Case Summary (G.R. No. 210302)
Key Dates and Procedural Posture
- Policy period: March 31, 2009 – March 31, 2010.
- Fire and loss: May 24, 2009.
- Claim filed by Integrated Micro: May 25, 2009.
- Initial denial by Standard Insurance: letter dated February 24, 2010 (received by Integrated Micro).
- Reconsideration denied by Standard Insurance: letter dated April 12, 2010 (received April 15, 2010).
- Complaint for specific performance and damages filed in the RTC: April 11, 2011.
- RTC denied insurer’s motion to dismiss (Nov. 9, 2011).
- Court of Appeals (CA) granted insurer’s petition for certiorari and annulled RTC orders (Decision dated March 26, 2013).
- Supreme Court decision under review: affirmed CA; petition for review on certiorari denied.
Applicable Law and Governing Authority
- Constitution: 1987 Philippine Constitution (governing constitutional framework for decisions rendered 1990 or later).
- Rules of Court: 1997 Rules of Civil Procedure (in particular Rule 14, Section 11 on service upon juridical entities).
- Contract and Civil Law principle: Civil Code, Article 1370 (literal interpretation where terms are clear and unambiguous).
- Relevant precedents cited: Eagle Star Co., Ltd. v. Chia Yu; Summit Guarantee; Sun Insurance Office, Ltd. v. Court of Appeals; H.H. Hollero Construction, Inc. v. GSIS; decisions on service and substantial compliance (Villarosa; Spouses Mason).
Insurance Policy Provision at Issue
The policy’s General Conditions (Claim provision) states in essence: if a claim is made and rejected and an action is not commenced in the Insurance Commission or any court within twelve (12) months from receipt of notice of such rejection, the claim shall be deemed abandoned and not recoverable. The clause contains no qualification that the 12‑month period waits for a final administrative resolution or for denial of a motion for reconsideration.
Issues Presented
- Whether Integrated Micro’s cause of action prescribed under the 12‑month contractual period counting from the insurer’s rejection.
- Whether service of summons upon the legal assistant or secretary of the insurer’s in‑house counsel constituted valid service under Rule 14, Section 11 of the 1997 Rules of Civil Procedure.
Contract Interpretation and the Accrual of Cause of Action
The Court applied the established rule that clear and unambiguous contractual terms are to be enforced according to their plain and ordinary meaning (Civil Code Art. 1370; Alpha Insurance precedent). The policy’s claim clause explicitly conditions the right to sue on commencing suit within 12 months “from receipt of notice of such rejection.” Because the clause does not state that the 12‑month period should be counted from a later or “final” rejection after reconsideration, the parties intended the accrual to run from the insurer’s initial communicated rejection.
Prescription Analysis and Precedent
- CA’s view: The complaint was filed beyond the 12‑month period measured from the initial denial (Feb. 24, 2010) and therefore prescribed.
- Insured’s argument: Relied on Eagle Star and argued accrual occurs only upon final rejection; claimed the February 24 letter was an initial rejection and that the 12‑month period should run from April 15, 2010 (receipt of denial of reconsideration).
- Supreme Court analysis: While Eagle Star used “final rejection” to avoid premature litigation, subsequent and controlling authorities (Sun Insurance; H.H. Hollero) clarify that “rejection” in such contractual clauses means the insurer’s rejection in the first instance; allowing tolling by filing for reconsideration would require express contractual stipulation and would spawn procedural uncertainties (how many reconsideration rounds, formality required, etc.). The Court held that accrual occurs upon the insurer’s communicated refusal, expressly or impliedly. Applying that rule, the initial denial dated February 24, 2010 triggered the 12‑month period; the complaint filed April 11, 2011 was therefore beyond the contractually stipulated period and barred.
Service of Summons Analysis
- Governing provision: Rule 14, Section 11 (1997 Rules), which prescribes authorized persons for service upon domestic private juridical entities: president, managing partner, general manager, corporate secretary, treasurer, or in‑house counsel.
- Change from prior rule: The 1997 Rules narrowed and specifically enumerated authorized recipients, displacing the broader agent‑based service and effectivel
Case Syllabus (G.R. No. 210302)
Facts / Antecedents
- In March 2009, a panel of insurers consisting of Standard Insurance Co., Inc. (Standard Insurance), UCPB General Insurance, Pioneer Insurance and Surety Corporation, BPI M/S Insurance Corporation, and Malayan Insurance Co., Inc. issued Policy No. HOF09FD-FAR086036 insuring Integrated Micro Electronics, Inc. (Integrated Micro) against "all risks of physical loss, destruction of, or damage, including fire" for March 31, 2009 to March 31, 2010.
- On May 24, 2009, a fire occurred at Integrated Micro's building, damaging production equipment and machinery.
- Integrated Micro filed a claim for indemnity with Standard Insurance on May 25, 2009.
- Standard Insurance denied the claim by letter dated February 24, 2010.
- Integrated Micro sought reconsideration of the denial; Standard Insurance denied reconsideration in a letter dated April 12, 2010, which Integrated Micro received on April 15, 2010.
- On April 11, 2011 Integrated Micro filed a complaint for specific performance and damages against Standard Insurance before the RTC, seeking actual damages of US$1,117,056.84 or its peso equivalent at time of loss (P52,892,641.35).
- Standard Insurance moved to dismiss on grounds of invalid service of summons, lack of cause of action, and prescription.
- Standard Insurance alleged the summons was served on the legal assistant/secretary of its in-house counsel, not authorized to receive summons under Section 11, Rule 14 of the 1997 Rules of Civil Procedure.
- Standard Insurance argued the mere allegation of occurrence of fire is insufficient to establish a cause of action because the policy requires the fire be unforeseen, sudden, and accidental.
- Standard Insurance contended Integrated Micro's cause of action had prescribed because the complaint was filed more than 12 months after notification of claim denial (February 24, 2010).
- On November 9, 2011, the RTC denied the motion to dismiss and directed Standard Insurance to file a responsive pleading; its motion for reconsideration was denied by the RTC.
- Standard Insurance filed a petition for certiorari with the Court of Appeals (CA-G.R. SP No. 124433).
- On March 26, 2013, the Court of Appeals granted the petition, ruling Integrated Micro's cause of action had prescribed and that service of summons was invalid; the CA nullified and set aside the RTC orders dated November 9, 2011 and February 13 (year not specified in source extract).
- Integrated Micro's motion for reconsideration to the CA was denied, prompting this Petition for Review on Certiorari under Rule 45 to the Supreme Court.
Procedural Timeline (dates and filings)
- March 31, 2009: Policy effective date (policy covers March 31, 2009 to March 31, 2010).
- May 24, 2009: Fire occurred.
- May 25, 2009: Claim for indemnity filed by Integrated Micro.
- February 24, 2010: Standard Insurance denied the claim (letter dated).
- April 12, 2010: Standard Insurance denied reconsideration (letter dated); received by Integrated Micro on April 15, 2010.
- April 11, 2011: Integrated Micro filed complaint before RTC (specific performance and damages).
- November 9, 2011: RTC denied motion to dismiss and ordered respondent to file answer.
- March 26, 2013: Court of Appeals decision granting petition of Standard Insurance and dismissing case for prescription and invalid service.
- Subsequent denial of CA motion for reconsideration; Petition for Review to Supreme Court filed (docket G.R. No. 210302) and decided August 27, 2020.
Issues Presented to the Supreme Court
- Whether Integrated Micro’s cause of action had prescribed under the policy’s 12-month period after "receipt of notice of such rejection."
- Whether the service of summons upon the legal assistant or secretary of Standard Insurance's in-house counsel constituted valid service under Section 11, Rule 14 of the 1997 Rules of Civil Procedure.
Arguments of Petitioner (Integrated Micro Electronics, Inc.)
- Integrated Micro contended its cause of action had not prescribed because the cause of action accrues only when the insurer finally rejects the claim, citing Eagle Star Co., Ltd. et al. v. Chia Yu (96 Phil. 696, 1955).
- Integrated Micro argued the February 24, 2010 letter was only an initial denial and did not prejudice its request for reconsideration; thus the 12-month prescriptive period should be reckoned from April 15, 2010 when Integrated Micro received Standard Insurance’s denial of its request for reconsideration.
- Integrated Micro asserted that service of summons upon the legal assistant or secretary of the insurer’s in-house counsel should constitute substantial compliance and be considered valid because Standard Insurance actually received the summons.
Arguments of Respondent (Standard Insurance Co., Inc.)
- Standard Insurance maintained the summons was invalidly served because it was served on the legal assistant/secretary of its in-house counsel, a person not listed in Section 11, Rule 14 of the 1997 Rules as authorized to receive summons for a corporation.
- Standard Insurance argued the complaint should be dismissed for lack of cause of action, contending the policy requires the fire to be unforeseen, sudden, and accidental and mere allegation of fire is insufficient.
- Standard Insurance argued Integrated Micro’s cause of action had prescribed because the 12-month period runs from the date of denial of the claim (February 24, 2010), and the complaint was filed on April 11, 2011, beyond the 12-month period.
Court of Appeals' Decision (March 26, 2013) — Findings and Reasoning
- The CA interpreted the policy clause stating that if a claim is made and rejected, an action or suit must be commenced within 12 months "from receipt of notice of such rejection," and concluded the complaint was filed out of time.
- The CA relied on jurisprudence that the one-year period is to be counted from the date of rejection by the insurer, as this is when the cause of action accrues (citing Summit Guarantee, et al. v. Hon. De Guzman).
- The CA determined Integrated Micro had until February 24 (presumably 2011) to file, but filed on April 11, 2011, "a period of one and a half months after the cause of action has prescribed."
- The CA also found the service of summons invalid because it was served on the legal assistant