Case Summary (G.R. No. 198174)
Key Dates
- Insurance Policy Period: February 26, 2007 – February 26, 2008
- Theft Incident: April 16, 2007
- Claim Denial: July 5, 2007
- RTC Decision: December 19, 2008
- CA Decision: May 31, 2011
- SC Decision: September 2, 2013
Applicable Law
- 1987 Philippine Constitution
- Insurance Code
- Rules of Court, Rule 45 (Petition for Review on Certiorari)
Facts
Respondent entered into a motor car insurance policy covering her Toyota Revo DLX DSL for P630,000.00. On April 16, 2007, she directed her driver, Lanuza, to take the vehicle for a tune-up. The driver never returned the vehicle. After police and insurer notifications, petitioner denied the claim, invoking the policy’s exception barring “any malicious damage caused by the Insured, any member of his family or by a person in the Insured’s service.”
Policy Terms and Exceptions
Section III – Loss or Damage: Covers loss or damage from collision, fire, theft, malicious act, and transit risks, subject to limits and deductibles.
Exceptions to Section III include:
- Deductible of 1% of fair market value (minimum Php3,000)
- Consequential loss, wear and tear, mechanical breakdown
- Tire damage unless concurrent with vehicle damage
- “Any malicious damage caused by the Insured, any member of his family or by a person in the Insured’s service.”
Denial of Claim
Petitioner construed “malicious damage” to encompass loss by theft, arguing that theft by the driver falls under paragraph 4 of the Exceptions. Respondent countered that the exception applies only to damage (injury to property), not loss (failure to keep possession).
RTC Decision
The trial court ruled for respondent, awarding P466,000.00 plus 6% interest, attorney’s fees (P65,000.00), and costs, finding no clear exclusion of theft by a person in the insured’s service. It held that the policy’s theft coverage lacked any qualification on the identity of the perpetrator.
CA Decision
The Court of Appeals affirmed the RTC in toto, applying the principle that restrictive insurance provisions, if ambiguous, must be interpreted in favor of the insured and strictly against the insurer.
Issue
Whether the loss of the insured vehicle by theft committed by the insured’s driver is excluded from coverage under paragraph 4 of the Exceptions to Section III.
Supreme Court’s Analysis
Loss vs. Damage—Common Usage
- “Loss” means failure to keep possession; “damage” means injury or deterioration.
- Paragraph 4 refers only to “malicious damage,” not to loss of property.
Policy Language and Intent
- Clear and unambiguous provisions must be given their plain meaning.
- The policy separately uses “loss” and “damage,” indicating distinct concepts.
- No language in the exceptions bars coverage for theft by a person in the insured’s service.
Construction of Insurance Contracts
- Insurance contracts are contracts of adhesion and must be construed liberally in favor of the insured and strictly against the insurer.
- Ambiguities or equivocal terms are resolved in favor of coverage.
- Limitations o
Case Syllabus (G.R. No. 198174)
Case Background
- Petitioner, Alpha Insurance and Surety Co., filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court.
- The petition assails the Decision dated May 31, 2011 and Resolution dated August 10, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 93027.
- The dispute arose from an insurance contract executed on February 21, 2007 between petitioner and respondent covering a Toyota Revo DLX DSL.
Insurance Contract Terms
- Policy No. MAND/CV-00186 covers losses or damage to the insured vehicle from February 26, 2007 to February 26, 2008.
- The insurer agreed to pay up to Six Hundred Thirty Thousand Pesos (P630,000.00) for loss or damage.
- Section III (“Loss or Damage”) broadly indemnifies the insured against accidental collision, fire, theft, malicious act, and transit risks.
- “Exceptions to Section III” exclude:
• Deductible of 1% of Fair Market Value (minimum Php3,000.00) per loss.
• Consequential loss, wear and tear, mechanical breakdowns, tire damage unless concurrent with other damage.
• “Any malicious damage caused by the Insured, any member of his family or by a person in the Insured’s service.”
Circumstances of Loss
- On April 16, 2007 at about 9:00 a.m., respondent’s driver, Jose Joel Salazar Lanuza, took the vehicle for tune-up and failed to return it.
- Respondent made diligent efforts to locate the vehicle but without success.
- She reported the theft to the police and notified petitioner, demanding P630,000.00 as insurance proceeds.
Claim and Denial by Petitioner
- By letter dated July 5, 2007, petitioner denied the claim, citing Exception 4 to Section III, which excludes malicious damage by a person in the insured’s service.
- Petitioner interpreted “damage” to include loss by theft