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CASE 09: FIREMANS FUND INSURANCE COMPANY AND THE FIRESTONE TIRE
AND RUBBER COMPANY OF THE PHILIPPINES v JAMILA & COMPANY - Rebecca
Flores
Topic: Subrogation
DOCTRINE: When the insurance company pays for the loss, such payment operates as
an equitable assignment to the insurer of the property and all remedies which the insured
may have for the recovery thereof. That right is not dependent upon, nor does it grow out
of, any privity of contract, or upon written assignment of claim, and payment to the insured
makes the insurer an assignee in equity.
DOCTRINE: Article 2207 of the Civil Code is founded on the well-settled principle of
subrogation. If the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the insurer, upon payment to the
assured, will be subrogated to the rights of the assured to recover from the wrongdoer to
the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operates as an equitable assignment to the former of all remedies which the latter
may have against the third party whose negligence or wrongful act caused the loss. The
right of subrogation is not dependent upon, nor does it grow out of, any privity of contract
or upon written assignment of claim. It accrues simply upon payment of the insurance
claim by the insurer.
FACTS
1. Jamila/Veterans PH Scouts Security Agency contracted to supply security guards to
Firestone. Jamila assumed responsibility for the acts of its security guards.
2. First Quezon City Insurance executed a bond for P20K to guarantee Jamilas
obligation under that contract.
3. Later on Firestones properties valued at P11,925 were allegedly lost due to the acts
of its employees who connived with Jamilas security guard
4. Firemans Fund, as insurer paid to Firestone the amount of the loss and Firemans
Fund was subrogated to Firestones right to get reimbursement from Jamila. Jamila
and its surety (First Quezon Insurance) failed to pay the amount of the loss.
5. Fireman invoked Article 2207, as the insurer Firemans Fund is entitled to go after the
person or entity that violated its contractual commitment to answer for the loss insured
against.
6. Jamila contends that it did not consent to the subrogation of Firemans Fund to
Firestones right to get reimbursement from Jamila and its surety. Further arguing that
legal subrogation under Art 2207 of the Civil Code requires the debtors consent and
that according to Art 1302, the instant case is not among the cases mentioned when
legal subrogation can take place.
ISSUE: WON Firemans Fund can subrogate to the rights of Jamilia?
RULING: YES! Article 2207 is a restatement of a settled principle of American
jurisprudence. Subrogation has been referred to as the doctrine of substitution. It is an
arm of equity that may guide or even force one to pay a debt for which an obligation was
incurred but which was in whole or in part paid by another.
Subrogation is founded on principles of justice and equity, and its operation is governed by
principles of equity. It rests on the principle that substantial justice should be attained
regardless of form, that is, its basis is the doing of complete, essential, and perfect justice
between all the parties without regard to form.
Subrogation is a normal incident of indemnity insurance. Upon payment of the loss, the
insurer is entitled to be subrogated pro tanto to any right of action which the insured may
have against the third person whose negligence or wrongful act caused the loss
When the insurance company pays for the loss, such payment operates as an equitable
assignment to the insurer of the property and all remedies which the insured may have for
the recovery thereof. That right is not dependent upon, nor does it grow out of, any privity
of contract, or upon written assignment of claim, and payment to the insured makes the
insurer an assignee in equity
where the assured by his own act releases the wrongdoer or third party liable for
the loss or damage
where the insurer pays the assured the value of the lost goods without notifying
the carrier who has in good faith settled the assured's claim for loss
where the insurer pays the assured for a loss which is not a risk covered by the
policy, thereby effecting "voluntary payment"
FACTS: United Coconut Chemicals, Inc. shipped 404.774 metric tons of distilled C6-C18
fatty acid on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen Philippines Inc. ,
from Bauan, Batangas, Philippines, consigned to "Nieuwe Matex" at Rotterdam,
Netherlands, covered by Tanker Bill of Lading BL No. BAT-1. The shipment was insured
under a marine cargo policy with Petitioner National Union Fire Insurance Company of
Pittsburg, a non-life American insurance corporation, through its settling agent in the
Philippines, the American International Underwriters (Philippines), Inc. A Bill of Lading was
present , containing a general statement of incorporation of the terms of a Charter Party
between the Shipper, namely, United Coconut Chemicals Inc., and Parcel Tankers, Inc.,
entered into in Greenwich, Connecticut, U.S.A. Upon receipt of the goods in Netherlands,
they were found to be discolored. The insurer indemnified the shipper because of this.
4.
As a subrogee of the shipper, the insurer filed suit against the carrier, Stolt-Nielsen. The
latter moved to dismiss the case, as they claim it is an arbitrable one, the Bill of Lading
being its basis which contained provisions relating to a Charter Party. The RTC deferred
the motion, and the appellate court reversed the RTC, and ordered the case for arbitration.
ISSUE: WON Prudential was subrogated to the rights of William Lines, Inc. upon its
payment of the total amount covered in the insurance policy.
ISSUE: WON the claim of the insurer against the carrier is an arbitrable one.
RULING: We hold, therefore, that the INSURER cannot avoid the binding effect of the
arbitration clause. By subrogation, it became privy to the Charter Party as fully as the
SHIPPER before the latter was indemnified, because as subrogee it stepped into the
shoes of the SHIPPER-ASSURED and is subrogated merely to the latter's rights. It can
recover only the amount that is recoverable by the assured. And since the right of action of
the SHIPPER-ASSURED is governed by the provisions of the Bill of Lading, which
includes by reference the terms of the Charter Party, necessarily, a suit by the INSURER is
subject to the same agreements
DISPOSITIVE: Yes, the case is an arbitrable one, Stolt-Nielsen wins the case, as it cannot
escape liability arising from the Charter Party Provisions included in the Bill of Lading as it
is a subrogee of the rights of the shipper.
5.
6.
William Lines, Inc. filed a complaint for damages against petitioner alleging that the
fire which broke out was the result of CSEWs negligence and lack of care. An
amended complaint was filed impleading Prudential as co-plaintiff after the latter had
paid William Lines, Inc. the value of the hull and machinery insurance on the M/V
Manila City. As a result of the payment, Prudential was subrogated to the claim of P45
million, representing the value of the insurance it paid.
The trial court issued a decision against petitioner Cebu Shipyards. The Court of
Appeals affirmed the said decision.
Petitioner claims that Prudential is not entitled to be subrogated to the rights of William
Lines, Inc. theorizing that (1) the fire which gutted M/V Manila City was an excluded
risk (2) it is a co-assured under the Marine Hull Insurance Policy.
RULING: YES. Clause 20 of the Work Order in question is clear in the sense that it
requires William Lines to maintain insurance on the vessel during the period of dry-docking
or repair. Concededly, such a stipulation works to the benefit of CSEW as the ship repairer.
However, the fact that CSEW benefits from the said stipulation does not automatically
make it as a co-assured of William Lines. The intention of the parties to make each other a
co-assured under an insurance policy is to be gleaned principally from the insurance
contract or policy itself and not from any other contract or agreement because the
insurance policy denominates the assured and the beneficiaries of the insurance. The hull
and machinery insurance procured by William Lines, Inc. from Prudential named only
"William Lines, Inc." as the assured. There was no manifestation of any intention of William
Lines, Inc. to constitute CSEW as a co-assured under subject policy. It is axiomatic that
when the terms of a contract are clear its stipulations control. Thus, when the insurance
policy involved named only William Lines, Inc. as the assured thereunder, the claim of
CSEW that it is a co-assured is unfounded.
DISPOSITIVE: Petition was denied and petitioner was not allowed to limit its liability based
on the contract.
DOCTRINE:
When the insurer, after due verification of the merit and validity of the insurance claim of
the assured, pays the latter the total amount covered by its insurance policy, it becomes
subrogated to the right of the latter to recover the insured loss from the liable party.
DOCTRINE: The right of subrogation can only exist after the insurer has paid the insured,
otherwise the insured will be deprived of his right to full indemnity. If the insurance
proceeds are not sufficient to cover the damages suffered by the insured, then he may sue
the party responsible for the damage for the remainder. To the extent of the amount he has
already received from the insurer, the insurer enjoys the right of subrogation. Since the
insurer can be subrogated to only such rights as the insured may have, should the insured,
after receiving payment from the insurer, release the wrongdoer who caused the loss, the
insurer loses his rights against the latter. But in such a case, the insurer 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.
FACTS:
1. Cebu Shipyard is a domestic corporation engaged in the business of dry-docking and
repairing of marine vessels while the private respondent Prudential, a domestic
corporation, is in the business of non-life insurance.
2. William Lines, Inc. is in the shipping business. It was the owner of M/V Manila City, a
luxury passenger-cargo vessel, which caught fire and sank. At the time of the
accident, the vessel as insured with Prudential for P45M.
3. Petitioner was also insured by Prudential for 3 rd party liability under a Ship repairers
Legal Liability for Insurance Policy, such was for P10M. William Lines, Inc. brought its
vessel to the Cebu Shipyard for annual dry-docking and repair. After the subject
vessel was transferred to the docking quay, it caught fire and sank resulting to its loss.
FACTS: Manila Mahogany Manufacturing Corp. (petitioner) insured its Mercedes Benz 4door sedan with Zenith Insurance Corp. (respondent). The insured vehicle was bumped
and damaged by a truck owned by San Miguel Corp. For the damage cause, respondent
paid petitioner P5,000 in an amicable settlement. Petitioners general manager executed a
Release of Claim, subrogating respondent to all its right to action against San Miguel.
HELD: YES. If a property is insured and the owner receives the indemnity from the insurer,
it is provided in Art. 2207 of the New Civil Code that the insurer is deemed subrogated to
the rights of the insured against the wrongdoer and if the amount paid by the insurer does
not fully cover the loss, then the aggrieved party is the one entitled to recover the
deficiency. Under this legal provision, the real party in interest with regard to the portion of
the indemnity paid is the insurer and not the insured.
In this case, petitioner is entitled to keep the sum of P4,500 paid by San Miguel under its
clear right to file a deficiency claim for damages incurred, against the wrongdoer, should
the insurance company not fully pay for the injury caused. However, when petitioner
released San Miguel from any liability, petitioners right to retain the sum of P5,000 no
longer existed, thereby entitling private respondents to recover the same.
CASE 17: F.F. Cruz v CA Dennis Reyes
Topic: Subrogation
DOCTRINE: in Article 2207. Upon payment of the loss incurred by the insured, the insurer
is entitled to be subrogated pro tanto to any right of action which the insured may have
against the third person whose negligence or wrongful act caused the loss.
FACTS: The furniture manufacturing shop of petitioner was situated adjacent to the
residence of private respondents. Private respondent, Gregorio Mable, first approached
the petitioner's plant manager to request that a firewall be constructed between the shop
and private respondents' residence. The request was repeated several times but they fell
on deaf ears.
A fire broke out in petitioner's shop. Petitioner's employees tried to put out the fire, but their
efforts proved futile. The fire spread to private respondents' house. Both the shop and the
house were razed to the ground. The cause of the conflagration was never discovered.
Private respondents collected P35,000.00 on the insurance on their house and the
contents thereof.
Private respondents filed an action for damages against petitioner. Trial Court awarded
damages in favor of the private respondent; Court of Appeals: affirmed the decision of the
trial court
ISSUE: Even though the Respondent received a sum of money (P35,000) from the insurer,
can the latter collect from the petitioner
RULING: The Court finds that petitioner is liable for damages to private respondents, the
fact that private respondents have been indemnified by their insurer in the amount of
P35,000.00 for the damage caused to their house and its contents has not escaped the