Case Digest (G.R. No. 244407)
Facts:
In UCPB General Insurance Co., Inc. vs. Asgard Corrugated Box Manufacturing Corporation (G.R. No. 244407, January 26, 2021), UCPB General Insurance Co., Inc. (“UCPB Insurance”) sought relief from the Court of Appeals’ Decision dated August 31, 2018 and Resolution dated January 8, 2019, which upheld the Regional Trial Court’s (RTC) February 17, 2017 judgment ordering UCPB Insurance to pay Asgard Corrugated Box Manufacturing Corporation (“Asgard”) ₱147,000,000.00 in actual damages under an Industrial All Risk Policy covering machinery and equipment from August 1, 2009 to August 1, 2010. The policy was issued following Asgard’s failed corporate rehabilitation petition (denied June 9, 2009) and stemmed from a Toll Manufacturing Agreement (TMA) dated February 1, 2006 between Asgard and Milestone Paper Products, Inc. (“Milestone”), automatically extended month-to-month after January 31, 2008 absent a 60-day written termination notice. Milestone had installed and later replaced key parCase Digest (G.R. No. 244407)
Facts:
- Toll Manufacturing Agreement (TMA)
- On February 1, 2006, Asgard Corrugated Box Manufacturing Corp. (Asgard) and Milestone Paper Products, Inc. (Milestone) executed a TMA whereby Asgard would toll-manufacture paper products for Milestone until January 31, 2008.
- Clause 19 provided automatic month-to-month extension unless terminated by either party upon 60-day prior written notice; termination or expiration would not affect obligations incurred prior thereto.
- Milestone’s Involvement and Equipment Contribution
- Milestone initially managed Asgard’s operations to assess business viability, installed new paper-mill and corrugating equipment, and later contributed such equipment as capital.
- In 2007, the parties agreed that Milestone would modify Asgard’s corrugating machines by replacing vital parts with Milestone’s own components.
- Corporate Rehabilitation and Policy Procurement
- December 22, 2007: Asgard filed an amended petition for corporate rehabilitation, proposing Milestone’s machinery contribution worth ₱150 million; petition denied June 9, 2009 for lack of feasibility.
- August 7, 2009: Asgard and Milestone obtained Industrial All Risk Policy No. HOF09FD-FAR087915 from UCPB General Insurance Co., Inc. (UCPB Insurance), naming Milestone and/or Asgard as insureds, covering Asgard’s machinery and equipment (sum insured up to ₱500 million) for August 1, 2009–August 1, 2010.
- Loss and Claim Denial
- July 15, 2010: Milestone withdrew its stocks, machinery, and replaced equipment from Asgard’s plant in Novaliches, causing malicious damage to corrugating machines and accessories.
- Asgard filed an insurance claim under the Malicious Damage Endorsement; UCPB Insurance denied coverage, invoking Section 87 (now 89) of the Insurance Code (no liability for willful acts of the insured) and absence of “cross-liability” cover.
- Judicial Proceedings Through CA
- Asgard sued for actual damages (₱147 million), exemplary damages (₱500,000), and attorney’s fees (₱400,000). RTC granted UCPB’s summary judgment, finding Milestone had insurable interest as co-insured.
- CA reversed, remanding for trial on factual disputes (existence of insurable interest at time of loss). On appeal by UCPB, RTC granted Asgard’s claim in full; CA in 2018 deleted exemplary damages and attorney’s fees but affirmed liability.
- Supreme Court Petition
- UCPB petitioned for partial review under Rule 45, contesting:
- CA’s finding that Milestone lacked insurable interest at loss date;
- Inapplicability of Section 87/89 notwithstanding Milestone’s willful damage;
- Scope of Malicious Damage Endorsement.
- Asgard maintained Milestone’s insurable interest had terminated when it withdrew equipment, and that the Endorsement covered any malicious act of any person.
Issues:
- Did Milestone possess an insurable interest in Asgard’s corrugating machines at the time of the July 15, 2010 loss, given the TMA’s automatic month-to-month extension and lack of written termination?
- Is UCPB Insurance relieved from liability under Section 89 of the Insurance Code for loss caused by the willful act of a co-insured (Milestone)?
- Does the Malicious Damage Endorsement operate independently, or only as an extension of the Riot and Strike Endorsement requiring a strike/lock-out context?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)