G.R. No.

71360 July 16, 1986

DEVELOPMENT INSURANCE CORPORATION, petitioner,

vs.
INTERMEDIATE APPELLATE COURT, and PHILIPPINE UNION REALTY DEVELOPMENT
CORPORATION, respondents.

Balgos & Perez Law Offices for petitioner.

Agustin M. Sundiam for private respondent.

CRUZ, J.:

A fire occurred in the building of the private respondent and it sued for recovery of damages from the petitioner on
the basis of an insurance contract between them. The petitioner allegedly failed to answer on time and was declared
in default by the trial court. A judgment of default was subsequently rendered on the strength of the evidence
submitted ex parte by the private respondent, which was allowed full recovery of its claimed damages. On learning
of this decision, the petitioner moved to lift the order of default, invoking excusable neglect, and to vacate the
judgment by default. Its motion was denied. It then went to the respondent court, which affirmed the decision of the
trial court in toto. The petitioner is now before us, hoping presumably that it will fare better here than before the trial
court and the Intermediate Appellate Court. We shall see.

On the question of default, the record argues mightily against it. It is indisputable that summons was served on it,
through its senior vice-president, on June 19,1980. On July 14, 1980, ten days after the expiration of the original 15-
day period to answer (excluding July 4), its counsel filed an ex parte motion for an extension of five days within
which to file its answer. On July 18, 1980, the last day of the requested extension-which at the time had not yet been
granted-the same counsel filed a second motion for another 5-day extension, fourteen days after the expiry of the
original period to file its answer. The trial court nevertheless gave it five days from July 14, 1980, or until July 19,
1980, within which to file its answer. But it did not. It did so only on July 26, 1980, after the expiry of the original and
extended periods, or twenty-one days after the July 5, deadline. As a consequence, the trial court, on motion of the
private respondent filed on July 28, 1980, declared the petitioner in default. This was done almost one month later,
on August 25, 1980. Even so, the petitioner made no move at all for two months thereafter. It was only on October
27, 1980, more than one month after the judgment of default was rendered by the trial court on September 26, 1980,
that it filed a motion to lift the order of default and vacate the judgment by default.1

The pattern of inexcusable neglect, if not deliberate delay, is all too clear. The petitioner has slumbered on its right
and awakened too late. While it is true that in Trajano v. Cruz,2 which it cites, this Court declared "that judgments by default are generally
looked upon with disfavor," the default judgment in that case was set aside precisely because there was excusable neglect, Summons in that case was served
through "an employee in petitioners' office and not the person in-charge," whereas in the present case summons was served on the vice-president of the petitioner
who however refused to accept it. Furthermore, as Justice Guerrero noted, there was no evidence showing that the petitioners in Trajano intended to unduly delay
the case.

Besides, the petitioners in Trajano had a valid defense against the complaint filed against them, and this justified a
relaxation of the procedural rules to allow full hearing on the substantive issues raised. In the instant case, by
contrast, the petitioner must just the same fail on the merits even if the default orders were to be lifted. As the
respondent Court observed, "Nothing would be gained by having the order of default set aside considering the
appellant has no valid defense in its favor." 3

The petitioner's claim that the insurance covered only the building and not the elevators is absurd, to say the least.
This Court has little patience with puerile arguments that affront common sense, let alone basic legal principles with
which even law students are familiar. The circumstance that the building insured is seven stories high and so had to
be provided with elevators-a legal requirement known to the petitioner as an insurance company-makes its
contention all the more ridiculous.

No less preposterous is the petitioner's claim that the elevators were insured after the occurrence of the fire, a case
of shutting the barn door after the horse had escaped, so to speak.4 This pretense merits scant attention. Equally undeserving of
serious consideration is its submission that the elevators were not damaged by the fire, against the report of The arson investigators of the INP5 and, indeed, its
own expressed admission in its answer6 where it affirmed that the fire "damaged or destroyed a portion of the 7th floor of the insured building and more particularly
a Hitachi elevator control panel." 7

There is no reason to disturb the factual findings of the lower court, as affirmed by the Intermediate Appellate Court,
that the heat and moisture caused by the fire damaged although they did not actually burn the elevators. Neither is
this Court justified in reversing their determination, also factual, of the value of the loss sustained by the private
respondent in the amount of P508,867.00.

The only remaining question to be settled is the amount of the indemnity due to the private respondent under its
insurance contract with the petitioner. This will require an examination of this contract, Policy No. RY/F-082, as
renewed, by virtue of which the petitioner insured the private respondent's building against fire for P2,500,000.00. 8

The petitioner argues that since at the time of the fire the building insured was worth P5,800,000.00, the private
respondent should be considered its own insurer for the difference between that amount and the face value of the
policy and should share pro rata in the loss sustained. Accordingly, the private respondent is entitled to an indemnity
of only P67,629.31, the rest of the loss to be shouldered by it alone. In support of this contention, the petitioner cites
Condition 17 of the policy, which provides:

If the property hereby insured shall, at the breaking out of any fire, be collectively of greater value
than the sum insured thereon then the insured shall be considered as being his own insurer for the
difference, and shall bear a ratable proportion of the loss accordingly. Every item, if more than one,
of the policy shall be separately subject to this condition.

However, there is no evidence on record that the building was worth P5,800,000.00 at the time of the loss; only the
petitioner says so and it does not back up its self-serving estimate with any independent corroboration. On the
contrary, the building was insured at P2,500,000.00, and this must be considered, by agreement of the insurer and
the insured, the actual value of the property insured on the day the fire occurred. This valuation becomes even more
believable if it is remembered that at the time the building was burned it was still under construction and not yet
completed.

The Court notes that Policy RY/F-082 is an open policy and is subject to the express condition that:

Open Policy

This is an open policy as defined in Section 57 of the Insurance Act. In the event of loss, whether
total or partial, it is understood that the amount of the loss shall be subject to appraisal and the
liability of the company, if established, shall be limited to the actual loss, subject to the applicable
terms, conditions, warranties and clauses of this Policy, and in no case shall exceed the amount of
the policy.

As defined in the aforestated provision, which is now Section 60 of the Insurance Code, "an open policy is one in
which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss. " This means that
the actual loss, as determined, will represent the total indemnity due the insured from the insurer except only that
the total indemnity shall not exceed the face value of the policy.

The actual loss has been ascertained in this case and, to repeat, this Court will respect such factual determination in
the absence of proof that it was arrived at arbitrarily. There is no such showing. Hence, applying the open policy
clause as expressly agreed upon by the parties in their contract, we hold that the private respondent is entitled to
the payment of indemnity under the said contract in the total amount of P508,867.00.

The refusal of its vice-president to receive the private respondent's complaint, as reported in the sheriff's return, was
the first indication of the petitioner's intention to prolong this case and postpone the discharge of its obligation to the
private respondent under this agreement. That intention was revealed further in its subsequent acts-or inaction-
which indeed enabled it to avoid payment for more than five years from the filing of the claim against it in 1980. The
petitioner has temporized long enough to avoid its legitimate responsibility; the delay must and does end now.

WHEREFORE, the appealed decision is affirmed in full, with costs against the petitioner.
SO ORDERED.

Yap (Chairman), Narvasa, Melencio-Herrera and Paras, JJ., concur.

G.R. No. L-25579 March 29, 1972

EMILIA T. BIAGTAN, JUAN T. BIAGTAN, JR., MIGUEL T. BIAGTAN, GIL T. BIAGTAN and GRACIA T.
BIAGTAN, plaintiffs-appellees,
vs.
THE INSULAR LIFE ASSURANCE COMPANY, LTD., defendant-appellant.

Tanopo, Millora, Serafica, and Sañez for plaintiff-appellees.

Araneta, Mendoza and Papa for defendant-appellant.

MAKALINTAL, J.:p

This is an appeal from the decision of the Court of First Instance of Pangasinan in its Civil Case No. D-1700.

The facts are stipulated. Juan S. Biagtan was insured with defendant InsularLife Assurance Company under Policy
No. 398075 for the sum of P5,000.00 and, under a supplementary contract denominated "Accidental Death Benefit
Clause, for an additional sum of P5,000.00 if "the death of the Insured resulted directly from bodily injury effected
solely through external and violent means sustained in an accident ... and independently of all other causes." The
clause, however,expressly provided that it would not apply where death resulted from an injury"intentionally inflicted
by another party."

On the night of May 20, 1964, or during the first hours of the following day a band of robbers entered the house of
the insured Juan S. Biagtan. What happened then is related in the decision of the trial court as follows:

...; that on the night of May 20, 1964 or the first hours of May 21, 1964, while the said life policy and
supplementary contract were in full force and effect, the house of insured Juan S. Biagtan was
robbed by a band of robbers who were charged in and convicted by the Court of First Instance of
Pangasinan for robbery with homicide; that in committing the robbery, the robbers, on reaching the
staircase landing on the second floor, rushed towards the door of the second floor room, where they
suddenly met a person near the door of oneof the rooms who turned out to be the insured Juan S.
Biagtan who received thrusts from their sharp-pointed instruments, causing wounds on the body of
said Juan S. Biagtan resulting in his death at about 7 a.m. on the same day, May 21, 1964;

Plaintiffs, as beneficiaries of the insured, filed a claim under the policy. The insurance company paid the basic
amount of P5,000.00 but refused to pay the additional sum of P5,000.00 under the accidental death benefit clause,
on the ground that the insured's death resulted from injuries intentionally inflicted by third parties and therefore was
not covered. Plaintiffs filed suit to recover, and after due hearing the court a quo rendered judgment in their favor.
Hence the present appeal by the insurer.

The only issue here is whether under the facts are stipulated and found by the trial court the wounds received by the
insured at the hands of the robbers — nine in all, five of them mortal and four non-mortal — were inflicted
intentionally. The court, in ruling negatively on the issue, stated that since the parties presented no evidence and
submitted the case upon stipulation, there was no "proof that the act of receiving thrust (sic) from the sharp-pointed
instrument of the robbers was intended to inflict injuries upon the person of the insured or any other person or
merely to scare away any person so as to ward off any resistance or obstacle that might be offered in the pursuit of
their main objective which was robbery."
The trial court committed a plain error in drawing the conclusion it did from the admitted facts. Nine wounds were
inflicted upon the deceased, all by means of thrusts with sharp-pointed instruments wielded by the robbers. This is a
physical fact as to which there is no dispute. So is the fact that five of those wounds caused the death of the
insured. Whether the robbers had the intent to kill or merely to scare the victim or to ward off any defense he might
offer, it cannot be denied that the act itself of inflicting the injuries was intentional. It should be noted that the
exception in the accidental benefit clause invoked by the appellant does not speak of the purpose — whether
homicidal or not — of a third party in causing the injuries, but only of the fact that such injuries have been
"intentionally" inflicted — this obviously to distinguish them from injuries which, although received at the hands of a
third party, are purely accidental. This construction is the basic idea expressed in the coverage of the clause itself,
namely, that "the death of the insured resulted directly from bodily injury effected solely through external and violent
means sustained in an accident ... and independently of all other causes." A gun which discharges while being
cleaned and kills a bystander; a hunter who shoots at his prey and hits a person instead; an athlete in a competitive
game involving physical effort who collides with an opponent and fatally injures him as a result: these are instances
where the infliction of the injury is unintentional and therefore would be within the coverage of an accidental death
benefit clause such as thatin question in this case. But where a gang of robbers enter a house and coming face to
face with the owner, even if unexpectedly, stab him repeatedly, it is contrary to all reason and logic to say that his
injuries are not intentionally inflicted, regardless of whether they prove fatal or not. As it was, in the present case
they did prove fatal, and the robbers have been accused and convicted of the crime of robbery with homicide.

The case of Calanoc vs. Court of Appeals, 98 Phil. 79, is relied upon by the trial court in support of its decision. The
facts in that case, however, are different from those obtaining here. The insured there was a watchman in a certain
company, who happened to be invited by a policeman to come along as the latter was on his way to investigate a
reported robbery going on in a private house. As the two of them, together with the owner of the house, approached
and stood in front of the main gate, a shot was fired and it turned out afterwards that the watchman was hit in the
abdomen, the wound causing his death. Under those circumstances this Court held that it could not be said that the
killing was intentional for there was the possibility that the malefactor had fired the shot to scare people around for
his own protection and not necessarrily to kill or hit the victim. A similar possibility is clearly ruled out by the facts in
the case now before Us. For while a single shot fired from a distance, and by a person who was not even seen
aiming at the victim, could indeed have been fired without intent to kill or injure, nine wounds inflicted with bladed
weapons at close range cannot conceivably be considered as innocent insofar as such intent is concerned. The
manner of execution of the crime permits no other conclusion.

Court decisions in the American jurisdiction, where similar provisions in accidental death benefit clauses in
insurance policies have been construed, may shed light on the issue before Us. Thus, it has been held that
"intentional" as used in an accident policy excepting intentional injuries inflicted by the insured or any other person,
etc., implies the exercise of the reasoning faculties, consciousness and volition.1 Where a provision of the policy
excludes intentional injury, it is the intention of the person inflicting the injury that is controlling.2 If the injuries
suffered by the insured clearly resulted from the intentional act of a third person the insurer is relieved from liability
as stipulated.3

In the case of Hutchcraft's Ex'r v. Travelers' Ins. Co., 87 Ky. 300, 8 S.W. 570, 12 Am. St. Rep. 484, the insured was
waylaid and assassinated for the purpose of robbery. Two (2) defenses were interposed to the action to recover
indemnity, namely: (1) that the insured having been killed by intentional means, his death was not accidental, and
(2) that the proviso in the policy expressly exempted the insurer from liability in case the insured died from injuries
intentionally inflicted by another person. In rendering judgment for the insurance company the Court held that while
the assassination of the insured was as to him an unforeseen event and therefore accidental, "the clause of the
proviso that excludes the (insurer's) liability, in case death or injury is intentionally inflicted by another person,
applies to this case."

In Butero v. Travelers' Acc. Ins. Co., 96 Wis. 536, 65 Am. St. Rep. 61, 71 S.W. 811, the insured was shot three
times by a person unknown late on a dark and stormy night, while working in the coal shed of a railroad company.
The policy did not cover death resulting from "intentional injuries inflicted by the insured or any other person." The
inquiry was as to the question whether the shooting that caused the insured's death was accidental or intentional;
and the Court found that under the facts, showing that the murderer knew his victim and that he fired with intent to
kill, there could be no recovery under the policy which excepted death from intentional injuries inflicted by any
person.
WHEREFORE, the decision appealed from is reversed and the complaint dismissed, without pronouncement as to
costs.

Zaldivar, Castro, Fernando and Villamor, JJ., concur.

Makasiar, J., reserves his vote.

G.R. No. 81026 April 3, 1990

PAN MALAYAN INSURANCE CORPORATION, petitioner,

vs.
COURT OF APPEALS, ERLINDA FABIE AND HER UNKNOWN DRIVER, respondents.

Regulus E. Cabote & Associates for petitioner.

Benito P. Fabie for private respondents.

CORTES, J.:

Petitioner Pan Malayan Insurance Company (PANMALAY) seeks the reversal of a decision of the Court of Appeals
which upheld an order of the trial court dismissing for no cause of action PANMALAY's complaint for damages
against private respondents Erlinda Fabie and her driver.

The principal issue presented for resolution before this Court is whether or not the insurer PANMALAY may institute
an action to recover the amount it had paid its assured in settlement of an insurance claim against private
respondents as the parties allegedly responsible for the damage caused to the insured vehicle.

On December 10, 1985, PANMALAY filed a complaint for damages with the RTC of Makati against private
respondents Erlinda Fabie and her driver. PANMALAY averred the following: that it insured a Mitsubishi Colt Lancer
car with plate No. DDZ-431 and registered in the name of Canlubang Automotive Resources Corporation
[CANLUBANG]; that on May 26, 1985, due to the "carelessness, recklessness, and imprudence" of the unknown
driver of a pick-up with plate no. PCR-220, the insured car was hit and suffered damages in the amount of
P42,052.00; that PANMALAY defrayed the cost of repair of the insured car and, therefore, was subrogated to the
rights of CANLUBANG against the driver of the pick-up and his employer, Erlinda Fabie; and that, despite repeated
demands, defendants, failed and refused to pay the claim of PANMALAY.

Private respondents, thereafter, filed a Motion for Bill of Particulars and a supplemental motion thereto. In
compliance therewith, PANMALAY clarified, among others, that the damage caused to the insured car was settled
under the "own damage", coverage of the insurance policy, and that the driver of the insured car was, at the time of
the accident, an authorized driver duly licensed to drive the vehicle. PANMALAY also submitted a copy of the
insurance policy and the Release of Claim and Subrogation Receipt executed by CANLUBANG in favor of
PANMALAY.

On February 12, 1986, private respondents filed a Motion to Dismiss alleging that PANMALAY had no cause of
action against them. They argued that payment under the "own damage" clause of the insurance policy precluded
subrogation under Article 2207 of the Civil Code, since indemnification thereunder was made on the assumption that
there was no wrongdoer or no third party at fault.

After hearings conducted on the motion, opposition thereto, reply and rejoinder, the RTC issued an order dated
June 16, 1986 dismissing PANMALAY's complaint for no cause of action. On August 19, 1986, the RTC denied
PANMALAY's motion for reconsideration.
On appeal taken by PANMALAY, these orders were upheld by the Court of Appeals on November 27, 1987.
Consequently, PANMALAY filed the present petition for review.

After private respondents filed its comment to the petition, and petitioner filed its reply, the Court considered the
issues joined and the case submitted for decision.

Deliberating on the various arguments adduced in the pleadings, the Court finds merit in the petition.

PANMALAY alleged in its complaint that, pursuant to a motor vehicle insurance policy, it had indemnified
CANLUBANG for the damage to the insured car resulting from a traffic accident allegedly caused by the negligence
of the driver of private respondent, Erlinda Fabie. PANMALAY contended, therefore, that its cause of action against
private respondents was anchored upon Article 2207 of the Civil Code, which reads:

If the plaintiffs property has been insured, and he has received indemnity from the insurance company for
the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall
be subrogated to the rights of the insured against the wrongdoer or the person who has violated the
contract. . . .

PANMALAY is correct.

Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is
destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon
payment to the assured, will be subrogated to the rights of the assured to recover from the wrongdoer to the extent
that the insurer has been obligated to pay. Payment by the insurer to the assured operates as an equitable
assignment to the former of all remedies which the latter may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity of
contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer
[Compania Maritima v. Insurance Company of North America, G.R. No. L-18965, October 30, 1964, 12 SCRA 213;
Fireman's Fund Insurance Company v. Jamilla & Company, Inc., G.R. No. L-27427, April 7, 1976, 70 SCRA 323].

There are a few recognized exceptions to this rule. For instance, if the assured by his own act releases the
wrongdoer or third party liable for the loss or damage, from liability, the insurer's right of subrogation is defeated
[Phoenix Ins. Co. of Brooklyn v. Erie & Western Transport, Co., 117 US 312, 29 L. Ed. 873 (1886); Insurance
Company of North America v. Elgin, Joliet & Eastern Railway Co., 229 F 2d 705 (1956)]. Similarly, where the insurer
pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the assured's
claim for loss, the settlement is binding on both the assured and the insurer, and the latter cannot bring an action
against the carrier on his right of subrogation [McCarthy v. Barber Steamship Lines, Inc., 45 Phil. 488 (1923)]. And
where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary
payment", the former has no right of subrogation against the third party liable for the loss [Sveriges Angfartygs
Assurans Forening v. Qua Chee Gan, G. R. No. L-22146, September 5, 1967, 21 SCRA 12].

None of the exceptions are availing in the present case.

The lower court and Court of Appeals, however, were of the opinion that PANMALAY was not legally subrogated
under Article 2207 of the Civil Code to the rights of CANLUBANG, and therefore did not have any cause of action
against private respondents. On the one hand, the trial court held that payment by PANMALAY of CANLUBANG's
claim under the "own damage" clause of the insurance policy was an admission by the insurer that the damage was
caused by the assured and/or its representatives. On the other hand, the Court of Appeals in applying the ejusdem
generis rule held that Section III-1 of the policy, which was the basis for settlement of CANLUBANG's claim, did not
cover damage arising from collision or overturning due to the negligence of third parties as one of the insurable
risks. Both tribunals concluded that PANMALAY could not now invoke Article 2207 and claim reimbursement from
private respondents as alleged wrongdoers or parties responsible for the damage.

The above conclusion is without merit.

It must be emphasized that the lower court's ruling that the "own damage" coverage under the policy
implies damage to the insured car caused by the assured itself, instead of third parties, proceeds from an incorrect
comprehension of the phrase "own damage" as used by the insurer. When PANMALAY utilized the phrase "own
damage" — a phrase which, incidentally, is not found in the insurance policy — to define the basis for its settlement
of CANLUBANG's claim under the policy, it simply meant that it had assumed to reimburse the costs for repairing
the damage to the insured vehicle [See PANMALAY's Compliance with Supplementary Motion for Bill of Particulars,
p. 1; Record, p. 31]. It is in this sense that the so-called "own damage" coverage under Section III of the insurance
policy is differentiated from Sections I and IV-1 which refer to "Third Party Liability" coverage (liabilities arising from
the death of, or bodily injuries suffered by, third parties) and from Section IV-2 which refer to "Property Damage"
coverage (liabilities arising from damage caused by the insured vehicle to the properties of third parties).

Neither is there merit in the Court of Appeals' ruling that the coverage of insured risks under Section III-1 of the
policy does not include to the insured vehicle arising from collision or overturning due to the negligent acts of the
third party. Not only does it stem from an erroneous interpretation of the provisions of the section, but it also violates
a fundamental rule on the interpretation of property insurance contracts.

It is a basic rule in the interpretation of contracts that the terms of a contract are to be construed according to the
sense and meaning of the terms which the parties thereto have used. In the case of property insurance policies, the
evident intention of the contracting parties, i.e., the insurer and the assured, determine the import of the various
terms and provisions embodied in the policy. It is only when the terms of the policy are ambiguous, equivocal or
uncertain, such that the parties themselves disagree about the meaning of particular provisions, that the courts will
intervene. In such an event, the policy will be construed by the courts liberally in favor of the assured and strictly
against the insurer [Union Manufacturing Co., Inc. v. Philippine Guaranty Co., Inc., G.R., No. L-27932, October 30,
1972, 47 SCRA 271; National Power Corporation v. Court of Appeals, G.R. No. L-43706, November 14, 1986, 145
SCRA 533; Pacific Banking Corporation v. Court of Appeals, G.R. No. L-41014, November 28, 1988, 168 SCRA
1. Also Articles 1370-1378 of the Civil Code].

Section III-1 of the insurance policy which refers to the conditions under which the insurer PANMALAY is liable to
indemnify the assured CANLUBANG against damage to or loss of the insured vehicle, reads as follows:

SECTION III — LOSS OR DAMAGE

1. The Company will, subject to the Limits of Liability, indemnify the Insured against loss of or damage to the
Scheduled Vehicle and its accessories and spare parts whilst thereon: —

(a) by accidental collision or overturning, or collision or overturning consequent upon mechanical

breakdown or consequent upon wear and tear;

(b) by fire, external explosion, self ignition or lightning or burglary, housebreaking or theft;

(c) by malicious act;

(d) whilst in transit (including the processes of loading and unloading) incidental to such transit by
road, rail, inland, waterway, lift or elevator.

xxx xxx xxx

[Annex "A-1" of PANMALAY's Compliance with Supplementary Motion for Bill of Particulars; Record, p. 34;
Emphasis supplied].

PANMALAY contends that the coverage of insured risks under the above section, specifically Section III-1(a), is
comprehensive enough to include damage to the insured vehicle arising from collision or overturning due to the fault
or negligence of a third party. CANLUBANG is apparently of the same understanding. Based on a police report
wherein the driver of the insured car reported that after the vehicle was sideswiped by a pick-up, the driver thereof
fled the scene [Record, p. 20], CANLUBANG filed its claim with PANMALAY for indemnification of the damage
caused to its car. It then accepted payment from PANMALAY, and executed a Release of Claim and Subrogation
Receipt in favor of latter.
Considering that the very parties to the policy were not shown to be in disagreement regarding the meaning and
coverage of Section III-1, specifically sub-paragraph (a) thereof, it was improper for the appellate court to indulge in
contract construction, to apply the ejusdem generis rule, and to ascribe meaning contrary to the clear intention and
understanding of these parties.

It cannot be said that the meaning given by PANMALAY and CANLUBANG to the phrase "by accidental collision or
overturning" found in the first paint of sub-paragraph (a) is untenable. Although the terms "accident" or "accidental"
as used in insurance contracts have not acquired a technical meaning, the Court has on several occasions defined
these terms to mean that which takes place "without one's foresight or expectation, an event that proceeds from an
unknown cause, or is an unusual effect of a known cause and, therefore, not expected" [De la Cruz v. The Capital
Insurance & Surety Co., Inc., G.R. No. L-21574, June 30, 1966, 17 SCRA 559; Filipino Merchants Insurance Co.,
Inc. v. Court of Appeals, G.R. No. 85141, November 28, 1989]. Certainly, it cannot be inferred from jurisprudence
that these terms, without qualification, exclude events resulting in damage or loss due to the fault, recklessness or
negligence of third parties. The concept "accident" is not necessarily synonymous with the concept of "no fault". It
may be utilized simply to distinguish intentional or malicious acts from negligent or careless acts of man.

Moreover, a perusal of the provisions of the insurance policy reveals that damage to, or loss of, the insured vehicle
due to negligent or careless acts of third parties is not listed under the general and specific exceptions to the
coverage of insured risks which are enumerated in detail in the insurance policy itself [See Annex "A-1" of
PANMALAY's Compliance with Supplementary Motion for Bill of Particulars, supra.]

The Court, furthermore. finds it noteworthy that the meaning advanced by PANMALAY regarding the coverage of
Section III-1(a) of the policy is undeniably more beneficial to CANLUBANG than that insisted upon by respondents
herein. By arguing that this section covers losses or damages due not only to malicious, but also to negligent acts of
third parties, PANMALAY in effect advocates for a more comprehensive coverage of insured risks. And this, in the
final analysis, is more in keeping with the rationale behind the various rules on the interpretation of insurance
contracts favoring the assured or beneficiary so as to effect the dominant purpose of indemnity or payment
[SeeCalanoc v. Court of Appeals, 98 Phil. 79 (1955); Del Rosario v. The Equitable Insurance and Casualty Co., Inc.,
G.R. No. L-16215, June 29, 1963, 8 SCRA 343; Serrano v. Court of Appeals, G.R. No. L-35529, July 16, 1984, 130
SCRA 327].

Parenthetically, even assuming for the sake of argument that Section III-1(a) of the insurance policy does not cover
damage to the insured vehicle caused by negligent acts of third parties, and that PANMALAY's settlement of
CANLUBANG's claim for damages allegedly arising from a collision due to private respondents' negligence would
amount to unwarranted or "voluntary payment", dismissal of PANMALAY's complaint against private respondents for
no cause of action would still be a grave error of law.

For even if under the above circumstances PANMALAY could not be deemed subrogated to the rights of its assured
under Article 2207 of the Civil Code, PANMALAY would still have a cause of action against private respondents. In
the pertinent case of Sveriges Angfartygs Assurans Forening v. Qua Chee Gan, supra., the Court ruled that the
insurer who may have no rights of subrogation due to "voluntary" payment may nevertheless recover from the third
party responsible for the damage to the insured property under Article 1236 of the Civil Code.

In conclusion, it must be reiterated that in this present case, the insurer PANMALAY as subrogee merely prays that
it be allowed to institute an action to recover from third parties who allegedly caused damage to the insured vehicle,
the amount which it had paid its assured under the insurance policy. Having thus shown from the above discussion
that PANMALAY has a cause of action against third parties whose negligence may have caused damage to
CANLUBANG's car, the Court holds that there is no legal obstacle to the filing by PANMALAY of a complaint for
damages against private respondents as the third parties allegedly responsible for the damage. Respondent Court
of Appeals therefore committed reversible error in sustaining the lower court's order which dismissed PANMALAY's
complaint against private respondents for no cause of action. Hence, it is now for the trial court to determine if in fact
the damage caused to the insured vehicle was due to the "carelessness, recklessness and imprudence" of the
driver of private respondent Erlinda Fabie.

WHEREFORE, in view of the foregoing, the present petition is GRANTED. Petitioner's complaint for damages
against private respondents is hereby REINSTATED. Let the case be remanded to the lower court for trial on the
merits.
SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

G.R. No. 115278 May 23, 1995

FORTUNE INSURANCE AND SURETY CO., INC., petitioner,

vs.
COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES, respondents.

DAVIDE, JR., J.:

The fundamental legal issue raised in this petition for review on certiorari is whether the petitioner is liable under the
Money, Security, and Payroll Robbery policy it issued to the private respondent or whether recovery thereunder is
precluded under the general exceptions clause thereof. Both the trial court and the Court of Appeals held that there
should be recovery. The petitioner contends otherwise.

This case began with the filing with the Regional Trial Court (RTC) of Makati, Metro Manila, by private respondent
Producers Bank of the Philippines (hereinafter Producers) against petitioner Fortune Insurance and Surety Co., Inc.
(hereinafter Fortune) of a complaint for recovery of the sum of P725,000.00 under the policy issued by Fortune. The
sum was allegedly lost during a robbery of Producer's armored vehicle while it was in transit to transfer the money
from its Pasay City Branch to its head office in Makati. The case was docketed as Civil Case No. 1817 and assigned
to Branch 146 thereof.

After joinder of issues, the parties asked the trial court to render judgment based on the following stipulation of facts:

1. The plaintiff was insured by the defendants and an insurance policy was issued,
the duplicate original of which is hereto attached as Exhibit "A";

2. An armored car of the plaintiff, while in the process of transferring cash in the sum
of P725,000.00 under the custody of its teller, Maribeth Alampay, from its Pasay
Branch to its Head Office at 8737 Paseo de Roxas, Makati, Metro Manila on June 29,
1987, was robbed of the said cash. The robbery took place while the armored car
was traveling along Taft Avenue in Pasay City;

3. The said armored car was driven by Benjamin Magalong Y de Vera, escorted by
Security Guard Saturnino Atiga Y Rosete. Driver Magalong was assigned by PRC
Management Systems with the plaintiff by virtue of an Agreement executed on
August 7, 1983, a duplicate original copy of which is hereto attached as Exhibit "B";

4. The Security Guard Atiga was assigned by Unicorn Security Services, Inc. with the
plaintiff by virtue of a contract of Security Service executed on October 25, 1982, a
duplicate original copy of which is hereto attached as Exhibit "C";

5. After an investigation conducted by the Pasay police authorities, the driver

Magalong and guard Atiga were charged, together with Edelmer Bantigue Y Eulalio,
Reynaldo Aquino and John Doe, with violation of P.D. 532 (Anti-Highway Robbery
Law) before the Fiscal of Pasay City. A copy of the complaint is hereto attached as
Exhibit "D";

6. The Fiscal of Pasay City then filed an information charging the aforesaid persons
with the said crime before Branch 112 of the Regional Trial Court of Pasay City. A
copy of the said information is hereto attached as Exhibit "E." The case is still being
tried as of this date;
 7. Demands were made by the plaintiff upon the defendant to pay the amount of the
loss of P725,000.00, but the latter refused to pay as the loss is excluded from the
coverage of the insurance policy, attached hereto as Exhibit "A," specifically under
page 1 thereof, "General Exceptions" Section (b), which is marked as Exhibit "A-1,"
and which reads as follows:

GENERAL EXCEPTIONS

The company shall not be liable under this policy in report of

xxx xxx xxx

(b) any loss caused by any dishonest, fraudulent or criminal act of the
insured or any officer, employee, partner, director, trustee or
authorized representative of the Insured whether acting alone or in
conjunction with others. . . .

8. The plaintiff opposes the contention of the defendant and contends that Atiga and
Magalong are not its "officer, employee, . . . trustee or authorized representative . . .
at the time of the robbery.1

On 26 April 1990, the trial court rendered its decision in favor of Producers. The dispositive portion thereof reads as
follows:

WHEREFORE, premises considered, the Court finds for plaintiff and against defendant, and

(a) orders defendant to pay plaintiff the net amount of P540,000.00 as

liability under Policy No. 0207 (as mitigated by the P40,000.00
special clause deduction and by the recovered sum of P145,000.00),
with interest thereon at the legal rate, until fully paid;

(b) orders defendant to pay plaintiff the sum of P30,000.00 as and for
attorney's fees; and

(c) orders defendant to pay costs of suit.

All other claims and counterclaims are accordingly dismissed forthwith.

SO ORDERED. 2

The trial court ruled that Magalong and Atiga were not employees or representatives of Producers. It Said:

The Court is satisfied that plaintiff may not be said to have selected and engaged Magalong and
Atiga, their services as armored car driver and as security guard having been merely offered by PRC
Management and by Unicorn Security and which latter firms assigned them to plaintiff. The wages
and salaries of both Magalong and Atiga are presumably paid by their respective firms, which alone
wields the power to dismiss them. Magalong and Atiga are assigned to plaintiff in fulfillment of
agreements to provide driving services and property protection as such — in a context which does
not impress the Court as translating into plaintiff's power to control the conduct of any assigned
driver or security guard, beyond perhaps entitling plaintiff to request are replacement for such driver
guard. The finding is accordingly compelled that neither Magalong nor Atiga were plaintiff's
"employees" in avoidance of defendant's liability under the policy, particularly the general exceptions
therein embodied.

Neither is the Court prepared to accept the proposition that driver Magalong and guard Atiga were
the "authorized representatives" of plaintiff. They were merely an assigned armored car driver and
security guard, respectively, for the June 29, 1987 money transfer from plaintiff's Pasay Branch to its
 Makati Head Office. Quite plainly — it was teller Maribeth Alampay who had "custody" of the
P725,000.00 cash being transferred along a specified money route, and hence plaintiff's then
designated "messenger" adverted to in the policy. 3

Fortune appealed this decision to the Court of Appeals which docketed the case as CA-G.R. CV No. 32946. In its
decision 4 promulgated on 3 May 1994, it affirmed in toto the appealed decision.

The Court of Appeals agreed with the conclusion of the trial court that Magalong and Atiga were neither employees
nor authorized representatives of Producers and ratiocinated as follows:

A policy or contract of insurance is to be construed liberally in favor of the insured and strictly against
the insurance company (New Life Enterprises vs. Court of Appeals, 207 SCRA 669; Sun Insurance
Office, Ltd. vs. Court of Appeals, 211 SCRA 554). Contracts of insurance, like other contracts, are to
be construed according to the sense and meaning of the terms which the parties themselves have
used. If such terms are clear and unambiguous, they must be taken and understood in their plain,
ordinary and popular sense (New Life Enterprises Case, supra, p. 676; Sun Insurance Office, Ltd.
vs. Court of Appeals, 195 SCRA 193).

The language used by defendant-appellant in the above quoted stipulation is plain, ordinary and
simple. No other interpretation is necessary. The word "employee" must be taken to mean in the
ordinary sense.

The Labor Code is a special law specifically dealing with/and specifically designed to protect labor
and therefore its definition as to employer-employee relationships insofar as the
application/enforcement of said Code is concerned must necessarily be inapplicable to an insurance
contract which defendant-appellant itself had formulated. Had it intended to apply the Labor Code in
defining what the word "employee" refers to, it must/should have so stated expressly in the
insurance policy.

Said driver and security guard cannot be considered as employees of plaintiff-appellee bank
because it has no power to hire or to dismiss said driver and security guard under the contracts
(Exhs. 8 and C) except only to ask for their replacements from the contractors.5

On 20 June 1994, Fortune filed this petition for review on certiorari. It alleges that the trial court and the Court of
Appeals erred in holding it liable under the insurance policy because the loss falls within the general exceptions
clause considering that driver Magalong and security guard Atiga were Producers' authorized representatives or
employees in the transfer of the money and payroll from its branch office in Pasay City to its head office in Makati.

According to Fortune, when Producers commissioned a guard and a driver to transfer its funds from one branch to
another, they effectively and necessarily became its authorized representatives in the care and custody of the
money. Assuming that they could not be considered authorized representatives, they were, nevertheless,
employees of Producers. It asserts that the existence of an employer-employee relationship "is determined by law
and being such, it cannot be the subject of agreement." Thus, if there was in reality an employer-employee
relationship between Producers, on the one hand, and Magalong and Atiga, on the other, the provisions in the
contracts of Producers with PRC Management System for Magalong and with Unicorn Security Services for Atiga
which state that Producers is not their employer and that it is absolved from any liability as an employer, would not
obliterate the relationship.

Fortune points out that an employer-employee relationship depends upon four standards: (1) the manner of
selection and engagement of the putative employee; (2) the mode of payment of wages; (3) the presence or
absence of a power to dismiss; and (4) the presence and absence of a power to control the putative employee's
conduct. Of the four, the right-of-control test has been held to be the decisive factor. 6 It asserts that the power of
control over Magalong and Atiga was vested in and exercised by Producers. Fortune further insists that PRC
Management System and Unicorn Security Services are but "labor-only" contractors under Article 106 of the Labor
Code which provides:

Art. 106. Contractor or subcontractor. — There is "labor-only" contracting where the person
supplying workers to an employer does not have substantial capital or investment in the form of
 tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter
were directly employed by him.

Fortune thus contends that Magalong and Atiga were employees of Producers, following the ruling in International
Timber Corp. vs. NLRC 7 that a finding that a contractor is a "labor-only" contractor is equivalent to a finding that
there is an employer-employee relationship between the owner of the project and the employees of the "labor-only"
contractor.

On the other hand, Producers contends that Magalong and Atiga were not its employees since it had nothing to do
with their selection and engagement, the payment of their wages, their dismissal, and the control of their conduct.
Producers argued that the rule in International Timber Corp. is not applicable to all cases but only when it becomes
necessary to prevent any violation or circumvention of the Labor Code, a social legislation whose provisions may set
aside contracts entered into by parties in order to give protection to the working man.

Producers further asseverates that what should be applied is the rule in American President Lines vs. Clave, 8 to wit:

In determining the existence of employer-employee relationship, the following elements are

generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power to control the employee's conduct.

Since under Producers' contract with PRC Management Systems it is the latter which assigned Magalong as the
driver of Producers' armored car and was responsible for his faithful discharge of his duties and responsibilities, and
since Producers paid the monthly compensation of P1,400.00 per driver to PRC Management Systems and not to
Magalong, it is clear that Magalong was not Producers' employee. As to Atiga, Producers relies on the provision of
its contract with Unicorn Security Services which provides that the guards of the latter "are in no sense employees
of the CLIENT."

There is merit in this petition.

It should be noted that the insurance policy entered into by the parties is a theft or robbery insurance policy which is
a form of casualty insurance. Section 174 of the Insurance Code provides:

Sec. 174. Casualty insurance is insurance covering loss or liability arising from accident or mishap,
excluding certain types of loss which by law or custom are considered as falling exclusively within
the scope of insurance such as fire or marine. It includes, but is not limited to, employer's liability
insurance, public liability insurance, motor vehicle liability insurance, plate glass insurance, burglary
and theft insurance, personal accident and health insurance as written by non-life insurance
companies, and other substantially similar kinds of insurance. (emphases supplied)

Except with respect to compulsory motor vehicle liability insurance, the Insurance Code contains no other provisions
applicable to casualty insurance or to robbery insurance in particular. These contracts are, therefore, governed by
the general provisions applicable to all types of insurance. Outside of these, the rights and obligations of the parties
must be determined by the terms of their contract, taking into consideration its purpose and always in accordance
with the general principles of insurance law. 9

It has been aptly observed that in burglary, robbery, and theft insurance, "the opportunity to defraud the insurer —
the moral hazard — is so great that insurers have found it necessary to fill up their policies with countless
restrictions, many designed to reduce this hazard. Seldom does the insurer assume the risk of all losses due to the
hazards insured against." 10 Persons frequently excluded under such provisions are those in the insured's service
and employment. 11 The purpose of the exception is to guard against liability should the theft be committed by one
having unrestricted access to the property. 12 In such cases, the terms specifying the excluded classes are to be
given their meaning as understood in common speech. 13 The terms "service" and "employment" are generally
associated with the idea of selection, control, and compensation. 14
A contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the
insurer, 15 or it should be construed liberally in favor of the insured and strictly against the insurer. 16 Limitations of
liability should be regarded with extreme jealousy and must be construed
in such a way, as to preclude the insurer from non-compliance with its obligation. 17 It goes without saying then that if
the terms of the contract are clear and unambiguous, there is no room for construction and such terms cannot be
enlarged or diminished by judicial construction. 18

An insurance contract is a contract of indemnity upon the terms and conditions specified therein. 19 It is settled that
the terms of the policy constitute the measure of the insurer's liability. 20 In the absence of statutory prohibition to the
contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever
conditions they deem best upon their obligations not inconsistent with public policy.

With the foregoing principles in mind, it may now be asked whether Magalong and Atiga qualify as employees or
authorized representatives of Producers under paragraph (b) of the general exceptions clause of the policy which,
for easy reference, is again quoted:

GENERAL EXCEPTIONS

The company shall not be liable under this policy in respect of

xxx xxx xxx

(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any
officer, employee, partner, director, trustee or authorized representative of the
Insured whether acting alone or in conjunction with others. . . . (emphases supplied)

There is marked disagreement between the parties on the correct meaning of the terms "employee" and "authorized
representatives."

It is clear to us that insofar as Fortune is concerned, it was its intention to exclude and exempt from protection and
coverage losses arising from dishonest, fraudulent, or criminal acts of persons granted or having unrestricted
access to Producers' money or payroll. When it used then the term "employee," it must have had in mind any person
who qualifies as such as generally and universally understood, or jurisprudentially established in the light of the four
standards in the determination of the employer-employee relationship, 21 or as statutorily declared even in a limited
sense as in the case of Article 106 of the Labor Code which considers the employees under a "labor-only" contract
as employees of the party employing them and not of the party who supplied them to the employer. 22

Fortune claims that Producers' contracts with PRC Management Systems and Unicorn Security Services are "labor-
only" contracts.

Producers, however, insists that by the express terms thereof, it is not the employer of Magalong.
Notwithstanding such express assumption of PRC Management Systems and Unicorn Security Services
that the drivers and the security guards each shall supply to Producers are not the latter's employees, it
may, in fact, be that it is because the contracts are, indeed, "labor-only" contracts. Whether they are is, in
the light of the criteria provided for in Article 106 of the Labor Code, a question of fact. Since the parties
opted to submit the case for judgment on the basis of their stipulation of facts which are strictly limited to the
insurance policy, the contracts with PRC Management Systems and Unicorn Security Services, the
complaint for violation of P.D. No. 532, and the information therefor filed by the City Fiscal of Pasay City,
there is a paucity of evidence as to whether the contracts between Producers and PRC Management
Systems and Unicorn Security Services are "labor-only" contracts.

But even granting for the sake of argument that these contracts were not "labor-only" contracts, and PRC
Management Systems and Unicorn Security Services were truly independent contractors, we are satisfied that
Magalong and Atiga were, in respect of the transfer of Producer's money from its Pasay City branch to its head
office in Makati, its "authorized representatives" who served as such with its teller Maribeth Alampay. Howsoever
viewed, Producers entrusted the three with the specific duty to safely transfer the money to its head office, with
Alampay to be responsible for its custody in transit; Magalong to drive the armored vehicle which would carry the
money; and Atiga to provide the needed security for the money, the vehicle, and his two other companions. In short,
for these particular tasks, the three acted as agents of Producers. A "representative" is defined as one who
represents or stands in the place of another; one who represents others or another in a special capacity, as an
agent, and is interchangeable with "agent." 23

In view of the foregoing, Fortune is exempt from liability under the general exceptions clause of the insurance policy.

WHEREFORE , the instant petition is hereby GRANTED. The decision of the Court of Appeals in CA-G.R. CV No.
32946 dated 3 May 1994 as well as that of Branch 146 of the Regional Trial Court of Makati in Civil Case No. 1817
are REVERSED and SET ASIDE. The complaint in Civil Case No. 1817 is DISMISSED.

No pronouncement as to costs.

SO ORDERED.

Bellosillo and Kapunan, JJ., concur.

Padilla, J., took no part.

Quiason, J., is on leave.

G.R. No. 92383 July 17, 1992

SUN INSURANCE OFFICE, LTD., petitioner,

vs.
THE HON. COURT OF APPEALS and NERISSA LIM, respondents.

CRUZ, J.:

The petitioner issued Personal Accident Policy No. 05687 to Felix Lim, Jr. with a face value of P200,000.00. Two
months later, he was dead with a bullet wound in his head. As beneficiary, his wife Nerissa Lim sought payment on
the policy but her claim was rejected. The petitioner agreed that there was no suicide. It argued, however that there
was no accident either.

Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It happened on October 6, 1982, at about 10
o'clock in the evening, after his mother's birthday party. According to Nalagon, Lim was in a happy mood (but not
drunk) and was playing with his handgun, from which he had previously removed the magazine. As she watched
television, he stood in front of her and pointed the gun at her. She pushed it aside and said it might he loaded. He
assured her it was not and then pointed it to his temple. The next moment there was an explosion and Lim slumped
to the floor. He was dead before he fell. 1

The widow sued the petitioner in the Regional Trial Court of Zamboanga City and was sustained. 2 The petitioner
was sentenced to pay her P200,000.00, representing the face value of the policy, with interest at the legal rate;
P10,000.00 as moral damages; P5,000.00 as exemplary damages; P5,000.00 as actual and compensatory
damages; and P5,000.00 as attorney's fees, plus the costs of the suit. This decision was affirmed on appeal, and
the motion for reconsideration was denied. 3 The petitioner then came to this Court to fault the Court of Appeals for
approving the payment of the claim and the award of damages.

The term "accident" has been defined as follows:

The words "accident" and "accidental" have never acquired any technical signification in law, and when used in an
insurance contract are to be construed and considered according to the ordinary understanding and common usage
and speech of people generally. In-substance, the courts are practically agreed that the words "accident" and
"accidental" mean that which happens by chance or fortuitously, without intention or design, and which is
unexpected, unusual, and unforeseen. The definition that has usually been adopted by the courts is that an accident
is an event that takes place without one's foresight or expectation — an event that proceeds from an unknown
cause, or is an unusual effect of a known case, and therefore not expected. 4

An accident is an event which happens without any human agency or, if happening through human agency, an
event which, under the circumstances, is unusual to and not expected by the person to whom it happens. It has also
been defined as an injury which happens by reason of some violence or casualty to the injured without his design,
consent, or voluntary co-operation. 5

In light of these definitions, the Court is convinced that the incident that resulted in Lim's death was indeed an
accident. The petitioner, invoking the case of De la Cruz v. Capital Insurance, 6 says that "there is no accident when
a deliberate act is performed unless some additional, unexpected, independent and unforeseen happening occurs
which produces or brings about their injury or death." There was such a happening. This was the firing of the gun,
which was the additional unexpected and independent and unforeseen occurrence that led to the insured person's
death.

The petitioner also cites one of the four exceptions provided for in the insurance contract and contends that the
private petitioner's claim is barred by such provision. It is there stated:

Exceptions —

The company shall not be liable in respect of

1. Bodily injury

xxx xxx xxx

b. consequent upon

i) The insured person attempting to commit suicide or willfully exposing himself to needless peril
except in an attempt to save human life.

To repeat, the parties agree that Lim did not commit suicide. Nevertheless, the petitioner contends that the insured
willfully exposed himself to needless peril and thus removed himself from the coverage of the insurance policy.

It should be noted at the outset that suicide and willful exposure to needless peril are in pari materia because they
both signify a disregard for one's life. The only difference is in degree, as suicide imports a positive act of ending
such life whereas the second act indicates a reckless risking of it that is almost suicidal in intent. To illustrate, a
person who walks a tightrope one thousand meters above the ground and without any safety device may not
actually be intending to commit suicide, but his act is nonetheless suicidal. He would thus be considered as "willfully
exposing himself to needless peril" within the meaning of the exception in question.

The petitioner maintains that by the mere act of pointing the gun to hip temple, Lim had willfully exposed himself to
needless peril and so came under the exception. The theory is that a gun is per se dangerous and should therefore
be handled cautiously in every case.

That posture is arguable. But what is not is that, as the secretary testified, Lim had removed the magazine from the
gun and believed it was no longer dangerous. He expressly assured her that the gun was not loaded. It is submitted
that Lim did not willfully expose himself to needless peril when he pointed the gun to his temple because the fact is
that he thought it was not unsafe to do so. The act was precisely intended to assure Nalagon that the gun was
indeed harmless.

The contrary view is expressed by the petitioner thus:

 Accident insurance policies were never intended to reward the insured for his tendency to show off
or for his miscalculations. They were intended to provide for contingencies. Hence, when I
miscalculate and jump from the Quezon Bridge into the Pasig River in the belief that I can overcome
the current, I have wilfully exposed myself to peril and must accept the consequences of my act. If I
drown I cannot go to the insurance company to ask them to compensate me for my failure to swim
as well as I thought I could. The insured in the case at bar deliberately put the gun to his head and
pulled the trigger. He wilfully exposed himself to peril.

The Court certainly agrees that a drowned man cannot go to the insurance company to ask for compensation. That
might frighten the insurance people to death. We also agree that under the circumstances narrated, his beneficiary
would not be able to collect on the insurance policy for it is clear that when he braved the currents below,
he deliberately exposed himself to a known peril.

The private respondent maintains that Lim did not. That is where she says the analogy fails. The petitioner's
hypothetical swimmer knew when he dived off the Quezon Bridge that the currents below were dangerous. By
contrast, Lim did not know that the gun he put to his head was loaded.

Lim was unquestionably negligent and that negligence cost him his own life. But it should not prevent his widow
from recovering from the insurance policy he obtained precisely against accident. There is nothing in the policy that
relieves the insurer of the responsibility to pay the indemnity agreed upon if the insured is shown to have contributed
to his own accident. Indeed, most accidents are caused by negligence. There are only four exceptions expressly
made in the contract to relieve the insurer from liability, and none of these exceptions is applicable in the case at
bar. **

It bears noting that insurance contracts are as a rule supposed to be interpreted liberally in favor of the assured.
There is no reason to deviate from this rule, especially in view of the circumstances of this case as above analyzed.

On the second assigned error, however, the Court must rule in favor of the petitioner. The basic issue raised in this
case is, as the petitioner correctly observed, one of first impression. It is evident that the petitioner was acting in
good faith then it resisted the private respondent's claim on the ground that the death of the insured was covered by
the exception. The issue was indeed debatable and was clearly not raised only for the purpose of evading a
legitimate obligation. We hold therefore that the award of moral and exemplary damages and of attorney's fees is
unjust and so must be disapproved.

In order that a person may be made liable to the payment of moral damages, the law requires that
his act be wrongful. The adverse result of an action does not per se make the act wrongful and
subject the act or to the payment of moral damages. The law could not have meant to impose a
penalty on the right to litigate; such right is so precious that moral damages may not be charged on
those who may exercise it erroneously. For these the law taxes costs. 7

The fact that the results of the trial were adverse to Barreto did not alone make his act in bringing the
action wrongful because in most cases one party will lose; we would be imposing an unjust condition
or limitation on the right to litigate. We hold that the award of moral damages in the case at bar is not
justified by the facts had circumstances as well as the law.

If a party wins, he cannot, as a rule, recover attorney's fees and litigation expenses, since it is not
the fact of winning alone that entitles him to recover such damages of the exceptional circumstances
enumerated in Art. 2208. Otherwise, every time a defendant wins, automatically the plaintiff must
pay attorney's fees thereby putting a premium on the right to litigate which should not be so. For
those expenses, the law deems the award of costs as sufficient. 8

WHEREFORE, the challenged decision of the Court of Appeals is AFFIRMED in so far as it holds the petitioner liable to the private respondent in the sum of
P200,000.00 representing the face value of the insurance contract, with interest at the legal rate from the date of the filing of the complaint until the full amount is
paid, but MODIFIED with the deletion of all awards for damages, including attorney's fees, except the costs of the suit.

SO ORDERED.