Insurance Law Case Digests

BALANCING OF INTERESTS
Western Guaranty, Corp. v. Court of Appeals (Rodriguez & De Dios Transportation)
G.R. No. 91666|J. Feliciano|Petition for Review|July 20, 1990

DOCTRINE: Contractual limitations of liability found in insurance contracts should be

regarded by courts with a jaundiced eye and extreme care and should be so construed as
to preclude the insurer from evading compliance with its just obligations.

FACTS: A De Dios Transport bus driven by Walter Saga stuck Priscilla Rodriguez as
she was crossing the pedestrian lane on Airport Rd. Saga had ignored the traffic
policeman’s stop sign to allow the pedestrians to cross. Rodriguez was thrown to the
ground, injuring her forehead. She was treated at the Protacio Emergency Hospital
and later hospitalized at the San Juan De Dios Hospital. Her face was permanently
disfigured causing her serious anxiety and moral distress.
De Dios Transport was insured with Western Guaranty under its Master Policy
which provided for protection against third party liability.

Section 1. Liability to the Public — Company will, subject to the Limits of

Liability, pay all sums necessary to discharge liability of the insured in respect
of––
(b) death of or bodily injury or damage to property of any THIRD PARTY as
defined herein in any accident caused by or arising out of the use of the
Schedule Vehicle, provided that the liability shall have first been determined

Rodriguez filed a complaint for damages before RTC-Makati against De Dios

Transport and Saga. The Company filed a third-party complaint against Western, as
its insurer. The RTC ruled in favor of Rodriguez ordering De Dios/Saga (solidarily)
and Western by way of contribution, indemnity, or subrogation) to pay ₱2.7K (actual),
₱1.5K (lost earnings), ₱10K (moral), ₱10K (atty.’s fees). Western would cover the
unpaid amount not exceeding ₱50K. On appeal, CA affirmed RTC in toto.
Western has a Schedule for Death and/or Bodily Injuries establishes monetary
limits which it may invoke in case of occurrence particular kinds of physical injury
ranging from ₱450 for loss of hearing in one ear to ₱6K for loss of both limbs.

ISSUE: W/N the indemnities the court ordered Western to pay is beyond what is
stipulated in the Master Policy. NO.

HELD: Master Policy issued by Western shows that that §1 defines the scope of the
liability of insurer Western as well as the events which generate such liability. The
scope of liability of Western is marked out in comprehensive terms: "all sums
necessary to discharge liability of the insured in respect of [the precipitating
events]—" The precipitating events which generate liability either in favor of a
passenger or a third party, are: (1) death of, or (2) bodily injury to, or (3) damage to

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property of, the passenger or the third party. Where no death, no bodily injury and
no damage to property resulted from the casualty, no liability is for Western.
Schedule of Indemnities does not purport to restrict the kinds of damages that
may be awarded against Western once liability has arisen. Section 1, does refer to
certain "Limits of Liability" which in the case of the third-party liability section of the
Master Policy, is apparently ₱50K per person per accident. Within this over-all
quantitative limit, all kinds of damages allowable by law—“actual or compensatory
damages”; “moral damages”; “nominal damages”; “temperate or moderate damages”;
“liquidated damages”; and “exemplary damages”— may be awarded by a court
against Western once liability is shown to have arisen, and the essential requisites
or conditions for grant of each species of damages are present. It appears to us self-
evident that the Schedule of Indemnities was not intended to be an enumeration,
much less a closed enumeration, of the specific kinds of damages which may be
awarded under the Master Policy Western has issued.
The interpretation of Western of the Schedule of Indemnities comes too close to
working fraud upon both the insured and the third party beneficiary. It would
drastically and without warning limit the otherwise unlimited (the over-all limit of
₱50K) and comprehensive scope of liability assumed by the insurer Western under §1.
This is repugnant to public policy. The burden was on Western to have been more
specific and precise so that the purchasers of the policy and the Insurance
Commissioner may be properly informed and act accordingly.
Contractual limitations of liability found in insurance contracts should be
regarded by courts with a jaundiced eye and extreme care and should be so construed
as to preclude the insurer from evading compliance with its just obligations.
Insurance contracts are contracts of adhesion; it must be construed strictly
against the party which prepared the contract.

JUDGMENT: DENY the Petition for Review for lack of merit.

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