Title
Platinum Group Metals Corporation vs. The Mercantile Insurance Co., Inc.
Case
G.R. No. 253716
Decision Date
Jul 10, 2023
Mining firm claimed insurance for trucks damaged during armed attack; court ruled insurer not liable due to excepted peril of insurrection under policy.
insurance policy
breach of obligation
insurable interest

Case Summary (G.R. No. 253716)

Factual Background

PGMC is a mining company that procured from Mercantile a Special Risks Policy effective August 8, 2011 to August 8, 2012, insuring one hundred brand new Sinotruck Howo 6x4 tipper trucks at P2,084,109.88 per unit, for a total sum insured of P208,410,988.00. On October 3, 2011, at least three hundred armed persons who identified themselves as members of the Communist Party of the Philippines/New People’s Army/Nationalist Democratic Front (CNN) simultaneously raided and seized control of three mining sites in Claver, Surigao del Norte, including PGMC’s plant site; PGMC employees were held hostage, the attackers expressed political grievances and demands, and the attackers fired upon and burned facilities, equipment, and vehicles, resulting in the destruction or total loss of eighty-nine of the insured trucks. PGMC requested an adjuster and submitted claims to Mercantile, which denied the claim on August 29, 2012, alleging that the losses were caused by riot, civil commotion, insurrection, or rebellion—perils expressly excepted under the policy.

Claims and Pleadings

PGMC filed suit in the RTC on August 29, 2013, seeking recovery of the insurance proceeds in the amount of P208,410,988.00, legal interest, attorney’s fees, and costs. Mercantile filed an Answer denying liability and asserting, among others, the defense that the loss resulted from excepted perils under Policy Conditions 21(g) and 21(h) (strikes, riots, civil commotions, insurrection, rebellion), and raised multiple procedural and affirmative defenses including lack of jurisdiction, improper venue, absence of the real party in interest, failure to comply with conditions precedent, and defects in verification and certification against forum shopping.

Trial Proceedings and Evidence

Pretrial and trial were conducted. PGMC presented nine witnesses and lodged a formal offer of evidence; the RTC admitted Exhibits “A” to “L” but denied Exhibits “M” to “S” for failure to mark them at pretrial. Mercantile filed its own Motion for Reconsideration with Motion to Admit its Formal Offer of Evidence and tendered a Formal Offer of Evidence, but the RTC did not rule on that motion before it rendered its decision. The parties’ documentary exhibits became common exhibits in the record, and the RTC’s factfinding repeatedly referred to various documents, including Mercantile’s policy documents.

RTC Ruling and Relief

The RTC, in its November 6, 2017 Decision, found for PGMC, held that the policy’s exclusion clauses were ambiguous and therefore to be construed in favor of the insured, and awarded PGMC P183,260,779.32 as insurance proceeds. Upon post-decision proceedings the case was re-raffled and Branch 132 granted PGMC’s partial reconsideration, ordering additional relief including six percent per annum interest from filing, attorney’s fees of Php18,000,000.00, and costs of suit of Php4,470,766.05.

Court of Appeals Decision

On appeal, the CA reversed and set aside the RTC decisions and dismissed the complaint. The CA grounded its reversal principally on two findings: first, that the RTC had failed to rule on Mercantile’s Motion to Admit Formal Offer of Evidence and therefore could not be deemed to have considered Mercantile’s documentary evidence for the purposes for which they were offered; and second, that PGMC failed to establish an insurable interest in the trucks because the contracts of sale submitted to prove ownership were photocopies and not the best evidence required under Section 3, Rule 130, Rules of Court. The CA therefore concluded that PGMC had no right to claim under the insurance policy and did not reach the question whether the proximate cause was an excepted peril.

Contentions before the Supreme Court

PGMC petitioned for certiorari, contending that the CA erred in inferring that the RTC disregarded Mercantile’s exhibits because the RTC in fact referred to and relied on documentary exhibits common to both parties and that the alleged procedural omission was a minor technicality that did not prejudice the parties. PGMC further argued that the CA wrongly shifted the burden on insurable interest to PGMC and that the evidence on record, including testimony of its Executive Vice President Atty. Dante R. Bravo, established PGMC’s insurable interest and the fact of loss. Mercantile maintained that the CA correctly found absence of insurable interest, that PGMC’s documentary proofs were inadmissible secondary evidence, that PGMC failed to prove total destruction of the trucks, and that, in any event, the loss fell within the policy’s excepted perils.

Legal Issue Presented

The principal issue framed for the Court’s review was whether the Court of Appeals erred in reversing the RTC Decision and Resolution based on: (a) the inference that the RTC did not consider Mercantile’s documentary exhibits and the purposes for which they were offered; and (b) the finding that PGMC failed to prove an insurable interest in the damaged trucks.

Standard of Review and Formal Offer Rule

The Court reiterated that petitions for review on certiorari ordinarily raise questions of law, but the exception applies when appellate factfinding diverges from the trial court’s findings. The Court reviewed the law on formal offers of evidence and recognized the general rule that evidence not formally offered during trial cannot be used against a party; however, the Court applied the relaxed approach established in its jurisprudence (citing Penoso v. Dona, Spouses Bautista v. Del Valle, and Sabay v. People) that evidence not formally offered may nonetheless be admitted where (a) the evidence was duly identified by testimony duly recorded, and (b) the evidence was incorporated in the records. The Court found that Mercantile had filed a formal offer, that the RTC repeatedly relied on Mercantile’s exhibits in its decision, that some exhibits were common to both parties, and that remand or exclusion of the exhibits would unfairly delay or prejudice the parties; accordingly, the Court exercised liberal construction of procedural rules and treated Mercantile’s exhibits as having been considered.

Insurable Interest Analysis

Applying Section 13 and Section 14 of Presidential Decree No. 612 and the applicable authorities, the Court held that PGMC had an insurable interest in the trucks. The Court noted that PGMC was named as the insured in the policy, that the insurance policy bearing the list of insured trucks was a common exhibit, and that insurable interest is determined by the existence of a substantial economic interest rather than strict legal title. Because PGMC had physical possession of and used the trucks in its business operations, it stood to benefit from their continued existence and to suffer pecuniary loss at their destruction; thus PGMC satisfied the insurable-interest requirement.

Excepted Perils Analysis and Application

The Court addressed whether the CNN attacks fell within the policy’s excepted perils. It reiterated the governing principle that an all-risk policy insures against all causes of loss except those expressly excluded, and therefore the insurer bears the burden to prove that the loss arose from an excepted peril (citing DBP Pool of Accredited Insurance Companies v. Radio Mindanao Network, Inc. and other authorities). After examining the ordinary and popular meanings of “riot,” “civil

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