9/30/2019 G.R. No. 115278 May 23, 1995 - FORTUNE INSURANCE AND SURETY CO., INC. v.

INC. v. COURT OF APPEALS, ET AL. : MAY 1995 - PHIL…

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FIRST DIVISION

[G.R. No. 115278. May 23, 1995.]

FORTUNE INSURANCE AND SURETY CO., INC., Petitioner, v. COURT OF APPEALS and
PRODUCERS BANK OF THE PHILIPPINES, Respondents.

Santiago, Arevalo, Tomas & Associates for Petitioner.

Julius Caesar Q. Llamas for Private Respondent.

SYLLABUS

1. COMMERCIAL LAW; INSURANCE; BURGLARY, THEFT AND ROBBERY POLICY; A CASUALTY INSURANCE;
GOVERNING PRINCIPLES. — The insurance policy entered into by the parties is a theft or robbery
insurance policy which is a form of casualty insurance. 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.

DebtKollect Company, Inc.
2. ID.; ID.; ID.; GENERAL EXCEPTIONS; SERVICE AND EMPLOYMENT; MEANING THEREOF. — 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." Persons frequently excluded under such provisions are those in the
insured’s service and employment. The purpose of the exception is to guard against liability should the
theft be committed by one having unrestricted access to the property. In such cases, the terms
specifying the excluded classes are to be given their meaning as understood in common speech. The
terms "service" and "employment" are generally associated with the idea of selection, control, and
compensation.

3. ID.; ID.; ID.; ID.; ID.; LABOR-ONLY CONTRACTS, CONSIDERED AUTHORIZED REPRESENTATIVE IN
CASE AT BAR. — Notwithstanding the 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

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9/30/2019 G.R. No. 115278 May 23, 1995 - FORTUNE INSURANCE AND SURETY CO., INC. v. COURT OF APPEALS, ET AL. : MAY 1995 - PHIL…
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May-1995 Jurisprudence
G.R. Nos. 101801-03 May 2, 1995 : PEOPLE OF THE
PHIL. vs. EDUARDO "EDDIE" TAMI
G.R. No. 113739 May 2, 1995 : CLAUDIO M.
ANONUEVO, ET AL. vs. COURT OF APPEALS, ET AL.
G.R. No. 108886 May 5, 1995 : AQUILES U. REYES
vs. REGIONAL TRIAL COURT OF ORIENTAL MINDORO,
BRANCH XXXIX, ET AL.
Adm. Matter No. RTJ-95-1293 May 9, 1995 : GIL V.
MANLAVI vs. EUSTAQUIO Z. GACOTT, JR.
G.R. No. 101444 May 9, 1995 : A.C. ENTERPRISES,
INC. vs. CONSTRUCTION INDUSTRY ARBITRATION
COMMISSION, ET AL.
G.R. No. 113287 May 9, 1995 : LOYOLA SECURITY
AND DETECTIVE AGENCY, ET AL. vs. NATIONAL LABOR
RELATIONS COMMISSION, ET AL.
Adm. Matter No. MTJ-93-842 May 10, 1995 : MYLA
PAREDES, ET AL. vs. JACINTO A. MANALO
G.R. No. L-42108 May 10, 1995 : OSCAR D. RAMOS,
ET AL. vs. COURT OF APPEALS, ET AL.
G.R. No. 110590 May 10, 1995 : ZORAYDA AMELIA
C. ALONZO vs. IGNACIO M. CAPULONG, ET AL.
G.R. No. 91756 May 11, 1995 : PEOPLE OF THE
PHIL. vs. RAUL G. ESCOTO, ET AL.
G.R. No. 117389 May 11, 1995 : ROMEO V. OBLEA,
ET AL. vs. COURT OF APPEALS, ET AL.
Adm. Case No. 2468 May 12, 1995 : NILO L.
MIRAFLOR vs. JUAN M. HAGAD, ET AL.
Adm. Matter No. MTJ-93-782 May 12, 1995 :
YOLANDA CRUZ vs. FILOMENO S. PASCUAL
G.R. No. 100125 May 12, 1995 : PEOPLE OF THE
PHIL. vs. ROMEO B. MAGALONG, ET AL.
G.R. No. 113081 May 12, 1995 : WORLDWIDE
PAPERMILLS, INC., ET AL. vs. NATIONAL LABOR
RELATIONS COMMISSION, ET AL.
G.R. No. 95028 May 15, 1995 : PEOPLE OF THE
PHIL. vs. MARLO L. COMPIL
G.R. No. 100911 May 16, 1995 : PEOPLE OF THE
PHIL. vs. MAJID SAMSON, ET AL.
G.R. No. 105248 May 16, 1995 : BENJAMIN
ROMUALDEZ vs. SANDIGANBAYAN, ET AL.
G.R. No. 106643 May 16, 1995 : PEOPLE OF THE
PHIL. vs. EDWIN M. MESAL
G.R. No. 112141 May 16, 1995 : PHOENIX IRON
AND STEEL CORP. vs. SECRETARY OF LABOR AND
EMPLOYMENT, ET AL.
www.chanrobles.com/cralaw/1995maydecisions.php?id=681
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."
In view of the foregoing, Fortune is exempt from liability under the general exceptions clause of the
insurance policy.
4. ID.; ID.; CONTRACT OF INSURANCE AS CONTRACT OF ADHESION; INTERPRETATION THEREOF. — A
contract of insurance is a contract of adhesion, thus any ambiguity therein should be resolved against the
insurer, or it should be construed liberally in favor of the insured and strictly against the insurer.
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. 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.
5. ID.; ID.; CONTRACT OF INSURANCE AS CONTRACT OF INDEMNITY. — An insurance contract is a
contract of indemnity upon the terms and conditions specified therein. It is settled that the terms of the
policy constitute the measure of the insurer’s liability. In the absence of statutory prohibition to the
contract, 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.
DECISION
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 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.
chanrobles.com:cralaw:red
After joinder of issues, the parties asked the trial court to render judgment based on the following
stipulation of facts: chanrob1es virtual 1aw library
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: jgc:chanrobles.com.ph
"GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect of
x x x
(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. . . ." cralaw virtua1aw library
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: chanrob1es virtual 1aw library
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.
2/6
9/30/2019 G.R. No. 115278 May 23, 1995 - FORTUNE INSURANCE AND SURETY CO., INC. v. COURT OF APPEALS, ET AL. : MAY 1995 - PHIL…
G.R. No. 96372 May 22, 1995 : ANTONIO L.
CASTELO, ET AL. vs. COURT OF APPEALS, ET AL.
G.R. No. 99846 May 22, 1995 : BELEN CRUZ, ET AL.
vs. FE ESPERANZA LEABRES
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PHIL vs. LUIS TAMPAL, ET AL.
G.R. No. 106483 May 22, 1995 : ERNESTO L.
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INSTITUTE
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vs. COURT OF APPEALS, ET AL.
G.R. No. 109991 May 22, 1995 : ELIAS C. QUIBAL,
ET AL. vs. SANDIGANBAYAN, ET AL.
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COMELEC
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ET AL. vs. CONRADO M. VASQUEZ, ET AL.
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INSURANCE AND SURETY CO., INC. vs. COURT OF
APPEALS, ET AL.
G.R. No. 116650 May 23, 1995 : TOYOTA SHAW,
INC. vs. COURT OF APPEALS, ET AL.
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ET AL.
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G.R. No. 114870 May 26, 1995 : MIGUELA R.
VILLANUEVA, ET AL. vs. COURT OF APPEALS, ET AL.
G.R. No. 115814 May 26, 1995 : PEDRO P. PECSON
vs. COURT OF APPEALS, ET AL.
G.R. No. 94033 May 29, 1995 : FELICIANO RAMOS
vs. FRANCISCO C. RODRIGUEZ
G.R. No. 97936 May 29, 1995 : PEOPLE OF THE
PHIL. vs. ALEJANDRO C. LUCERO
G.R. No. 105208 May 29, 1995 : COMMISSIONER OF
INTERNAL REVENUE vs. PHILIPPINE AMERICAN LIFE
INSURANCE CO., ET AL.
G.R. Nos. 106385-88 May 29, 1995 : PEOPLE OF
THE PHIL. vs. ALEJANDRO MANDAP
G.R. No. 108123 May 29, 1995 : PEOPLE OF THE
PHIL. vs. ARNEL M. SOBERANO
G.R. No. 109142 May 29, 1995 : PEOPLE OF THE
PHIL. vs. IRENEO SILVESTRE, ET AL.
G.R. No. 112045 May 29, 1995 : DANILO F.C.
RIMONTE vs. CIVIL SERVICE COMMISSION, ET AL.
G.R. Nos. 113057-58 May 29, 1995 : PEOPLE OF
THE PHIL. vs. JUAN F. REMOTO
G.R. No. 113786 May 29, 1995 : PEOPLE OF THE
PHIL. vs. NONY BACLAYO, ET AL.
Adm. Matter No. P-93-976 May 31, 1995 : MENCHIE
PUNSALAN-SANTOS vs. NAPOLEON I. ARQUIZA
G.R. No. 73974 May 31, 1995 : REPUBLIC OF THE
PHIL. vs. REGISTER OF DEEDS OF QUEZON
G.R. No. 100915 May 31, 1995 : PEOPLE OF THE
PHIL. vs. JOSEPH SUPREMO
G.R. No. 106639 May 31, 1995 : PEOPLE OF THE
PHIL. vs. SATURNINO J. SOLON
G.R. No. 108544 May 31, 1995 : REPUBLIC OF THE
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G.R. No. 110808 May 31, 1995 : PEOPLE OF THE
PHIL. vs. ALFONSO QUINEVISTA, JR.
www.chanrobles.com/cralaw/1995maydecisions.php?id=681
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:chanrob1es virtual 1aw library
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 a replacement for such driver or 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: chanrob1es virtual 1aw library
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 v. Court of Appeals, 207 SCRA 669; Sun Insurance Office, Ltd.
v. 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. v. 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" should 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. chanrobles law library : red
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: chanrobles.com : virtual law library
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. v. 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 employed 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.
Producer further asseverates that what should be applied is the rule in American President Lines v. Clave,
8 to wit: chanrob1es virtual 1aw library
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.
3/6
9/30/2019 G.R. No. 115278 May 23, 1995 - FORTUNE INSURANCE AND SURETY CO., INC. v. COURT OF APPEALS, ET AL. : MAY 1995 - PHIL…
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ET AL. v. COURT OF APPEALS, ET AL.
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ET AL. v. COURT OF APPEALS, ET AL.
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YOLANDA CRUZ v. FILOMENO S. PASCUAL
G.R. No. 100125 May 12, 1995 - PEOPLE OF THE
PHIL. v. ROMEO B. MAGALONG, ET AL.
G.R. No. 113081 May 12, 1995 - WORLDWIDE
PAPERMILLS, INC., ET AL. v. NATIONAL LABOR
RELATIONS COMMISSION, ET AL.
G.R. No. 95028 May 15, 1995 - PEOPLE OF THE
PHIL. v. MARLO L. COMPIL
G.R. No. 100911 May 16, 1995 - PEOPLE OF THE
PHIL. v. MAJID SAMSON, ET AL.
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ROMUALDEZ v. SANDIGANBAYAN, ET AL.
G.R. No. 106643 May 16, 1995 - PEOPLE OF THE
PHIL. v. EDWIN M. MESAL
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AND STEEL CORP. v. SECRETARY OF LABOR AND
EMPLOYMENT, ET AL.
G.R. No. 96372 May 22, 1995 - ANTONIO L.
CASTELO, ET AL. v. COURT OF APPEALS, ET AL.
G.R. No. 99846 May 22, 1995 - BELEN CRUZ, ET AL.
v. FE ESPERANZA LEABRES
G.R. No. 102485 May 22, 1995 - PEOPLE OF THE
PHIL v. LUIS TAMPAL, ET AL.
G.R. No. 106483 May 22, 1995 - ERNESTO L.
CALLADO v. INTERNATIONAL RICE RESEARCH
INSTITUTE
G.R. No. 107903 May 22, 1995 - MARILOU RIVERA
v. COURT OF APPEALS, ET AL.
G.R. No. 109991 May 22, 1995 - ELIAS C. QUIBAL,
ET AL. v. SANDIGANBAYAN, ET AL.
G.R. No. 110658 May 22, 1995 - PEOPLE OF THE
PHIL. v. DEBORAH WOOLCOCK, ET AL.
G.R. Nos. 116506-07 May 22, 1995 - BILLY P.
OBUGAN v. PEOPLE OF THE PHIL., ET AL.
G.R. No. 119694 May 22, 1995 - PHILIPPINE PRESS
INSTITUTE, INC. v. COMMISSION ON ELECTIONS
G.R. No. 95367 May 23, 1995 - JOSE T. ALMONTE,
ET AL. v. CONRADO M. VASQUEZ, ET AL.
www.chanrobles.com/cralaw/1995maydecisions.php?id=681
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." chanrobles.com : virtual law library
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: chanrob1es virtual 1aw library
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. (Emphasis 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 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:
chanrobles.com:cralaw:red
GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect of
x x x
(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. . . . (Emphasis supplied)
There is marked disagreement between the parties on the correct meaning of the terms "employee" and
"authorized representatives." cralaw virtua1aw library
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 the PRC Management Systems and Unicorn Security Services are "labor-only" contracts. chanrobles law library
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.
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9/30/2019 G.R. No. 115278 May 23, 1995 - FORTUNE INSURANCE AND SURETY CO., INC. v. COURT OF APPEALS, ET AL. : MAY 1995 - PHIL…
G.R. No. 115278 May 23, 1995 - FORTUNE WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals in CA-G.R. CV
INSURANCE AND SURETY CO., INC. v. COURT OF No. 32946 dated 3 May 1994 as well as that of Branch 146 of the Regional Trial Court of Makati in Civil
APPEALS, ET AL. Case No. 1817 are REVERSED and SET ASIDE. The complaint in Civil Case No. 1817 is DISMISSED.
G.R. No. 116650 May 23, 1995 - TOYOTA SHAW, No pronouncement as to costs.
INC. v. COURT OF APPEALS, ET AL.

G.R. No. 68252 May 26, 1995 - COMMISSIONER OF SO ORDERED.

INTERNAL REVENUE v. TOKYO SHIPPING CO. LTD., ET
AL. Bellosillo and Kapunan, JJ., concur.

G.R. No. 100354 May 26, 1995 - PEOPLE OF THE Padilla, J., took no part.
PHIL. v. DIONISIO M. TADEPA
Quiason, J., is on leave.
G.R. No. 109560 May 26, 1995 - NESTOR ILANO v.
COURT OF APPEALS, ET AL.
Endnotes:
G.R. No. 109776 May 26, 1995 - PEOPLE OF THE
PHIL v. ROQUE CABRESOS

G.R. No. 110776 May 26, 1995 - MARANAW HOTEL 1. Rollo, 46-47 (Emphasis supplied).
& RESORT CORPORATION v. NATIONAL LABOR
RELATIONS COMMISSION, ET AL. 2. Id., 8.

G.R. No. 112015 May 26, 1995 - PEOPLE OF THE 3. Rollo, 10-11.
PHIL. v. RENATO DAEN, JR.
4. Annex "A" of Petition; Id., 45-53. Per Austria-Martinez, A., J., with Marigomen, A. and
G.R. No. 114870 May 26, 1995 - MIGUELA R. Reyes, R., JJ., concurring.
VILLANUEVA, ET AL. v. COURT OF APPEALS, ET AL.

G.R. No. 115814 May 26, 1995 - PEDRO P. PECSON 5. Rollo, 51-52.
v. COURT OF APPEALS, ET AL.
6. Citing in the Petition, Broadway Motors, Inc. v. NLRC, 156 SCRA 522 [1987], and in the
G.R. No. 94033 May 29, 1995 - FELICIANO RAMOS Memorandum, Vallum Security Services v. NLRC, 224 SCRA 781 [1993].
v. FRANCISCO C. RODRIGUEZ
7. 169 SCRA 341 [1989].
G.R. No. 97936 May 29, 1995 - PEOPLE OF THE
PHIL. v. ALEJANDRO C. LUCERO 8. 114 SCRA 832 [1982].
G.R. No. 105208 May 29, 1995 - COMMISSIONER 9. MARIA CLARA M. CAMPOS, Insurance, 1983 ed., 199.
OF INTERNAL REVENUE v. PHILIPPINE AMERICAN
LIFE INSURANCE CO., ET AL.
10. WILLIAM B. VANCE, Handbook on the Law of Insurance, 3rd ed. by Buist M. Andersen
G.R. Nos. 106385-88 May 29, 1995 - PEOPLE OF [1951], 1014.
THE PHIL. v. ALEJANDRO MANDAP
11. Bowling v. Hamblen County Motor Co., 66 S.W. 2d 229, 16 Tenn. App. 52.
G.R. No. 108123 May 29, 1995 - PEOPLE OF THE
PHIL. v. ARNEL M. SOBERANO 12. Barret v. Commercial Standard Ins. Co., Tex. Civ. App., 145 S.W. 2d 315.

G.R. No. 109142 May 29, 1995 - PEOPLE OF THE 13. Ledvinka v. Home Ins. Co. of New York, 115 A. 596, 139 Md. 434, 19 A.L.R. 167.
PHIL. v. IRENEO SILVESTRE, ET AL.
14. Id., Gulf Finance & Securities Co. v. National Fire Ins. Co., 7 La. App. 8.
G.R. No. 112045 May 29, 1995 - DANILO F.C.
RIMONTE v. CIVIL SERVICE COMMISSION, ET AL.
15. CAMPOS, op. cit., 22.
G.R. Nos. 113057-58 May 29, 1995 - PEOPLE OF
THE PHIL. v. JUAN F. REMOTO 16. Verendia v. Court of Appeals, 217 SCRA 417 [1993].

G.R. No. 113786 May 29, 1995 - PEOPLE OF THE
PHIL. v. NONY BACLAYO, ET AL.
Adm. Matter No. P-93-976 May 31, 1995 - MENCHIE
PUNSALAN-SANTOS v. NAPOLEON I. ARQUIZA
17. CAMPOS, op. cit., 13.
18. 43 Am Jur 2d Insurance § 271 [1982].
19. Strokes v. Malayan Insurance, 127 SCRA 766 [1984].

G.R. No. 73974 May 31, 1995 - REPUBLIC OF THE 20. Paramount Insurance Corp. v. Japzon, 211 SCRA 879 [1992].
PHIL. v. REGISTER OF DEEDS OF QUEZON
21. See Broadway Motors, Inc. v. NLRC, supra note 6; Canlubang Security Agency Corp. v.
G.R. No. 100915 May 31, 1995 - PEOPLE OF THE
NLRC, 216 SCRA 280 [1992]; Vallum Security Services v. NLRC, supra note 6; and Villuga
PHIL. v. JOSEPH SUPREMO
v. NLRC, 225 SCRA 537 [1993].
G.R. No. 106639 May 31, 1995 - PEOPLE OF THE
PHIL. v. SATURNINO J. SOLON 22. See International Timber Corp. v. NLRC, supra note 7; Baguio v. NLRC, 202 SCRA 465
[1965].
G.R. No. 108544 May 31, 1995 - REPUBLIC OF THE
PHIL. v. NATIONAL LABOR RELATIONS COMMISSION, 23. Black’s Law Dictionary, Fifth ed., 1170.
ET AL.

G.R. No. 110808 May 31, 1995 - PEOPLE OF THE

PHIL. v. ALFONSO QUINEVISTA, JR.

G.R. No. 110954 May 31, 1995 - DELFIN N. Back to Home | Back to Main
DIVINAGRACIA, JR., ET AL. v. PATRICIA A. STO.
TOMAS, ET AL.

G.R. No. 111812 May 31, 1995 - DIONISIO M. QUICK SEARCH

RABOR v. CIVIL SERVICE COMMISSION

G.R. No. 114268 May 31, 1995 - PEOPLE OF THE

PHIL. v. FELICIANO HILARIO
1901 1902 1903 1904 1905 1906 1907 1908
G.R. No. 115942 May 31, 1995 - RUBLE RUBENECIA 1909 1910 1911 1912 1913 1914 1915 1916
v. CIVIL SERVICE COMMISSION
1917 1918 1919 1920 1921 1922 1923 1924
1925 1926 1927 1928 1929 1930 1931 1932
1933 1934 1935 1936 1937 1938 1939 1940
1941 1942 1943 1944 1945 1946 1947 1948
1949 1950 1951 1952 1953 1954 1955 1956
1957 1958 1959 1960 1961 1962 1963 1964
1965 1966 1967 1968 1969 1970 1971 1972
1973 1974 1975 1976 1977 1978 1979 1980
1981 1982 1983 1984 1985 1986 1987 1988
1989 1990 1991 1992 1993 1994 1995 1996
1997 1998 1999 2000 2001 2002 2003 2004
2005 2006 2007 2008 2009 2010 2011 2012
2013 2014 2015 2016 2017 2018

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