Limitations

In Fedex v. American Home Insurance (473 SCRA 50) the Supreme Court held that filing of a notice
of loss or injury is a condition precedent, and not a limitation, to the filing of an action.
In this case, Smithkline of Nebraska, USA delivered to Burlington Express, an agent of FedEx, a
shipment of veterinary biological for delivery to Smithkline in Makati, Metro Manila. Burlington
insured the cargoes with American Home Insurance Company (AHAC). The cargoes arrived in Manila
but were stored improperly before the broker hired by Smithkilne Makati could facilitate their
release. Smithkilne therefore abandoned the shipment, declaring total loss for the unusable
shipment. It filed a claim with AHAC, who recompensed the former the whole insured amount. AHAC
in turned filed an action for damages against FedEx and the warehouse for negligently handling the
cargo. Both the RTC and CA found FedEx liable for payment of the damages.
The Supreme Court, upon petition of FedEx, reversed both RTC and CA as to FedExs liability for
damages. The Court held that undeniably, upon payment to the consignee of an indemnity for loss
or damage of the goods insured, the insurers entitlement to subrogation equips it with a cause of
action in case of breach or negligence. However, in this jurisdiction, the filing of a claim with the
carrier within the time limitation therefor actually constitutes a condition precedent to the accrual of
a right of action against a carrier for loss of or damage to the goods. The shipper or consignee must
allege and prove the fulfilment of the condition. If it fails to do so, no right of action against the
carrier can accrue in favour of the former. The aforementioned requirement is a reasonable
condition precedent; it does not constitute a limitation of action.
In this case, no notice of loss or injury to the goods was filed within the prescribed period. While
respondents may have had a cause of action then, they cannot now enforce it for their failure to
comply with the aforesaid condition precedent.
In Manila Mahogany v. Court of Appeals (164 SCRA 652), Manila Mahogany insured it Mercedes
Benz with Zenith Insurance. The Benz got hit by a truck owned by San Miguel Corporation. In an
amicable settlement, Zenith paid Manila Mahogany P5000.00, as a consequence of which the latter
executed a release of claim, subrogating the former to all its right of action against San Miguel. But
when Zenith tried to recover from San Miguel, the latter refused to pay because apparently, San
Miguel has already paid Manila Mahogany P4,500.00 for damages and Manila Mahogany has
executed a release of claim discharging San Miguel from all actions, claims, demands, and rights of
actions that arise from the accident.
In a suit for reimbursement filed by Zenith, Manila Mahogany contended that it was not bound to
pay because it had the right to recover for deficiencies against San Miguel since the total damages
were P9, 486.00 and Zenith only paid P5, 000.00. The Court however decided in favour of Zenith. It
said that the insurer can only be subrogated to such rights as the insured may have. Should the
insured, after receiving payment from the insurer, releases the wrongdoer who caused the loss then
the insurer loses his right against the latter. The insurer however will be entitled to recover from the
insured whatever it has paid to the latter, unless the release was made with the consent of the
insurer.

Here, Manila Mahogany had the right to file a deficiency claim against San Miguel, without prejudice
to Zeniths right of subrogation, but when it executed a release of claim in favour of San Miguel, it
defeated the right of Zenith to subrogation and Manila Mahoganys right to retain the sum of
P5000.00 no longer existed. Therefore Zenith is entitled to recover from Manila Mahogany the
amount of insurance money it paid.
Vda. Maglana et al. v. Consolacion (212 SCRA 268)
On his way to work, Maglana, while riding a motorcycle was bumped by a PUJ jeep. The accident
resulted in his death. In a criminal case, the driver was found to be driving recklessly and in a civil
case, the operator was found guilty of not exercising sufficient diligence as the operator of the jeep.
The two were ordered to pay the heirs of Maglana, and the insurance company was ordered to
reimburse the operator whatever amounts the latter pay, but only up to the extent of the insurance
coverage. The heirs assailed the decision and contend that the insurer, AFISCO, should be held
directly and solidarily liable with the operator and not merely secondarily liable.
The Court, in disposing of the case, held that AFISCO can be held to be directly liable because its
policy of insures directly against liability, and the mere occurrence of the injury or event means the
accrual of the liability of the insurer. However, AFISCO is not solidarily liable with the operator
because its liability is under an insurance contract and not tort. The heirs therefore have the option
of either claiming a part of the judgment against AFISCO and the balance from the operator or
enforce the entire judgment against the operator subject to reimbursement from AFISCO to the
extent of the coverage.

Cebu Shipyard and Engineering Works Inc., v. William Lines Inc., et al. (306 SCRA 762)
While William Lines vessel was undergoing dry docking and repairs within the premises of Cebu
Shipyard, it caught fire and sank because of the negligence of the latters workers, resulting to its
eventual total loss. Prudential Life paid William Lines the value of the hull and machinery insurance
policy worth P45 million, as a result of which the former was subrogated to the claim of P45 million.
Cebu Shipyard contends that Prudential is not entitled to be subrogated because the fire was and
excluded risk because it resulted from want of due diligence of assured, owners, or managers and
that Cebu Shipyard was a co-assured of William Lines under the hull and machinery policy.
In the contract between Cebu Shipyard and William Lines, the latter was to maintain insurance on
the vessel. While said stipulation works to the benefit of Cebu, it does not automatically make Cebu
Shipyard a co-assured. Since the insurance was procured by William Lines only in its name, Cebu
Shipyard is not a co-assured. Also under their contract, Cebu Shipyard is liable for damages
attributable to its negligence. As it was properly established that the loss was due to Cebus
repairmens negligence, upon payment of Prudential to William Lines of the amount of loss,
Prudential was subrogated to the right of William Lines to be indemnified by Cebu Shipyard under
Article 2207.

Malayan Insurance v. CA (165 SCRA 536)

Malayan Insurance issued an insurance policy covering a Willys Jeep in favour of a certain Sio Choy.
The coverage was for own damage not to exceed P600.00 and third-party liability in the amount
of P20,000.00. The insured jeep, while being driven by an employee of San Leon Rice Mill, collided
with a PANTRANCO passenger bus causing damage to the vehicle, its driver and its passenger. The
passenger filed an action for damages against Sio Choy, Malayan and PANTRANCO. Sio Choy paid the
passenger P5000.00 for which he filed a counterclaim against Malayan. Malayan in turn filed a third
party complaint against San Leon Rice Mill claiming that it was the latters employee who caused the
accident and prayed that San Leon reimburse Malayan for any sum that it may pay.
The Court held that in this case, only Sio Choy and San Leon Rice mill are solidarily liable for the
damages awarded to the passenger, as principal tortfeasors being owner of the jeep and employer
of the driver respectively. The basis for Malayans liability is its insurance contract with Sio Choy,
particularly the third-party liability clause. It is not solidarily liable because the liability is based on
contract and not on tort.
Subrogation is a normal incident of indemnity insurance. Upon payment of the loss, the insurer is
entitled to any right of action the insured may have against the third person whose negligence was
the cause of the loss. The loss of the insured, after reimbursement or compensation becomes the
loss of the insurer. The payment operates as an equitable assignment to the insurer of the property
and all remedies which the insured may have for the recovery therefore. The right does is not
dependent upon nor does it grow out of privity of contract. Therefore, upon payment by Malayan to
the passenger of the amount not exceeding P20,000.00 as stipulated in their contract, it became the
subrogated to Sio Choys rights against San Leon Rice Mill.