,278.47 not covered by official receipts. It refused to give to
Calida the difference between the amount of medical expenses of P27,427.1010 which
he claimed to be entitled to under the CBA and the P12,148.63 which MMPC directly
paid to the hospital.
MMPSEU alleged that there is nothing in the CBA which prohibits an employee from
obtaining other insurance or declares that medical expenses can be reimbursed only
upon presentation of original official receipts. It stressed that the hospitalization
benefits should be computed based on the formula indicated in the CBA without
deducting the benefits derived from other insurance providers. Besides, if reduction is
permitted, MMPC would be unjustly benefited from the monthly premium contributed
by the employees through salary deduction. MMPSEU added that its members had
legitimate claims under the CBA and that any doubt as to any of its provisions should
be resolved in favor of its members. Moreover, any ambiguity should be resolved in
favor of labor.21
In the case of Martin, his father, Jose, was admitted at The Medical City from March 26
to 27, 2000 due to Acid Peptic Disease and incurred medical expenses amounting
to P9,101.30.14 MEDICard
paid P8,496.00.15Consequently,
MMPC
only
paid P288.40,16 after deducting from the total medical expenses the amount paid by
MEDICard and the P316.90 discount given by the hospital.
On the other hand, MMPC argued that the reimbursement of the entire amounts being
claimed by the covered employees, including those already paid by other insurance
companies, would constitute double indemnity or double insurance, which is
circumscribed under the Insurance Code. Moreover, a contract of insurance is a
contract of indemnity and the employees cannot be allowed to profit from their
dependents loss.22
Claiming that under the CBA, they are entitled to hospital benefits amounting
to P27,427.10, P6,769.35 and P8,123.80, respectively, which should not be reduced by

Meanwhile, the parties separately sought for a legal opinion from the Insurance
Commission relative to the issue at hand. In its letter 23 to the Insurance Commission,
MMPC requested for confirmation of its position that the covered employees cannot
claim insurance benefits for a loss that had already been covered or paid by another
insurance company. However, the Office of the Insurance Commission opted not to
render an opinion on the matter as the same may become the subject of a formal
complaint before it.24 On the other hand, when queried by MMPSEU, 25 the Insurance
Commission, through Atty. Richard David C. Funk II (Atty. Funk) of the Claims
Adjudication Division, rendered an opinion contained in a letter,26 viz:
On December 3, 2002, the Voluntary Arbitrator rendered a Decision 27 finding MMPC

liable to pay or reimburse the amount of hospitalization expenses already paid by other
health insurance companies. The Voluntary Arbitrator held that the employees may
demand simultaneous payment from both the CBA and their dependents separate
health insurance without resulting to double insurance, since separate premiums were
paid for each contract. He also noted that the CBA does not prohibit reimbursement in
case there are other health insurers.
Ms.
Cecilia
Mitsubishi Motors Phils.
MMPC filed a Petition for Review with Prayer for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction 28 before the CA. It claimed that
the Voluntary Arbitrator committed grave abuse of discretion in not finding that
recovery under both insurance policies constitutes double insurance as both had the
same subject matter, interest insured and risk or peril insured against; in relying solely
on the unauthorized legal opinion of Atty. Funk; and in not finding that the employees
will be benefited twice for the same loss. In its Comment, 29 MMPSEU countered that
MMPC will unjustly enrich itself and profit from the monthly premiums paid if full
reimbursement is not made.
[Salaried]
Ortigas
Cainta, Rizal
L.
ParasPresident
Employees
Avenue
Union
Extension,
Madam:
We acknowledge receipt of your letter which, to our impression, basically poses the
question of whether or not recovery of medical expenses from a Health Maintenance
Organization bars recovery of the same reimbursable amount of medical expenses
under a contract of health or medical insurance.
We wish to opine that in cases of claims for reimbursement of medical expenses where
there are two contracts providing benefits to that effect, recovery may be had on both
simultaneously. In the absence of an Other Insurance provision in these coverages, the
courts have uniformly held that an insured is entitled to receive the insurance benefits
without regard to the amount of total benefits provided by other insurance.
(INSURANCE LAW, A Guide to Fundamental Principles, Legal Doctrines, and Commercial
Practices; Robert E. Keeton, Alau I. Widiss, p. 261). The result is consistent with the
public policy underlying the collateral source rule that is, x x x the courts have
usually concluded that the liability of a health or accident insurer is not reduced by
other possible sources of indemnification or compensation. (ibid).
Very truly yours,
RICHARD
DAVID
Officer-in-Charge
Claims Adjudication Division
(SGD.)
Attorney IV
C.
FUNK
II
Proceedings before the Court of Appeals
On March 31, 2006, the CA found merit in MMPCs Petition. It ruled that despite the
lack of a provision which bars recovery in case of payment by other insurers, the
wordings of the subject provision of the CBA showed that the parties intended to make
MMPC liable only for expenses actually incurred by an employees qualified dependent.
In particular, the provision stipulates that payment should be made directly to the
hospital and that the claim should be supported by actual hospital and doctors bills.
These mean that the employees shall only be paid amounts not covered by other
health insurance and is more in keeping with the principle of indemnity in insurance
contracts. Besides, a contrary interpretation would "allow unscrupulous employees to
unduly profit from the x x x benefits" and shall "open the floodgates to questionable
claims x x x."30
The dispositive portion of the CA Decision31 reads:
WHEREFORE, the instant petition is GRANTED. The decision of the voluntary arbitrator
dated December 3, 2002 is REVERSED and SET ASIDE and judgment is rendered
declaring that under Art. XI, Sec. 4 of the Collective Bargaining Agreement between
petitioner and respondent effective August 1, 1999 to July 31, 2002, the formers
obligation to reimburse the Union members for the hospitalization expenses incurred
by their dependents is exclusive of those paid by the Union members to the hospital.
SO ORDERED.32

In its Motion for Reconsideration, 33 MMPSEU pointed out that the alleged oppression
that may be committed by abusive employees is a mere possibility whereas the
resulting losses to the employees are real. MMPSEU cited Samsel v. Allstate Insurance
Co.,34 wherein the Arizona Supreme Court explicitly ruled that an insured may recover
from separate health insurance providers, regardless of whether one of them has
already paid the medical expenses incurred. On the other hand, MMPC argued in its
Comment35 that the cited foreign case involves a different set of facts.
The CA, in its Resolution36 dated December 5, 2006, denied MMPSEUs motion.
Hence, this Petition.
Issues
MMPSEU presented the following grounds in support of its Petition:
A.
THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT REVERSED THE DECISION
DATED 03 [DECEMBER] 2002 OF THE VOLUNTARY ARBITRATOR BELOW WHEN THE
SAME WAS SUPPORTED BY SUBSTANTIAL EVIDENCE, INCLUDING THE OPINION OF
THE INSURANCE COMMISSION THAT RECOVERY FROM BOTH THE CBA AND SEPARATE
HEALTH CARDS IS NOT PROHIBITED IN THE ABSENCE OF ANY SPECIFIC PROVISION
IN THE CBA.
B.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN OVERTURNING THE
DECISION OF THE VOLUNTARY ARBITRATOR WITHOUT EVEN GIVING ANY LEGAL OR
JUSTIFIABLE BASIS FOR SUCH REVERSAL.
C.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN REFUSING TO CONSIDER OR
EVEN MENTION ANYTHING ABOUT THE AMERICAN AUTHORITIES CITED IN THE
RECORDS THAT DO NOT PROHIBIT, BUT IN FACT ALLOW, RECOVERY FROM TWO
SEPARATE HEALTH PLANS.
D.
THE COURT OF APPEALS GRAVELY ERRED IN GIVING MORE IMPORTANCE TO A
POSSIBLE, HENCE MERELY SPECULATIVE, ABUSE BY EMPLOYEES OF THE BENEFITS IF
DOUBLE RECOVERY WERE ALLOWED INSTEAD OF THE REAL INJURY TO THE
EMPLOYEES WHO ARE PAYING FOR THE CBA HOSPITALIZATION BENEFITS THROUGH
MONTHLY SALARY DEDUCTIONS BUT WHO MAY NOT BE ABLE TO AVAIL OF THE SAME
IF THEY OR THEIR DEPENDENTS HAVE OTHER HEALTH INSURANCE.37
MMPSEU avers that the Decision of the Voluntary Arbitrator deserves utmost respect
and finality because it is supported by substantial evidence and is in accordance with
the opinion rendered by the Insurance Commission, an agency equipped with vast
knowledge concerning insurance contracts. It maintains that under the CBA, memberemployees are entitled to full reimbursement of medical expenses incurred by their
dependents regardless of any amounts paid by the latters health insurance provider.
Otherwise, non-recovery will constitute unjust enrichment on the part of MMPC. It
avers that recovery from both the CBA and other insurance companies is allowed under
their CBA and not prohibited by law nor by jurisprudence.
Our Ruling
The Petition has no merit.
Atty.
Funk
collateral source rule.
erred
in
applying
the
The Voluntary Arbitrator based his ruling on the opinion of Atty. Funk that the
employees may recover benefits from different insurance providers without regard to
the amount of benefits paid by each. According to him, this view is consistent with the
theory of the collateral source rule.
As part of American personal injury law, the collateral source rule was originally applied
to tort cases wherein the defendant is prevented from benefiting from the plaintiffs
receipt of money from other sources.38 Under this rule, if an injured person receives
compensation for his injuries from a source wholly independent of the tortfeasor, the
payment should not be deducted from the damages which he would otherwise collect
from the tortfeasor.39 In a recent Decision40 by the Illinois Supreme Court, the rule has
been described as "an established exception to the general rule that damages in
negligence actions must be compensatory." The Court went on to explain that although
the rule appears to allow a double recovery, the collateral source will have a lien or
subrogation right to prevent such a double recovery.41 In Mitchell v. Haldar,42 the
collateral source rule was rationalized by the Supreme Court of Delaware:
The collateral source rule is predicated on the theory that a tortfeasor has no interest
in, and therefore no right to benefit from monies received by the injured person from
sources unconnected with the defendant. According to the collateral source rule, a
tortfeasor has no right to any mitigation of damages because of payments or
compensation received by the injured person from an independent source. The

rationale for the collateral source rule is based upon the quasi-punitive nature of tort
law liability. It has been explained as follows:
The collateral source rule is designed to strike a balance between two competing
principles of tort law: (1) a plaintiff is entitled to compensation sufficient to make him
whole, but no more; and (2) a defendant is liable for all damages that proximately
result from his wrong. A plaintiff who receives a double recovery for a single tort
enjoys a windfall; a defendant who escapes, in whole or in part, liability for his wrong
enjoys a windfall. Because the law must sanction one windfall and deny the other, it
favors the victim of the wrong rather than the wrongdoer.
Thus, the tortfeasor is required to bear the cost for the full value of his or her negligent
conduct even if it results in a windfall for the innocent plaintiff. (Citations omitted)
As seen, the collateral source rule applies in order to place the responsibility for losses
on the party causing them.43 Its application is justified so that "'the wrongdoer should
not benefit from the expenditures made by the injured party or take advantage of
contracts or other relations that may exist between the injured party and third
persons."44 Thus, it finds no application to cases involving no-fault insurances under
which the insured is indemnified for losses by insurance companies, regardless of who
was at fault in the incident generating the losses. 45 Here, it is clear that MMPC is a nofault insurer. Hence, it cannot be obliged to pay the hospitalization expenses of the
dependents of its employees which had already been paid by separate health insurance
providers of said dependents.
The Voluntary Arbitrator therefore erred in adopting Atty. Funks view that the covered
employees are entitled to full payment of the hospital expenses incurred by their
dependents, including the amounts already paid by other health insurance companies
based on the theory of collateral source rule.
The conditions set forth in the CBA provision indicate an intention to limit MMPCs
liability only to actual expenses incurred by the employees dependents, that is,
excluding the amounts paid by dependents other health insurance providers.
The Voluntary Arbitrator ruled that the CBA has no express provision barring claims for
hospitalization expenses already paid by other insurers. Hence, the covered employees
can recover from both. The CA did not agree, saying that the conditions set forth in the
CBA implied an intention of the parties to limit MMPCs liability only to the extent of the
expenses actually incurred by their dependents which excludes the amounts
shouldered by other health insurance companies.
not include the amounts paid by other health insurance providers. This condition is
obviously intended to thwart not only fraudulent claims but also double claims for the
same loss of the dependents of covered employees.
It is well to note at this point that the CBA constitutes a contract between the parties
and as such, it should be strictly construed for the purpose of limiting the amount of
the employers liability.46 The terms of the subject provision are clear and provide no
room for any other interpretation. As there is no ambiguity, the terms must be taken in
their plain, ordinary and popular sense.47 Consequently, MMPSEU cannot rely on the
rule that a contract of insurance is to be liberally construed in favor of the insured.
Neither can it rely on the theory that any doubt must be resolved in favor of labor.
Samsel
v.
Allstate
on all fours with the case at bar.
Co.
is
not
MMPSEU cannot rely on Samsel v. Allstate Insurance Co. where the Supreme Court of
Arizona allowed the insured to enjoy medical benefits under an automobile policy
insurance despite being able to also recover from a separate health insurer. In that
case, the Allstate automobile policy does not contain any clause restricting medical
payment coverage to expenses actually paid by the insured nor does it specifically
provide for reduction of medical payments benefits by a coordination of
benefits.48 However, in the case before us, the dependents group hospitalization
insurance provision in the CBA specifically contains a condition which limits MMPCs
liability only up to the extent of the expenses that should be paid by the covered
employees dependent to the hospital and doctor. This is evident from the portion
which states that "payment by MMPC shall be direct to the hospital and doctor." 49 In
contrast, the Allstate automobile policy expressly gives Allstate the authority to pay
directly to the insured person or on the latters behalf all reasonable expenses actually
incurred. Therefore, reliance on Samsel is unavailing because the facts therein are
different and not decisive of the issues in the present case.
To
allow
reimbursement
under
other
insurance
constitute
double
recovery
sanctioned by law.
of
amounts
policies
which
is
paid
shall
not
MMPSEU insists that MMPC is also liable for the amounts covered under other insurance
policies; otherwise, MMPC will unjustly profit from the premiums the employees
contribute through monthly salary deductions.
This contention is unmeritorious.
We agree with the CA. The condition that payment should be direct to the hospital and
doctor implies that MMPC is only liable to pay medical expenses actually shouldered by
the employees dependents. It follows that MMPCs liability is limited, that is, it does
Insurance

To constitute unjust enrichment, it must be shown that a party was unjustly enriched
in the sense that the term unjustly could mean illegally or unlawfully.50 A claim for
unjust enrichment fails when the person who will benefit has a valid claim to such
benefit.51
The CBA has provided for MMPCs limited liability which extends only up to the amount
to be paid to the hospital and doctor by the employees dependents, excluding those
paid by other insurers. Consequently, the covered employees will not receive more
than what is due them; neither is MMPC under any obligation to give more than what is
due under the CBA.
Moreover, since the subject CBA provision is an insurance contract, the rights and
obligations of the parties must be determined in accordance with the general principles
of insurance law.52 Being in the nature of a non-life insurance contract and essentially a
contract of indemnity, the CBA provision obligates MMPC to indemnify the covered
employees medical expenses incurred by their dependents but only up to the extent of
the expenses actually incurred. 53 This is consistent with the principle of indemnity
which proscribes the insured from recovering greater than the loss. 54 Indeed, to profit
from a loss will lead to unjust enrichment and therefore should not be countenanced.
As aptly ruled by the CA, to grant the claims of MMPSEU will permit possible abuse by
employees.
WHEREFORE, the Petition is DENIED. The Decision dated March 31, 2006 and
Resolution dated December 5, 2006 of the Court of Appeals in CA-G.R. SP No. 75630,
are AFFIRMED.
SO ORDERED.

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INSURANCE | Oct.

December 16, 1955

BAUTISTA ANGELO, J.:

G.R. No. 60506 August 6, 1992

The defendant insurance company is ordered to reimburse defendant

Sec. 1 LIABILITY TO THE PUBLIC

two (2) respondents by reason of the indemnity contract against

(a) death of or bodily injury to any THIRD PARTY

INSURANCE | Oct. 24 |10

G.R. No. L-49699 August 8, 1988

INSURANCE | Oct. 24 |11

Jose B. Sanez for petitioner.

(b) Death certificate and evidence sufficient to

(c) Medical report and evidence of medical or

INSURANCE | Oct. 24 |12

From a reading of the provision, which is couched in straight-forward and unambiguous

1. A claim may be made against one motor vehicle only.

INSURANCE | Oct. 24 |13

JAMES STOKES, as Attorney-in-Fact of Daniel Stephen Adolfson and DANIEL

Pio B. Salomon, Jr., for Defendant-Appellant.

1. MERCANTILE LAW; INSURANCE CONTRACT; COMPLIANCE WITH TERMS THEREOF, A

This is an appeal by Malayan Insurance Company, Inc. (MALAYAN) from a decision of

INSURANCE | Oct. 24 |14

WHEREFORE, the appealed judgment is reversed. The complaint is dismissed. Costs

INSURANCE | Oct. 24 |15

G.R. No. 175773

June 17, 2013

INSURANCE | Oct. 24 |16

On separate occasions, three members of MMPSEU, namely, Ernesto Calida (Calida),

INSURANCE | Oct. 24 |17

On December 3, 2002, the Voluntary Arbitrator rendered a Decision 27 finding MMPC

Proceedings before the Court of Appeals

INSURANCE | Oct. 24 |18

INSURANCE | Oct. 24 |19

INSURANCE | Oct. 24 |20

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