Case No.

31

The Philippine American Life Insurance Company vs. Hon. Gregorio G. Pineda and
Rodolfo C. Dimayuga
G.R. No. 54216, 19 July 1989

Facts

Respondent Dimayuga procured a life insurance policy from petitioner on 15 January

1968 and designated his wife and children as irrevocable beneficiaries. Later on, he
petitioned that the designation of the beneficiaries be amended to revocable, which was
granted by petitioner Judge Pineda.

Issue

Whether or not respondent judge is correct in granting the petition.

Ruling

No. According to the Court, the Insurance Act, which was the applicable law at the time,
provides that the beneficiary designated in a life insurance contract cannot be changed
without the consent of the beneficiary because he has a vested right in the policy. It is
noteworthy that the designation of the beneficiaries in this case is irrevocable and as
such, the designation was made without reserving the right to change said
beneficiary/ies.

In effect, it is only with the consent of all the beneficiaries that any change or amendment
in the policy concerning the irrevocable beneficiaries may be legally and validly affected.
The alleged acquiescence of the beneficiaries is not also an effective ratification since
the wife had predeceased the insured and all the children are minors at the time hence,
could not validly give their consent. The parent-insured cannot exercise rights and/or
privileges pertaining to the insurance contract, for otherwise, the vested rights of the
irrevocable beneficiaries would be rendered inconsequential.

The lower court erred in granting the petition because in doing so, it gratuitously
provided for a contingency for when the change in the designation of beneficiaries would
be validly effected which the contract in this case did not provide for.
Case No. 32

Malayan Insurance Co., Inc vs. Philippines First Insurance Co., Inc and Reputable
Forwarder Services, Inc.,
G.R. No. 184300, 11 July 2012

Facts
Wyeth has been engaging the services of respondent Reputable since 1989 for the
delivery of its products to its customers. Sometime in 1993, Wyeth procured a marine
policy from respondent Philippines First covering its nutritional, pharmaceutical and other
products while the same are being transported or shipped in the Philippines. The policy
covered all risks of direct physical loss or damage from any external cause, if by land,
and provides a limit of 6 million pesos per any one land vehicle.

On December 1993, Wyeth and Reputable again entered into a contract of carriage but it
turns out that it was not signed by Wyeth’s representative/s but the terms thereof were
observed by the parties since the same have been annually executed since 1989. Under
the contract of carriage, Reputable shall be liable for the loss, destruction or damage of
the products while the same are in transit and until actual delivery to the customers,
salesmen and dealers of the company. Reputable was also required to secure an
insurance policy on the goods so it procured a Special Risk Insurance policy from
petitioner Malayan for the amount of 1 million.

During the effectivity of the policies, Reputable’s truck carrying Wyeth’s goods were
hijacked resulting and the cargo were lost. Philippines First paid Wyeth P2,133,257.00
pursuant to the policy and it demanded reimbursement from Reputable after
subrogation. Having refused to render payment, Philippines First instituted an action
against Reputable but the latter interposed as defenses: 1.) that it is a private carrier;
and 2.) the goods were lost due to force majeure. Reputable also impleaded petitioner
Malayan as 3rd party defendant as it was insured with petitioner for 1 million pesos.
Malayan on the other hand disclaimed liability alleging that the policy does not cover any
loss or damage to property which at the time of the happening of such loss or damage is
insured by any marine policy and that it expressly excluded 3 rd-party liability.

The RTC found Reputable liable to Philippines First for the amount it paid Wyeth and
Malayan to Reputable to the extent of the policy coverage. On appeal, the CA sustained
the RTC’s ruling.
Issues
1. Whether or not Reputable is liable for the loss of the goods including force
majeure.
2. Whether or not there is double insurance in the present case.

Ruling

1. Yes. The Court held that as a private carrier, the extent of Reputable’s liability is
fully governed by the stipulations of the contract of carriage which, in this case,
provides that it is liable to Wyeth for the loss of the goods/products due to any
and all causes whatsoever, including theft, robbery and other force majeure while
the goods are in transit and until actual delivery to Wyeth’s customers, salesmen
and dealers.

2. No. Under Section 93 of the Insurance Code, double insurance exists where the
same person is insured by several insurers separately in respect to the same
subject and interest and risk. In order for it to arise, the following requisites must
be present: 1.) the person insured is the same; 2.) two or more insurers insuring
separately; 3.) there is identity of subject matter; 4.) there is identity of interest
insured; and 5.) there is identity of the risk or peril insured against. In the present
case, although both policies were issued over the same subject matter and both
covered the same peril insured against, the said policies were issued to different
persons or entities. Wyeth was the insured under the Marine Policy while
Reputable is the insured under the SR Policy.

That Reputable procured the SR Policy over the goods of Wyeth pursuant merely
to the stipulated requirement under its contact of carriage does not make
Reputable a mere agent of Wyeth. The interest of Wyeth over the property
subject matter of both insurance contracts is also different and distinct from that
of Reputable’s. The policy issued by Philippines First was in consideration of the
legal and/or equitable interest of Wyeth over its own goods. On the other hand,
what was issued by Malayan to Reputable was over the latter’s insurable interest
over the safety of the goods, which may become the basis of the latter’s liability in
case of loss or damage to the property.
Hence, even though the two policies were issued over the same goods and cover
the same risk, there arises no double insurance since they were issued to two
difference persons/entities having distinct insurable interests.
Case No. 33
Isabela Roque and Ong Chiong vs. Intermediate Appellate Court and Pioneer Insurance
and Surety Corporation
G.R. No. L-66935, 11 November 1985

Facts
Manila Bay Lighterage and petitioners entered into a contract of carrigage coverning
about 422.18 cubic meters of logs from Palawan to Manila. Petitioners insured the cargo
against loss with respondent Pioneer for 100,000.00. While on transit, all 811 pieces of
logs were lost because the barge sank somewhere in Palawan. Petitioners alleged and
both the RTC and IAC found, that the barge was not seaworthy that it developed a leak.
IAC also found that one of the hatches were left open causing water to enter and since it
was not provided with the necessary cover, the ordinary splash of sea waves brought
more water inside the barge.

Petitioners demanded payment from Manila Bay but it ignored the demand, and from
respondent Pioneer claiming full amount of the policy but the latter refused payment
alleging that its liability depended upon the total loss by total loss of the vessel only.
Petitioners instituted an action against Manila Bay and respondent Pioneer before the
RTC. The trial court ruled in favor of petitioner. Respondent Pioneer appealed before the
IAC modified the RTC’s decision and absolved Pioneer from liability finding that there
was a breach of implied warranty of seaworthiness on the part of the petitioners and that
the loss of the insured’s cargo was cause by the perils of the ship and not by the perils of
the sea and is therefore not covered by the marine insurance policy.

Issue
Whether or not the loss in the present case is caused by ‘perils of the sea’ so as to
entitle petitioner to recover under the marine insurance policy.

Ruling
No. The term ‘perils of the sea’ extends only to losses caused by the sea damage, or by
the violence of the elements, and does not embrace all losses happening at sea. They
insure against losses from extraordinary occurrences only, such as stress of weather,
winds and waves, lightning, tempests, rocks and the like. It has been said to include only
such losses as are od extraordinary nature, or arise from some overwhelming power,
which cannot be guarded against by the ordinary exertion of human skill and prudence.
Damage done to a vessel by perils of the sea includes every species of damages done
to a vessel at sea, as distinguished from the ordinary wear and tear of the voyage, and
distinct from injuries suffered by the vessel in consequences of her not being seaworthy
at the outset of her voyage as in this case.

In the present case, the Court found that the loss of the cargo was not due to perils of
the sea but by perils of the ship which is a result of the ordinary wear and tear of the
ship, or from the negligent failure of the ship’s owner to provide the vessel with proper
equipment to convey the cargo under ordinary conditions. Hence, this negates the claim
of petitioner under the insurance policy. The purpose of the policy is to secure an
indemnity against accidents which may happen, not against events which must happen.

The Court also held that petitioners cannot validly allege barratry, which refers to any
willful misconduct on the part of the master or crew in pursuance of some unlawful or
fraudulent purpose without the consent of the owner, and to the prejudice of the owner’s
interest. Barratry requires a willful and intentional act in its commission. No honest error
of judgment or mere negligence, unless criminally gross can be barratry. In the present
case, ther is no barratry, only simple negligence or lack of skill.
Case No. 34
Delsan Transport Lines, Inc., vs. American Home Assurance Corporation
G.R. No. 149019, 15 August 2006

Facts:
Delsan received a shipment consisting of 1,986.627 k/l Automotive Diesel Oil at the
Bataan Refinery Corporation for Oil transportation and delivery to the Bacolod City of
Caltex Phils., Inc.. This was insured by respondent against all risks. The ship arrived in
Bacolod. But the discharging of the shipment had to be stopped on account of the
discovery that the port bow mooring of the vessel was intentionally cut or stolen by
unknown persons. And since there is nothing to hold it, the vessel drifted westward,
dragged and stretched the flexible rubber hose attached to the riser, broke the elbow into
pieces, severed completely the rubber hose connected to the tanker from the main
delivery line at the seabed lever and ultimately caused the diesel oil to spill into the sea.

To avoid further spillage, the crew tried water flushing to clear the line but to no avail and
the ship signaled to stop pumping. Assuming that the ship will resume pumping at any
time, the shore tender did not shut the storage tank gate valve and since all the gates
were open, all the oil discharged back-flowed. The loss of the diesel oil due to spillage
was placed at 113.788 k/l while some 435,081 k/l thereof back-flowed from the shore
tank. Caltex then sought recovery from Delsan, but the latter refused to pay. Respondent
then paid Caltex the sum of P479,262.57 for spillage and P1,939,575.37 for black-flow.

Respondent then instituted an action against Delsan as a subrogee of Caltex for the loss
caused by the spillage and another for the loss caused by the backflow. The RTC ruled
in favor of Respondent AHAC on account of its negligence in its duty as a common
carrier. On appeal on the CA, the appellate court affirmed the findings of the trial court
ruling that since the discharged has not been competed at the time the loss occurred,
there was no reason to imply that there was an actual delivery of the cargo to Caltex.
Hence, this present petition.

Issue:
Whether or not the doctrine of contributory negligence is applicable in the present case
so as to exculpate Delsan from liability.
Ruling
No. The Court agrees with the findings of both the trial court and the CA that there was o
contributory negligence on the part of Caltex. The proximate cause of the spillage and
the back-flow of the diesel was due to the severance of the port bow mooring line of the
vessel and the failure of the shore tender to close the storage tank gate valve even as a
check on the drain cock shower that there was still product on the pipeline. The actuation
of the gauger and the escort surveyor, both personnel from Caltex Bulk Depot, negated
the allegation that Caltex was remiss in its duties. As the Court sees it, the crew of the
vessel should have promptly informed the shore tender that the port mooring was cut off.
However, Delsan did not do so on the lame excuse that there was no available banca.
As it is, Delsan’s personnel signaled a red light which was not a sufficient warning
because such signal only meant that the pumping has been finished. Neither the blowing
of the whistle suffice considering the distance of more than 2 kilometers between the
vessel and the Caltex Bulk Depot, aside from the fact that it was not the agreed signal.
Had the gauger and the escort surveyor not gone aboard the vessel to make inquiries,
the shore tender would have not known what really happened. The crew of the vessel
should gave exerted utmost effort to immediately inform the shore tender that the port
bow mooring line was severed.

As a rule, it is upon Delsan to prove that the loss was cause by one of the excepted
causes if it were to seek exemption from responsibility. /Unfortunately, it miserably failed
to discharge this burden of proof.
Case No. 35
A. Magsaysay, Inc., vs. Anastacio Agan
G.R. No. L-6393, 31 January 1955

Facts
A vessel owned by plaintiff was bound for Basco, Batanes from Manila. However, while it
was on a stopover in Cagayan, it ran aground at the mount of Cagayan River and had to
be refloated with the help of Luzon Stevedoring Co., at an agreed compensation.
Respondent, one of the consignees of the cargoes on the vessel, did not make a deposit
or signed a bond to answer for their contribution to the average. Plaintiff instituted an
action against defendant alleging that the expenses incurred in floating the vessel
constituted general average to which both ship and cargo should contribute. Defendant
on the other hand denies liability contending that the stranding of the vessel was due to
the fault, negligence and lack of skill of its master, that the expenses did not constitute
general average. The trial court ruled in favor of plaintiff. Hence this petition.

Issue:
Whether or not the expenses for floating the vessel constituted general average.

Ruling:
No. Under the Code of Commerce, general or gross average s include all the damages
and expenses which are deliberately cause on order to save the vessel, its cargo, or
both at the same time, from a real and known risk. In order for general average to be
present the following requisites must be present: 1.) there must be a common danger;
2.) for the common safety part of the vessel or of the cargo or both is sacrificed
deliberately; 3.) from the expenses or damages caused follows the successful saving of
the vessel and cargo; and 4.) the expenses or damages should have been incurred or
inflicted after taking the proper legal steps and authority.

In the present case, the first element is absent since there is no evidence which would
show that the vessel had to be put afloat to save it from an imminent danger. The vessel
ran aground in fine weather inside the port at the mouth of a river, a place described as
‘very shallow” It would thus appear that the vessel and cargo were at the time in no
imminent fanger or a danger which might ‘rationally be sought to be certain and
imminent’. What appears is that the vessel had to be salvaged in order to enable it to
‘proceed to its port of destination’. It is the safety of the property and not of the voyage
which constitutes the true foundation of general average. As to the second requisite, the
expenses were not incurred for the common safety of vessel and cargo, since they, or at
least the cargo, were not in imminent peril. As to the third requisite, true enough, the
salvage operation was successful but since it was benefit of the vessel and not for the
purpose of saving the cargo. The cargo owners are not in law bound to contribute to the
expenses. The last requisite was also not proven.
Case No. 36
Philippine Home Assurance Corporation vs. Court of Appeals and Eastern Shipping
Lines, Inc.
G.R. No. 106999, 20 June 1996

Facts:
Eastern Shipping Lines (ESLI) loaded on board its vessel 4 cargoes consigned to 4
different consignees from Kobe, Japant to Manila and Cebu. While the vessel was off to
Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the
accommodation area near the engine room on the main deck level. As the crew was
trying to extinguish it, it suddenly exploded causing death and severe injuries to the crew
and instantly setting fire to the whole superstructure of the vessel forcing the master and
crew to abandon the ship. It was later declared to be a constructive total loss and its
voyage was declared abandoned. The vessel was tugged for extinguishment of the fire.
The cargoes which were saved were loaded to another vessel for deliver to their original
port of destination. ESLI charges the consignees several amounts corresponding to
additional freight and salvage charges, all of which were paid by petitioner under protest
and in behalf of the consignee.

As subrogee, petitioner filed a complaint against ESLi for the recovery of the sum paid
on the ground that the same were actually damages directly brought about by the fault,
negligence, illegal act and/or breach of contract of ESLI. For its defense, ESLI alleged
that it exercised the diligence required by law, the fire was due to an unforeseen event,
and that the additional freight charges are demandable under the Bill of Lading and the
salvage charges are collectible under the Salvage Law.

RTC dismissed the Complaints and ruled in favor of ESLI finding that the burning of the
vessel was not the fault or negligence of ESLI but a natural disaster or calamity which
nobody would like to happen. The salvage operations were perfectly legal and charges
made on the goods recovered were legitimate charges. The burning of the vessel
rendered it physically impossible for ESLI to comply with its obligation of delivering the
goods to their port of destination pursuant to the contract of carriage. Under Article 1266
of the Civil Code, the physical impossibility of the prestation extinguishes defendant’s
obligation. It is therefore legal and proper for defendant to demand additional freight from
consignees for forwarding the goods from Japan to Manila and Cebu on board another
vessel. The appellate court affirmed the RTC’s ruling, hence this petition.
Issues
1. Whether or not the lower court erred in finding that the fire was due to fortuitous
event.
2. Whether or not the lower court erred in concluding that the expenses incurred in
saving the cargo are considered general average.

Ruling:
1. Yes. The Court disagrees with the ruling of the RTC and affirmed by the CA. It
found that the fire which resulted to the constructive total loss of the vessel was
not due to unforeseen event but due to the fault or negligence of EXLI’s captain
and crew. First, the acetylene cylinder which was fully loaded should not have
been stored in the accommodation area near the engine room where the heat
generated therefrom could cause it to explode by reason of spontaneous
combustion. Respondent should have easily seen that it contained highly
inflammable material, was in real danger of exploding because it was stored in
close proximity to the engine room. Second, ESLI should have known that by
storing the acetylene cylinder in the accommodation area which was reserved to
passengers, it unnecessarily exposed its passengers to grave danger and injury.
Third, the fact that the acetylene cylinder was checked, tested and examined and
subsequently certified as having complied with the safety measures and standard
before it was loaded and while on board the ship only shows to a great extent that
negligence was present in the handling of the acetylene cylinder after it was
loaded and while on board the ship. Had ESLI and its agents not been negligent
in storing the acetylene cylinder near the engine room, then the same would not
have leaked and exploded during the voyage.
2. Yes. As a rule, general or gross averages include all damages and expenses
which are deliberately caused in order to save the vessel, its cargo, or both at the
same time, from a real and known risk. Although the present case may
technically fall within the purview of the said provisions, the formalities prescribed
under Article 813 and 814 of the Code of Commerce, which, among others,
requires for the resolution of the captain, adopted after deliberation with the
sailing mate and other officers of the vessel, and after hearing the persons
interested in the cargo who may be present, were not me. As such, ESLI cannot
validly claim for contribution from the consignees of the cargo at the time of the
occurrence of the average. It must therefore refund to petitioner the amount the
latter paid under protest for additional freight and salvage charges in behalf of the
consignees.
Case No. 37
Jacqueline Jimenez Vda. De Gabriel vs. Court of Appeals and Fortune Insurance &
Surety Company, Inc.
G.R. No. 103883, 14 November 1996

Facts
Marcelino Gabriel was employed by Emerald Construction & Development Corporation
(ECDC) at its construction project in Iraq. He was covered by a personal accident
insurance in the amount of 100,000.00 procured by ECDC. The risks covered was fr
bodily injury caused by violent accidental external and visible means which injury would
solely and independently of any other cause result in death or disability. During the
policy, Marcelino died and a year later, ECDC reported the death to private respondent
by telephone. Among the documents submitted were the death certificate stating that the
reason of death was not yet known and an autopsy report which states that de to
advanced state of the postmortem decomposition, cause of death could not be
determined. Subsequently, respondent denied the claim of ECDC on the ground of
prescription. Petitioner filed a complaint against respondent alleging that her husband
died of electrocution while in the performance of his work and demanded for the
insurance indemnification and other damages.

Private Respondent on the other hand alleged that the documents did not disclode the
cause of Gabriel’s death, and invoking prescription under Section 384 of the Insurance
Code.

The RTC ruled in favor of petitioner ruling that private respondent waived the defense
that Gabriel’s death was not cause by the insured peril and that the complaint has been
timely filed within tone year from private respondent’s denial of the claim.

Both parties appealed to the CA. In its decision, the appellate court reversed the
decision of the RTC ruling that petitioner failed to substantiate her allegation that her
husband’s death was caused by a risk insured against. The only evidence she presented
were her own affidavit and a letter allegedly written by a co-worker of the deceased in
Iraq which were unfortunately for her, were held to be both hearsay. Hence, this petition.

Issues
1. Whether or not prescription had already set in.
 2. Whether or not private respondent has waived its defense that the death was not
caused by the peril insured against.

Ruling
1. Yes. The Court held that private respondent was correct in invoking Section 384
of the Insurance Code which provides that any person having claim shall, without
any unnecessary delay, present to the insurance company concerned a written
notice of claim which must be file within six months from the date of he accident,
otherwise the claim shall be deemed waived. Action or suit for recovery of
damage due to loss or injury must be brought, in proper cases, with the
Commissioner or the Courts within one year from denial of the claim, otherwise,
the claimant’s right of action shall prescribe.

The notice of death was given to private respondent more than a year after the
death of petitioner’s husband. Private Respondent, in invoking the prescription,
was not referring to the one-year period from the denial of the claim within which
to file an action against the insurer but obviously to the written notice of claim that
had to be submitted within sic months from the time of the accident.

2. No. There is no basis in fact and in law to hold that respondent was deemed to
have waived he defense. The insurance policy expressly provided that to be
compensable, the injury or death should be caused by “violent accidental external
and visible means”. In attempting to prove the cause of her husband’s death were
a letter sent to her by her husband’s co-worker, stating that Gabriel died when he
tried to haul water out of the tank while its submerged motor was still functioning,
and petitioner’s sinumpaang salaysay which merely confirmed the receipt and
stated the contents of the letter.

In accident insurance, the insured’s beneficiary has the burden of proof in

demonstrating that the cause of death is due to the covered peril. Once that fact
is established, the burden shifts to the insurer to show any excepted peril that
may have been stipulated by the parties. An accident insurance is not thus to be
likened to an ordinary life insurance where the insured’s death, regardless of the
cause thereof, would normally be compensable. The latter is akin in property
insurance to an “all risk” coverage where the insured, on the aspect of burden of
proof, has merely to shown the condition of the property insured when the policy
attaches and the fact of loss or damage during the period of the policy and where,
thereafter, the burden would be on the insurer to shown any “excluded peril”.
When, however, the insured risk is specified, like in the case before us, it lies with
the claimant of the insurance proceeds to initially prove that the loss is caused by
the covered peril.
Case No. 38
Figuracion Vda. De Maglana, et al., v. Hon. Francisco Consolacion and Afisco Insurance
Corporation
G.R. No. 60506, 06 August 1992

Facts
Lope Maglana was an employee of Bureau of Customs. Sometime in 1978, on his way
to work driving a motorcycle owned by BOC, he met an accident which resulted to his
death. The jeep that bumped him was driven by Pepito Into who was at the time
overtaking another jeep driven by Destrajo. The point of impact was on the lane of the
motorcycle and the deceased was thrown from the road. Heirs of Maglana, herein
petitioners, filed an action for damages against Destrajo and respondent insurer. A
criminal information for homicide thru reckless imprudence was also filed against Into.

The RTC ordered Destrajo to pay petitioners for filing to exercise sufficient diligence as
operator of the jeepney, but respondent insurance company was merely ordered to
reimburse Destrajo whatever amounts the latter shall have paid up to the extent of its
insurance coverage.

Petitioners filed an MR alleging that AFISCO should be be merely held secondary 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 up to the extent of
the insurance coverage. The lower court denied the MR 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. It’s second MR was likewise denied, hence this
petition.

Issue
1. Whether or not AFISCO can be held directly liable by the petitioners.
2. Whether or not the insurance company is directly and solidarily liable with the
negligent operator to the extent of its insurance coverage.

Ruling
1. Yes. The insurance policy in the present case expressly holds AFISCO directly
liable to petitioners. Citing Shafer cs. Judge, RTC of Olangapo City , the Court
reiterated that where the 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 insured against the insured. The underlying reason behind the
third party liability of the Compulsory Motor Vehicle Liability Insurance is to
protect insured persons against the insolvency of the insured who causes such
injury, and to give such injure person a certain beneficial interest in the proceeds
of the policy.

2. No. Citing Malayan Insurance Co., Inc. vs. CA, the Court held that 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. If petitioners were solidarily liable with said
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.

The Court then held 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. As such, petitioners have the option either to claim the 15,000
from AFISCO and the balance from Destrajo or enforce the entire judgment from
Destrajo subject to the reimbursement from AFISCO to the extent of the
insurance coverage.
Case No. 39
Willian Tiu and Virgilio Te Laspinas vs. Pedro Arriesgado, Benjamin Condor, Sergio
Pedrano and Philippine Pheonix Surety and Insurance, Inc.
G.R. No. 138060, 01 September 2004

Facts
A bus owned by William Tiu, driven by Laspinas, rammed into a cargo truck parked
beside the National Highway because its tire exploded. The lights of the truck were on
and a tire was placed 6 fathoms away.

Respondents Arriesgado and his wife were passengers of the bus. He suffered from
injuries while his wife dies. He files a complaint for breach of contract of carriage,
damages and attorney’s fees against Tiu and Laspinas alleging that th bus was driving
as a fast and high speed along the national road and that petitioner did not take
precautionary measures to avoid the accident, and that by defendant-driver’s failure to
observe utmost diligence, they failed to safely reach their destination.

Petitioners filed a third party complaint against the truck owner and driver and its insurer
respondent PPSII. Petitioner alleges that the was parked in a slanted manner, its read
portion almost in the middle of the highway, no early warning device was displayed and
that it was left unattended by its driver.

The RTC ruled against the petitioner holding that as a common carrier, had Laspinas not
been driving at a fast pace, he could have avoided hitting the truck. It then held Laspinas
negligent. The fact that the truck was without any warning device is not sufficient to
impute negligence because the tail light were on and the road was well lighted. CA
affirmed the decision of the RTC, but reduced the award for moral and exemplary
damages. According to the CA, the action was not based on quasi-delict but breach of
contract of carriage. As a common carrier, Tiu has to porved that extraordinary diligence
was observed. For failing to do so, it is liable.

In the present appeal, petitioner alleges that since PPSOO had admitted that while it
attended to and settled the claims of the other injured passengers, respondent
Arriesgado’s claim remained unpaid as it was beyond the scheduled indemnity under the
insurance contract. They argue that PPSII should have settled the claim in accordance
with the scheduled indemnity instead of just denying the same.
Issue
Whether or not PPSII may be held liable to settle the claim of Arrisgado.

Ruling

Yes. The insurance contract in the present case was issued pursuant to the Compulsory
Motor Vehicle Liability Insurance Law. It provides that the limit of the insurer’s liability for
each person was 12,000 while the limit per accident was pegged at 50,000. An insurer in
an indemnity contract for third party liability is directly liable to the injured party up to the
extent specified in the agreement but it cannot e held solidarily liable beyond that
amount. PPSOO could not then just deny Tiu’s claim; it should have paid 12,000 for the
death of Felisa Arriesgado, and respondent Arriesgado’s hospitalization. The total
amount, even when added to that of the other injured passengers, which it claimed to
have settled would not exceed the 50,000 limit under the insurance agreement.

The nature of the Compulsory Motor Vehicle Liability Insurance is such that it is primarily
intended to provide compensation for the death or bodily injuries suffered by innocent
third parties or passengers as a result of the negligent operation and use of motor
vehicles. The victims and/or their dependents are assured of immediate financial
assistance, regardless of the financial capacity of motor vehicle owners.
Case No. 40
Tio Khe Chio vs. CA and Eastern Assurance and Surety Corporation
G.R. No. 76101-02, 30 September 1991

Facts:
Petitioner imported 1,000 bags of fishmeal valued at 36,000.30 dollars insured with
respondent EASCO and shipped on board a vessel owned by Far Eastern Shipping
Company. When the goods arrived in Manila, they were found to have been damaged by
sea water rendering them useless. Both EASCO and Far Eastern refused to pay
petitioner. Hence, he instituted an action for damages against EASCO and Far Eastern.
EASCO filed a counterclaim demanding for the unpaid premiums.

The trial court ordered EASCO and Far Easter to pay petitioner solidarily for the sum of
105,986 less the amount of 18,387 for unpaid premiums with the interest at legal rate
from the filing of the complaint.

The judgment became final as to EASCO but Eastern Shippine appealed and was
absolved from liability. Upon motion by the petitioner, the RTC issued a writ of execution
against EASCO and fixed the rate of interest at 12%. EASCO moved to quash the writ
alleging that the rate should be 6% pursuant to Article 2209 of the Civil Code. The RTC
denied the motion, and on appeal, the CA reduced the rate to 6% per annum. Hence this
petition.

Issue
Whether or not the appellate court is correct in reducing the rate to 6% per annum.

Ruling
Yes. Sections 243 and 244 of the Insurance Code provides that Refusal or failure to pay
the loss or damage within the time prescribed will entitle the assured to collect interest
on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling
prescribed by the Monetary Board, unless such failure or refusal to pay is based on the
ground that the claim is fraudulent. In the case at bar, the CA made no finding that there
was an unjustified refusal or withholding of payment on petitioner’s claim. As such,
Sections 243 and 244 of the IC ae not applicable to the present case. They apply only
when the courts finds an unreasonable delay or refusal in the payment of the claims.
In a line of cases decided by the Supreme Court, it has been consistently held that the
legal rate is 6% not 12% where the judgment award is based on an action for damages
for personal injury, not use or forbearance of money, goods or credit. The applicable rate
is Article 2209 of the Civil Code which states that if the obligation consists in the
payment of a sum of money and the debtor incurs delay, the indemnity for damages,
there being no stipulation to the contrary, shall be the payment of interest agreed upon,
and in the absence of stipulation, the legal interest which is six percent per annum.