ALPHA INSURANCE AND SURETY CO. vs.

ARSENIA SONIA CASTOR

July 2, 2014 Leave a comment

G.R. No. 198174, September 2, 2013 (PERALTA, J.)

FACTS:

Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for her Toyota Revo DLX DSL with Alpha Insurance and Surety Co
(Alpha). The contract of insurance obligates the petitioner to pay the respondent the amount of P630,000 in case of loss or damage to
said vehicle during the period covered.

On April 16, 2007, respondent instructed her driver, Jose Joel Salazar Lanuza to bring the vehicle to nearby auto-shop for a tune up.
However, Lanuza no longer returned the motor vehicle and despite diligent efforts to locate the same, said efforts proved futile.
Resultantly, respondent promptly reported the incident to the police and concomitantly notified petitioner of the said loss and
demanded payment of the insurance proceeds.

Alpha, however, denied the demand of Castor claiming that they are not liable since the culprit who stole the vehicle is employed with
Castor. Under the Exceptions to Section III of the Policy, the Company shall not be liable for (4) any malicious damage caused by the
insured, any member of his family or by A PERSON IN THE INSUREDS SERVICE.

Castor filed a Complaint for Sum of Money with Damages against Alpha before the Regional Trial Court of Quezon City. The trial
court rendered its decision in favor of Castor which decision is affirmed in toto by the Court of Appeals. Hence, this Petition for
Review on Certiorari.

ISSUE:

Whether or not the loss of respondents vehicle is excluded under the insurance policy

HELD:

NO. The words loss and damage mean different things in common ordinary usage. The word loss refers to the act or fact of
losing, or failure to keep possession, while the word damage means deterioration or injury to property. Therefore, petitioner cannot
exclude the loss of Castors vehicle under the insurance policy under paragraph 4 of Exceptions to Section III, since the same refers
only to malicious damage, or more specifically, injury to the motor vehicle caused by a person under the insureds service.
Paragraph 4 clearly does not contemplate loss of property.

A contract of insurance is a contract of adhesion. So, when the terms of the insurance contract contain limitations on liability, courts
should construe them in such a way as to preclude the insurer from non-compliance with his obligation. Thus, in Eternal Gardens
Memorial Park Corporation vs. Philippine American Life Insurance Company, this Court ruled that it must be remembered that an

insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latters interest.
G.R. No. 81026 April 3, 1990
PAN MALAYAN INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, ERLINDA FABIE AND
HER UNKNOWN DRIVER, respondents.
FACTS:
On December 10, 1985, PANMALAY filed a complaint for damages with the RTC of Makati against private respondents Erlinda
Fabie and her driver. PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer car with plate No. DDZ-431 and
registered in the name of Canlubang Automotive Resources Corporation [CANLUBANG]; that on May 26, 1985, due to the
"carelessness, recklessness, and imprudence" of the unknown driver of a pick-up with plate no. PCR-220, the insured car was hit and
suffered damages in the amount of P42,052.00; that PANMALAY defrayed the cost of repair of the insured car and, therefore, was
subrogated to the rights of CANLUBANG against the driver of the pick-up and his employer, Erlinda Fabie; and that, despite repeated
demands, defendants, failed and refused to pay the claim of PANMALAY. private respondents filed a Motion to Dismiss alleging that
PANMALAY had no cause of action against them. They argued that payment under the "own damage" clause of the insurance policy
precluded subrogation under Article 2207 of the Civil Code, since indemnification thereunder was made on the assumption that there
was no wrongdoer or no third party at fault.
DECISION OF LOWER COURTS:
(1) Trial Court: dismissed for no cause of action PANMALAY's complaint for damages against private respondents Erlinda Fabie and
her driver
(2) CA: affirmed trial court.
ISSUE:
Whether or not the insurer PANMALAY may institute an action to recover the amount it had paid its assured in settlement of an
insurance claim against private respondents as the parties allegedly responsible for the damage caused to the insured vehicle.

RULING:
PANMALAY is correct.
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 that the insurer has been obligated to pay. Payment by the insurer to the assured operates as an
equitable or negligence of a third party. CANLUBANG is apparently of the same understanding. Based on a police report assignment
to the former of all remedies that 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.
The exceptions are:
(1) if the assured by his own act releases the wrongdoer or third party liable for the loss or damage, from liability, the insurer's right of
subrogation is defeated
(2) 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, the settlement is binding on both the assured and the insurer, and the latter cannot bring an action against the
carrier on his right of subrogation
(3) where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary payment", the
former has no right of subrogation against the third party liable for the loss
None of the exceptions are availing in the present case.
Also, even if under the above circumstances PANMALAY could not be deemed subrogated to the rights of its assured under Article
2207 of the Civil Code, PANMALAY would still have a cause of action against private respondents. In the pertinent case of Sveriges
Angfartygs Assurans Forening v. Qua Chee Gan, supra., the Court ruled that the insurer who may have no rights of subrogation due to
"voluntary" payment may nevertheless recover from the third party responsible for the damage to the insured property under Article
1236 of the Civil Code.
WHEREFORE, in view of the foregoing, the present petition is GRANTED. Petitioner's complaint for damages against private
respondents is hereby REINSTATED. Let the case be remanded to the lower court for trial on the merits.
PERLA COMPANIA DE SEGUROS, INC V RAMOLETE
16NOV

G.R. No. L-60887 | November 13, 1991 | J. Feliciano

Facts:
On June 1976, a Cimarron PUJ owned by Nelia Enriquez, and driven by Cosme Casas, was travelling from Cebu City to Danao City.
While passing through Liloan, Cebu, the Cimarron PUJ collided with a private jeep owned by the late Calixto Palmes (husband of
private respondent Primitiva Palmes) who was then driving the private jeep. The impact of the collision was such that the private jeep
was flung away to a distance of about thirty (30) feet and then fell on its right side pinning down Calixto Palmes. He died as a result of
cardio-respiratory arrest due to a crushed chest. The accident also caused physical injuries on the part of 2-year-old Adeudatus Borbon.
Private respondents Primitiva and Honorato Borbon, Sr. (father of Adeudatus) filed a complaint against Cosme and Nelia before the
then Cebu CFI claiming actual, moral, nominal and exemplary damages as a result of the accident. The claim of Borbon, Sr. was
excluded from the complaint due to jurisdiction.
The CFI ruled in favor of Primitiva, ordering common carrier Nelia to pay her damages and attorneys fees. The judgment of the trial
court became final and executory and a writ of execution was issued, which however, returned unsatisfied, prompting the court to
summon and examine Nelia. She declared that the Cimarron PUJ was covered by a third-party liability insurance policy issued by
petitioner Perla.
Palmes then filed a motion for garnishment praying that an order of garnishment be issued against the insurance policy issued by
petitioner in favor of the judgment debtor. Respondent Judge then issued an Order directing the Provincial Sheriff or his deputy to
garnish the third-party liability insurance policy. Petitioner filed for MR and quashal of the writ of garnishment on the ground that
Perla was not a party to the case and that jurisdiction over its person had never been acquired by the trial court by service of summons
or by any process. The trial court denied petitioners motion.An Order for issuance of an alias writ of garnishment was subsequently
issued.
More than two (2) years later, the present Petition for Certiorari and Prohibition was filed with this Court alleging grave abuse of
discretion on the part of respondent Judge Ramolete in ordering garnishment of the third-party liability insurance contract issued by
petitioner Perla in favor of the judgment debtor, Nelia Enriquez. The Petition should have been dismissed forthwith for having been
filed way out of time but, for reasons which do not appear on the record, was nonetheless entertained.

Issue:
W/N there is GADALEJ on the part of the respondent judge
W/N there insurance policy may be subject to garnishment

Held:
1. No. The SC found no grave abuse of discretion or act in excess of or without jurisdiction on the part of respondent Judge Ramolete
in ordering the garnishment of the judgment debtors third-party liability insurance.
2. Yes. Garnishment has been defined as a species of attachment for reaching any property or credits pertaining or payable to a
judgment debtor. In legal contemplation, it is a forced novation by the substitution of creditors: the judgment debtor, who is the
original creditor of the garnishee is, through service of the writ of garnishment, substituted by the judgment creditor who thereby
becomes creditor of the garnishee. Garnishment has also been described as a warning to a person having in his possession property or
credits of the judgment debtor, not to pay the money or deliver the property to the latter, but rather to appear and answer the plaintiffs
suit.
In order that the trial court may validly acquire jurisdiction to bind the person of the garnishee, it is not necessary that
summons be served upon him. The garnishee need not be impleaded as a party to the case. All that is necessary for the trial
court lawfully to bind the person of the garnishee or any person who has in his possession credits belonging to the judgment
debtor is service upon him of the writ of garnishment.
Rule 39, Section 15 and Rule 57, Section 7(e) of the ROC themselves do not require that the garnishee be served with summons or
impleaded in the case in order to make him liable.
In the present case, there can be no doubt, therefore, that the trial court actually acquired jurisdiction over petitioner Perla when it was
served with the writ of garnishment of the third-party liability insurance policy it had issued in favor of judgment debtor Nelia
Enriquez. Perla cannot successfully evade liability thereon by such a contention.

In a third-party liability insurance contract, the insurer assumes the obligation of paying the injured third party to whom the insured is
liable. The insurer becomes liable as soon as the liability of the insured to the injured third person attaches. Prior payment by the
insured to the injured third person is not necessary in order that the obligation of the insurer may arise. From the moment that the
insured became liable to the third person, the insured acquired an interest in the insurance contract, which interest may be garnished
like any other credit.
A separate action is not necessary to establish petitioners liability.
Petition for Certiorari and Prohibition is hereby DISMISSED for having been filed out of time and for lack of merit. Judgment
AFFIRMED.

Philam v Arnaldo G.R. No. 76452 July 26, 1994

J. Quiason

Facts:
One Ramon Paterno complained about the unfair practices committed by the company against its
agents, employees and consumers. The Commissioner called for a hearing where Paterno was
required to specify which acts were illegal. Paterno then specified that the fees and charges
stated in the Contract of Agency between Philam and its agents be declared void. Philam, on the
other hand, averred that there Paterno must submit a verified formal complaint and that his letter
didnt contain information Philam was seeking from him. Philam then questioned the Insurance
Commissions jurisdiction over the matter and submitted a motion to quash. The commissioner
denied this. Hence this petition.

Issue: Whether or not the resolution of the legality of the Contract of Agency falls within the
jurisdiction of the Insurance Commissioner.

Held: No. Petition granted.

Ratio:
According to the Insurance code, the Insurance Commissioner was authorized to suspend,
directors, officers, and agents of insurance companies. In general, he was tasked to regulate the
insurance business, which includes:
(2)
The term "doing an insurance business" or "transacting an insurance business," within
the meaning of this Code, shall include
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of
business, including a reinsurance business, specifically recognized as constituting the doing of an
insurance business within the meaning of this Code; (d) doing or proposing to do any business in

substance equivalent to any of the foregoing in a manner designed to evade the provisions of this
Code. (Insurance Code, Sec. 2[2])
The contract of agency between Philamlife and its agents wasnt included with the
Commissoners power to regulate the business. Hence, the Insurance commissioner wasnt
vested with jurisidiction under the rule expresio unius est exclusion alterius.
The respondent contended that the commissioner had the quasi-judicial power to adjudicate
under Section 416 of the Code. It stated:
The Commissioner shall have the power to adjudicate claims and complaints involving any loss,
damage or liability for which an insurer may be answerable under any kind of policy or contract of
insurance, or for which such insurer may be liable under a contract of suretyship, or for which a
reinsurer may be used under any contract or reinsurance it may have entered into, or for which a
mutual benefit association may be held liable under the membership certificates it has issued to
its members, where the amount of any such loss, damage or liability, excluding interest, costs and
attorney's fees, being claimed or sued upon any kind of insurance, bond, reinsurance contract, or
membership certificate does not exceed in any single claim one hundred thousand pesos.
This was, however, regarding complaints filed by the insured against the Insurance company.
Also, the insurance code only discusses the licensing requirements for agents and brokers. The
Insurance Code does not have provisions governing the relations between insurance companies
and their agents.

Investment Planning Corporation of the Philippines v. Social Security Commission- that an

insurance company may have two classes of agents who sell its insurance policies: (1) salaried
employees who keep definite hours and work under the control and supervision of the company;
and (2) registered representatives, who work on commission basis.
The agents under the 2nd sentence are governed by the Civil Code laws on agency. This means
that the regular courts have jurisdiction over this category.
Great Pacific Life Assurance Corp. V. CA (1999)
FACTS:

A contract of group life insurance was executed between Great Pacific Life Assurance Corporation Grepalife) and
Development Bank of the Philippines (DBP)

Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP
November 11, 1983: Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life
insurance plan

Dr. Leuterio answered questions concerning his health condition as follows:

7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung, kidney or
stomach disorder or any other physical impairment?

Answer: No. If so give details ___________.

8. Are you now, to the best of your knowledge, in good health?

Answer: [ x ] Yes [

] No.[4]

November 15, 1983: Grepalife issued Certificate No. B-18558, as insurance coverage of Dr. Leuterio, to the extent of his DBP
mortgage indebtedness amounting to P86,200

August 6, 1984: Dr. Leuterio died due to massive cerebral hemorrhage.

DBP submitted a death claim to Grepalife
Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied

RTC: Favored Medarda V. Leuterio (widow) and held Grepalife (insurer) liable to pay DBP (creditor of the insured Dr.
Wilfredo Leuterio)

CA sustained

ISSUE:
1. W/N DBP has insurable interest as creditor - YES
2. W/N Grepalife should be held liable - YES

HELD:

1. YES

In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-payable clause does not
make the mortgagee a party to the contract

Section 8 of the Insurance Code provides:

Unless the policy provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable
to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor,

who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the
insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of
insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had
been performed by the mortgagor.
The insured Dr. Wilfredo Leuterio did not cede to the mortgagee all his rights or interests in the insurance. When Grepalife

denied payment, DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot
of Dr. Wilfredo Leuterio
Insured may be regarded as the real party in interest, although he has assigned the policy for the purpose of collection, or has

assigned as collateral security any judgment he may obtain

2. YES

medical findings were not conclusive because Dr. Mejia did not conduct an autopsy

widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension

Grepalife failed to establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim

fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation
as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and
convincing evidence rests upon the insurer

The policy states that upon receipt of due proof of the Debtors death during the terms of this insurance, a death benefit in the
amount of P86,200.00 shall be paid. In the event of the debtors death before his indebtedness with the creditor shall have been
fully paid, an amount to pay the outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured,
if there is any shall then be paid to the beneficiary/ies designated by the debtor.

DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagors outstanding loan

insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries

Equity dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio
protest). Hence, it cannot collect the insurance proceeds, after it already foreclosed on the mortgage