Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-21574             June 30, 1966

SIMON DE LA CRUZ, plaintiff and appellee, 

vs.
THE CAPITAL INSURANCE and SURETY CO., INC., defendant and appellant.

Achacoso, Nera and Ocampo for defendant and appellant.

Agustin M. Gramata for plaintiff and appellee.

BARRERA, J.:

This is an appeal by the Capital Insurance & Surety Company, Inc., from the decision of the Court of
First Instance of Pangasinan (in Civ Case No. U-265), ordering it to indemnify therein plaintiff Simon
de la Cruz for the death of the latter's son, to pay the burial expenses, and attorney's fees.

Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines, Inc. in Baguio, was the
holder of an accident insurance policy (No. ITO-BFE-170) underwritten by the Capital Insurance &
Surety Co., Inc., for the period beginning November 13, 1956 to November 12, 1957. On January 1,
1957, in connection with the celebration of the New Year, the Itogon-Suyoc Mines, Inc. sponsored a
boxing contest for general entertainment wherein the insured Eduardo de la Cruz, a non-
professional boxer participated. In the course of his bout with another person, likewise a non-
professional, of the same height, weight, and size, Eduardo slipped and was hit by his opponent on
the left part of the back of the head, causing Eduardo to fall, with his head hitting the rope of the ring.
He was brought to the Baguio General Hospital the following day. The cause of death was reported
as hemorrhage, intracranial, left.

Simon de la Cruz, the father of the insured and who was named beneficiary under the policy,
thereupon filed a claim with the insurance company for payment of the indemnity under the
insurance policy. As the claim was denied, De la Cruz instituted the action in the Court of First
Instance of Pangasinan for specific performance. Defendant insurer set up the defense that the
death of the insured, caused by his participation in a boxing contest, was not accidental and,
therefore, not covered by insurance. After due hearing the court rendered the decision in favor of the
plaintiff which is the subject of the present appeal.

It is not disputed that during the ring fight with another non-professional boxer, Eduardo slipped,
which was unintentional. At this opportunity, his opponent landed on Eduardo's head a blow, which
sent the latter to the ropes. That must have caused the cranial injury that led to his death. Eduardo
was insured "against death or disability caused by accidental means". Appellant insurer now
contends that while the death of the insured was due to head injury, said injury was sustained
because of his voluntary participation in the contest. It is claimed that the participation in the boxing
contest was the "means" that produced the injury which, in turn, caused the death of the insured.
And, since his inclusion in the boxing card was voluntary on the part of the insured, he cannot be
considered to have met his death by "accidental means". 1äwphï1.ñët
The terms "accident" and "accidental", as used in insurance contracts, have not acquired any
technical meaning, and are construed by the courts in their ordinary and common acceptation. Thus,
the terms have been taken to mean that which happen by chance or fortuitously, without intention
and design, and which is unexpected, unusual, and unforeseen. 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 cause and, therefore, not expected. 1

Appellant however, would like to make a distinction between "accident or accidental" and "accidental
means", which is the term used in the insurance policy involved here. It is argued that to be
considered within the protection of the policy, what is required to be accidental is the means that
caused or brought the death and not the death itself. It may be mentioned in this connection, that the
tendency of court decisions in the United States in recent years is to eliminate the fine distinction
between the terms "accidental" and "accidental means" and to consider them as legally
synonymous.2 But, even if we take appellant's theory, the death of the insured in the case at bar
would still be entitled to indemnification under the policy. The generally accepted rule is that, death
or injury does not result from accident or accidental means within the terms of an 
accident-policy if it is the natural result of the insured's voluntary act, unaccompanied by anything
unforeseen except the death or injury. 3 There is no accident when a deliberate act is performed
unless some additional, unexpected, independent, and unforeseen happening occurs which
produces or brings about the result of injury or death. 4 In other words, where the death or injury is
not the natural or probable result of the insured's voluntary act, or if something unforeseen occurs in
the doing of the act which produces the injury, the resulting death is within the protection of policies
insuring against death or injury from accident.

In the present case, while the participation of the insured in the boxing contest is voluntary, the injury
was sustained when he slid, giving occasion to the infliction by his opponent of the blow that threw
him to the ropes of the ring. Without this unfortunate incident, that is, the unintentional slipping of the
deceased, perhaps he could not have received that blow in the head and would not have died. The
fact that boxing is attended with some risks of external injuries does not make any injuries received
in the course of the game not accidental. In boxing as in other equally physically rigorous sports,
such as basketball or baseball, death is not ordinarily anticipated to result. If, therefore, it ever does,
the injury or death can only be accidental or produced by some unforeseen happening or event as
what occurred in this case.

Furthermore, the policy involved herein specifically excluded from its coverage —

(e) Death or disablement consequent upon the Insured engaging in football, hunting,
pigsticking, steeplechasing, polo-playing, racing of any kind, mountaineering, or
motorcycling.

Death or disablement resulting from engagement in boxing contests was not declared outside of the
protection of the insurance contract. Failure of the defendant insurance company to include death
resulting from a boxing match or other sports among the prohibitive risks leads inevitably to the
conclusion that it did not intend to limit or exempt itself from liability for such death. 5

Wherefore, in view of the foregoing considerations, the decision appealed from is hereby affirmed,
with costs against appellant. so ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez,
JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

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.   The petitioner was sentenced to pay her P200,000.00, representing the face value of the
2

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.   The petitioner then came to this Court to fault the Court of Appeals for approving the
3

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,   says that
6

"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.

Griño-Aquino, Medialdea and Bellosillo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-21821-22 and L-21824-27             May 31, 1966

DIOSDADO C. TY, plaintiff-appellant, 
vs.
FILIPINAS COMPAÑIA DE SEGUROS, et al., defendants-appellees.

Porfirio V. Villaroman for plaintiff-appellant.

Ramirez and Ortigas for defendants-appellees Filipinas Compañia de Seguros, Philippine Guaranty
Co., Inc. and Universal Insurance and Indemnity Co.
Renato L. Liboro for defendant-appellee People's Surety and Insurance Co., Inc.
Perfecto P. R. Chua Cheng for defendant-appellee South Sea Surety and Insurance Co., Inc.
Gil Carlos and Associates for defendant-appellee Plaridel Surety and Insurance Co., Inc.

BARRERA, J.:

These are appeals instituted by Diosdado C. Ty from a single decision of the Court of First Instance
of Manila (in Civ. Cases Nos. 26343, 26344, 26404, 26405, 26406, 26442, which were tried
together), dismissing the six separate complaints he filed against six insurance companies (Filipinas
Compañia de Seguros, People's Surety & Insurance Co., Inc., South Sea Surety & Insurance Co.,
Inc., The Philippine Guaranty Company, Inc., Universal Insurance & Indemnity Co., and Plaridel
Surety & Insurance Co., Inc.) for collection from each of them, of the sum of P650.00, as
compensation for the disability of his left hand.

The facts of these cases are not controverted:

Plaintiff-appellant was an employee of Broadway Cotton Factory at Grace Park, Caloocan City,
working as mechanic operator, with monthly salary of P185.00. In the latter part of 1953, he took
Personal Accident Policies from several insurance companies, among which are herein defendants-
appellees, on different dates,1 effective for 12 months. During the effectivity of these policies, or on
December 24, 1953, a fire broke out in the factory where plaintiff was working. As he was trying to
put out said fire with the help of a fire extinguisher, a heavy object fell upon his left hand. Plaintiff
received treatment at the National Orthopedic Hospital from December 26, 1953 to February 8,
1954, for the following injuries, to wit:

(1) Fracture, simple, oraximal phalanx, index finger, left;

(2) Fracture, compound, communite proximal phalanx, middle finger, left and 2nd phalanx
simple;

(3) Fracture, compound, communite phalanx, 4th finger, left;

(4) Fracture, simple, middle phalanx, middle finger, left;

(5) Lacerated wound, sutured, volar aspect, small finger, left;

(6) Fracture, simple, chip, head, 1st phalanx 5th digit, left.

which injuries, the attending surgeon certified, would cause temporary total disability of appellant's
left hand.

As the insurance companies refused to pay his claim for compensation under the policies by reason
of the said disability of his left hand, Ty filed motions in the Municipal Court of Manila, which
rendered favorable decision. On appeal to the Court of First Instance by the insurance companies,
the cases were dismissed on the ground that under the uniform terms of the insurance policies,
partial disability of the insured caused by loss of either hand to be compensable, the loss must result
in the amputation of that hand. Hence, these appeals by the insured. 1äwphï1.ñët

Plaintiff-appellant is basing his claim for indemnity under the provision of the insurance contract,
uniform in all the cases, which reads:

"INDEMNITY FOR TOTAL OR PARTIAL DISABILITY

If the Insured sustains any Bodily Injury which is effected solely through violent, external,
visible and accidental means, and which shall not prove fatal but shall result, independently
of all other causes and within sixty (60) days from the occurrence, thereof, in Total or Partial
Disability of the Insured, the Company shall pay, subject to the exceptions as provided for
hereinafter, the amount set opposite such injury.

xxx     xxx     xxx

PARTIAL DISABILITY

LOSS OF:

xxx     xxx     xxx

Either Hand P650.00

xxx     xxx     xxx

The loss of a hand shall mean the loss, by amputation through the bones of the wrist.
Appellant contends that to be entitled to indemnification under the foregoing provision, it is enough
that the insured is disabled to such an extent that he cannot substantially perform all acts or duties of
the kind necessary in the prosecution of his business. It is argued that what is compensable is the
disability and not the amputation of the hand. The definition of what constitutes loss of hand, placed
in the contract, according to appellant, consequently, makes the provision ambiguous and calls for
the interpretation thereof by this Court.

This is not the first time that the proper construction of this provision, which is uniformly carried in
personal accident policies, has been questioned. Herein appellant himself has already brought this
matter to the attention of this Court in connection with the other accident policies which he took and
under which he had tried to collect indemnity, for the identical injury that is the basis of the claims in
these cases. And, we had already ruled:

While we sympathize with the plaintiff or his employer, for whose benefit the policies were
issued, we can not go beyond the clear and express conditions of the insurance policies, all
of which definite partial disability as loss of either hand by amputation through the bones of
the wrist. There was no such amputation in the case at bar. All that was found by the trial
court, which is not disputed on appeal, was that the physical injuries "caused temporary total
disability of plaintiff's left hand." Note that the disability of plaintiff's hand was merely
temporary, having been caused by fractures of the index, the middle and the fourth fingers of
the left hand.

We might add that the agreement contained in the insurance policies is the law between the parties.
As the terms of the policies are clear, express and specific that only amputation of the left hand
should be considered as a loss thereof, an interpretation that would include the mere fracture or
other temporary disability not covered by the policies would certainly be unwarranted. 2

We find no reason to depart from the foregoing ruling on the matter. 

Plaintiff-appellant cannot come to the courts and claim that he was misled by the terms of the
contract. The provision is clear enough to inform the party entering into that contract that the loss to
be considered a disability entitled to indemnity, must be severance or amputation of that affected
member from the body of the insured.

Wherefore, finding no error in the decision appealed from, the same is hereby affirmed, without
costs. So ordered.

Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ.,
concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-8151        December 16, 1955

VIRGINIA CALANOC, petitioner, 
vs.
COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE CO., respondents.
Lucio Javillonar for petitioner.
J. A. Wolfson, Manuel Y. Mecias, Emilio Abello and Anselmo A. Reyes for respondents.

BAUTISTA ANGELO, J.:

This suit involves the collection of P2,000 representing the value of a supplemental policy covering
accidental death which was secured by one Melencio Basilio from the Philippine American Life
Insurance Company. The case originated in the Municipal Court of Manila and judgment being
favorable to the plaintiff it was appealed to the court of first instance. The latter court affirmed the
judgment but on appeal to the Court of Appeals the judgment was reversed and the case is now
before us on a petition for review.

Melencio Basilio was a watchman of the Manila Auto Supply located at the corner of Avenida Rizal
and Zurbaran. He secured a life insurance policy from the Philippine American Life Insurance
Company in the amount of P2,000 to which was attached a supplementary contract covering death
by accident. On January 25, 1951, he died of a gunshot wound on the occasion of a robbery
committed in the house of Atty. Ojeda at the corner of Oroquieta and Zurbaan streets. Virginia
Calanoc, the widow, was paid the sum of P2,000, face value of the policy, but when she demanded
the payment of the additional sum of P2,000 representing the value of the supplemental policy, the
company refused alleging, as main defense, that the deceased died because he was murdered by a
person who took part in the commission of the robbery and while making an arrest as an officer of
the law which contingencies were expressly excluded in the contract and have the effect of
exempting the company from liability.

The pertinent facts which need to be considered for the determination of the questions raised are
those reproduced in the decision of the Court of Appeals as follows:

The circumstances surrounding the death of Melencio Basilio show that when he was killed
at about seven o'clock in the night of January 25, 1951, he was on duty as watchman of the
Manila Auto Supply at the corner of Avenida Rizal and Zurbaran; that it turned out that Atty.
Antonio Ojeda who had his residence at the corner of Zurbaran and Oroquieta, a block away
from Basilio's station, had come home that night and found that his house was well-lighted,
but with the windows closed; that getting suspicious that there were culprits in his house,
Atty. Ojeda retreated to look for a policeman and finding Basilio in khaki uniform, asked him
to accompany him to the house with the latter refusing on the ground that he was not a
policeman, but suggesting that Atty. Ojeda should ask the traffic policeman on duty at the
corner of Rizal Avenue and Zurbaran; that Atty. Ojeda went to the traffic policeman at said
corner and reported the matter, asking the policeman to come along with him, to which the
policeman agreed; that on the way to the Ojeda residence, the policeman and Atty. Ojeda
passed by Basilio and somehow or other invited the latter to come along; that as the tree
approached the Ojeda residence and stood in front of the main gate which was covered with
galvanized iron, the fence itself being partly concrete and partly adobe stone, a shot was
fired; that immediately after the shot, Atty. Ojeda and the policeman sought cover; that the
policeman, at the request of Atty. Ojeda, left the premises to look for reinforcement; that it
turned out afterwards that the special watchman Melencio Basilio was hit in the abdomen,
the wound causing his instantaneous death; that the shot must have come from inside the
yard of Atty. Ojeda, the bullet passing through a hole waist-high in the galvanized iron gate;
that upon inquiry Atty. Ojeda found out that the savings of his children in the amount of P30
in coins kept in his aparador contained in stockings were taken away, the aparador having
 been ransacked; that a month thereafter the corresponding investigation conducted by the
police authorities led to the arrest and prosecution of four persons in Criminal Case No.
15104 of the Court of First Instance of Manila for 'Robbery in an Inhabited House and in
Band with Murder'.

It is contended in behalf of the company that Basilio was killed which "making an arrest as an officer
of the law" or as a result of an "assault or murder" committed in the place and therefore his death
was caused by one of the risks excluded by the supplementary contract which exempts the company
from liability. This contention was upheld by the Court of Appeals and, in reaching this conclusion,
made the following comment:

From the foregoing testimonies, we find that the deceased was a watchman of the Manila
Auto Supply, and, as such, he was not boud to leave his place and go with Atty. Ojeda and
Policeman Magsanoc to see the trouble, or robbery, that occurred in the house of Atty.
Ojeda. In fact, according to the finding of the lower court, Atty. Ojeda finding Basilio in
uniform asked him to accompany him to his house, but the latter refused on the ground that
he was not a policeman and suggested to Atty. Ojeda to ask help from the traffic policeman
on duty at the corner of Rizal Avenue and Zurbaran, but after Atty. Ojeda secured the help of
the traffic policeman, the deceased went with Ojeda and said traffic policeman to the
residence of Ojeda, and while the deceased was standing in front of the main gate of said
residence, he was shot and thus died. The death, therefore, of Basilio, although unexpected,
was not caused by an accident, being a voluntary and intentional act on the part of the one
wh robbed, or one of those who robbed, the house of Atty. Ojeda. Hence, it is out considered
opinion that the death of Basilio, though unexpected, cannot be considered accidental, for
his death occurred because he left his post and joined policeman Magsanoc and Atty. Ojeda
to repair to the latter's residence to see what happened thereat. Certainly, when Basilio
joined Patrolman Magsanoc and Atty. Ojeda, he should have realized the danger to which he
was exposing himself, yet, instead of remaining in his place, he went with Atty. Ojeda and
Patrolman Magsanoc to see what was the trouble in Atty. Ojeda's house and thus he was
fatally shot.

We dissent from the above findings of the Court of Appeals. For one thing, Basilio was a watchman
of the Manila Auto Supply which was a block away from the house of Atty. Ojeda where something
suspicious was happening which caused the latter to ask for help. While at first he declied the
invitation of Atty. Ojeda to go with him to his residence to inquire into what was going on because he
was not a regular policeman, he later agreed to come along when prompted by the traffic policeman,
and upon approaching the gate of the residence he was shot and died. The circumstance that he
was a mere watchman and had no duty to heed the call of Atty. Ojeda should not be taken as a
capricious desire on his part to expose his life to danger considering the fact that the place he was in
duty-bound to guard was only a block away. In volunteering to extend help under the situation, he
might have thought, rightly or wrongly, that to know the truth was in the interest of his employer it
being a matter that affects the security of the neighborhood. No doubt there was some risk coming to
him in pursuing that errand, but that risk always existed it being inherent in the position he was
holding. He cannot therefore be blamed solely for doing what he believed was in keeping with his
duty as a watchman and as a citizen. And he cannot be considered as making an arrest as an officer
of the law, as contended, simply because he went with the traffic policeman, for certainly he did not
go there for that purpose nor was he asked to do so by the policeman.

Much less can it be pretended that Basilio died in the course of an assault or murder considering the
very nature of these crimes. In the first place, there is no proof that the death of Basilio is the result
of either crime for the record is barren of any circumstance showing how the fatal shot was fired.
Perhaps this may be clarified in the criminal case now pending in court as regards the incident but
before that is done anything that might be said on the point would be a mere conjecture. Nor can it
be said that the killing was intentional for there is the possibility that the malefactor had fired the shot
merely to scare away the people around for his own protection and not necessarily to kill or hit the
victim. In any event, while the act may not excempt the triggerman from liability for the damage
done, the fact remains that the happening was a pure accident on the part of the victim. The victim
could have been either the policeman or Atty. Ojeda for it cannot be pretended that the malefactor
aimed at the deceased precisely because he wanted to take his life.

We take note that these defenses are included among the risks exluded in the supplementary
contract which enumerates the cases which may exempt the company from liability. While as a
general rule "the parties may limit the coverage of the policy to certain particular accidents and risks
or causes of loss, and may expressly except other risks or causes of loss therefrom" (45 C. J. S.
781-782), however, it is to be desired that the terms and phraseology of the exception clause be
clearly expressed so as to be within the easy grasp and understanding of the insured, for if the terms
are doubtful or obscure the same must of necessity be interpreted or resolved aganst the one who
has caused the obscurity. (Article 1377, new Civil Code) And so it has bene generally held that the
"terms in an insurance policy, which are ambiguous, equivacal, or uncertain . . . are to be construed
strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the
dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved"
(29 Am. Jur., 181), and the reason for this rule is that he "insured usually has no voice in the
selection or arrangement of the words employed and that the language of the contract is selected
with great care and deliberation by experts and legal advisers employed by, and acting exclusively in
the interest of, the insurance company." (44 C. J. S., p. 1174.)

Insurance is, in its nature, complex and difficult for the layman to understand. Policies are
prepared by experts who know and can anticipate the bearings and possible complications
of every contingency. So long as insurance companies insist upon the use of ambiguous,
intricate and technical provisions, which conceal rather than frankly disclose, their own
intentions, the courts must, in fairness to those who purchase insurance, construe every
ambiguity in favor of the insured. (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324, LRA
1917A, 1237.)lawphi1.net

An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat
the very purpose for which the policy was procured. (Moore vs. Aetna Life Insurance Co.,
LRA 1915D, 264.)

We are therefore persuaded to conclude that the circumstances unfolded in the present case do not
warrant the finding that the death of the unfortunate victim comes within the purview of the exception
clause of the supplementary policy and, hence, do not exempt the company from liability.

Wherefore, reversing the decision appealed from, we hereby order the company to pay petitioner-
appellant the amount of P2,000, with legal interest from January 26, 1951 until fully paid, with costs.

Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Jugo, Labrador, Concepcion, and Reyes, J.
B. L., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
  

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.  Where a provision of the policy excludes intentional injury, it is the
1

intention of the person inflicting the injury that is controlling.  If the injuries suffered by the insured
2

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.

Separate Opinions

 
BARREDO, J., concurring —

During the deliberations in this case, I entertained some doubts as to the correctness and validity of
the view upheld in the main opinion penned by Justice Makalintal. Further reflection has convinced
me, however, that there are good reasons to support it.

At first blush, one would feel that every death not suicidal should be considered accidental, for the
purposes of an accident insurance policy or a life insurance policy with a double indemnity clause in
case death results from accident. Indeed, it is quite logical to think that any event whether caused by
fault, negligence, intent of a third party or any unavoidable circumstance, normally unforeseen by the
insured and free from any possible connivance on his part, is an accident in the generally accepted
sense of the term. And if I were convinced that in including in the policy the provision in question,
both the insurer and the insured had in mind to exclude thereby from the coverage of the policy only
suicide whether unhelped or helped somehow by a third party, I would disregard the American
decisions cited and quoted in the main opinion as not even persuasive authorities. But examining the
unequivocal language of the provision in controversy and considering that the insured accepted the
policy without asking that it be made clear that the phrase "injury intentionally inflicted by a third
party" should be understood to refer only to injuries inflicted by a third party without any wilful
intervention on his part (of the insured) or, in other words, without any connivance with him (the
insured) in order to augment the proceeds of the policy for his benificiaries, I am inclined to agree
that death caused by criminal assault is not covered by the policies of the kind here in question,
specially if the assault, as a matter of fact, could have been more or less anticipated, as when the
insured happens to have violent enemies or is found in circumstances that would make his life fair
game of third parties.

As to the rest, I have no doubt that the killing of the insured in this case is as intentional as any
intentional act can be, hence this concurrence.

TEEHANKEE, J., dissenting:

The sole issue at bar is the correctness in law of the lower court's appealed decision adjudging
defendant insurance company liable, under its supplementary contract denominated "Accidental
Death Benefit Clause" with the deceased insured, to plaintiffs-beneficiaries (excluding plaintiff Emilia
T. Biagtan) in an additional amount of P5,000.00 (with corresponding legal interest) and ruling that
defendant company had failed to present any evidence to substantiate its defense that the insured's
death came within the stipulated exceptions.

Defendant's accidental death benefit clause expressly provides:

ACCIDENTAL DEATH BENEFIT. (hereinafter called the benefit). Upon receipt and
approval of due proof that the death of the Insured resulted directly from bodily injury
effected solely through external and violent means sustained in an accident, within
ninety days after the date of sustaining such injury, and independently of all other
causes, this Company shall pay, in addition to the sum insured specified on the first
page of this Policy, a further sum equal to said sum insured payable at the same time
and in the same manner as said sum insured, provided, that such death occurred
during the continuance of this Clause and of this Policy and before the sixtieth
birthday of the Insured." 1

A long list of exceptions and an Automatic Discontinuance clause immediately follow thereafter,
thus:

EXCEPTIONS. The Benefit shall not apply if the Insured's death shall result, either
directly or indirectly, from any one of the following causes:

(1) Self-destruction or self-inflicted injuries, whether the Insured be sane or insane;

(2) Bodily or mental infirmity or disease of any kind;

(3) Poisoning or infection, other than infection occurring simultaneously with and in
consequence of a cut or wound sustained in an accident;

(4) Injuries of which there is no visible contusions or wound on the exterior of the
body, drowning and internal injuries revealed by autopsy excepted;
 (5) Any injuries received (a) while on police duty in any military, naval or police
organization; (b) in any riot, civil commotion, insurrection or war or any act incident
thereto; (c) while travelling as a passenger or otherwise in any form of submarine
transportation, or while engaging in submarine operations; (d) in any violation of the
law by the Insured or assault provoked by the Insured; (e) that has been inflicted
intentionally by a third party, either with or without provocation on the part of the
Insured, and whether or not the attack or the defense by the third party was caused
by a violation of the law by the Insured;

(6) Operating or riding in or descending from any kind of aircraft if the Insured is a
pilot, officer or member of the crew of the aircraft or is giving or receiving any kind of
training or instruction or has any duties aboard the aircraft or requiring descent
therefrom; and

(7) Atomic energy explosion of any nature whatsoever.

The Company, before making any payment under this Clause, shall have the right
and opportunity to examine the body and make an autopsy thereof.

AUTOMATIC DISCONTINUANCE. This Benefit shall automatically terminate and the

additional premium therefor shall cease to be payable when and if:

(1) This Policy is surrendered for cash, paid-up insurance or extended term
insurance; or

(2) The benefit under the Total and Permanent Disability Waiver of Premium
Certificate is granted to the insured; or

(3) The Insured engages in military, naval or aeronautic service in time of war; or

(4) The policy anniversary immediately preceding the sixtieth birthday of the Insured
is reached. 2

It is undisputed that, as recited in the lower court's decision, the insured met his death, 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 of the second floor, rushed towards the doors of the second floor room, where they
suddenly met a person near the door of one of the rooms who turned out to be the insured Juan S.
Biagtan who received thrust 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. " 3

Defendant company, while admitting the above-recited circumstances under which the insured met
his death, disclaimed liability under its accidental death benefit clause under paragraph 5 of its
stipulated "Exceptions" on its theory that the insured's death resulted from injuries "intentionally
inflicted by a third party," i.e. the robbers who broke into the insured's house and inflicted fatal
injuries on him.

The case was submitted for decision upon the parties' stipulation of facts that (1) insurance
companies such as the Lincoln National Life Insurance Co. and Sun Life Assurance Co. of Canada
with which the deceased insured Juan S. Biagtan was also insured for much larger sums under
similar contracts with accidental death benefit provisions have promptly paid the benefits thereunder
to plaintiffs-beneficiaries; (2) the robbers who caused the insured's death were charged in and
convicted by the Court of First Instance of Pangasinan for the crime of robbery with homicide; and
(3) the injuries inflicted on the insured by the robbers consisted of five mortal and four non-mortal
wounds. 4

The lower court thereafter rendered judgment against defendant, as follows:

There is no doubt that the insured, Juan S. Biagtan, met his death as a result of the
wounds inflicted upon him by the malefactors on the early morning of May 21, 1964
by means of thrusts from sharp-pointed instruments delivered upon his person, and
there is likewise no question that the thrusts were made on the occasion of the
robbery. However, it is defendants' position that the killing of the insured was
intentionally done by the malefactors, who were charged with and convicted of the
crime of robbery with homicide by the Court of First Instance of Pangasinan.

It must be noted here that no evidence whatsoever was presented by the parties
who submitted the case for resolution upon the stipulation of facts presented by
them. Thus, the court does not have before it proof that the act of receiving thrust(s)
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. It was held that where a provision of the policy
excludes intentional injury, it is the intention of the person inflicting the injury that is
controlling ... and to come within the exception, the act which causes the injury must
be wholly intentional, not merely partly.

The case at bar has some similarity with the case of Virginia Calanoc vs. Court of
Appeals, et al., L-8151, promulgated December 16, 1965, where the Supreme Court
ruled that "the shot (which killed the insured) was merely to scare away the people
around for his own protection and not necessarily to kill or hit the victim."

In the Calanoc case, one Melencio Basilio, a watchman of a certain company, took
out life insurance from the Philippine American Life Insurance Company in the
amount of P2,000.00 to which was attached a supplementary contract covering
death by accident. Calanoc died of gunshot wounds on the occasion of a robbery
committed in the house of a certain Atty. Ojeda in Manila. The insured's widow was
paid P2,000.00, the face value of the policy, but when she demanded payment of the
additional sum of P2,000.00 representing the value of the supplemental policy, the
company refused alleging, as main defense, that the deceased died because he was
murdered by a person who took part in the commission of the robbery and while
making an arrest as an officer of the law which contingencies were (as in this case)
expressly excluded in the contract and have the effect of exempting the company
from liability.

The facts in the Calanoc case insofar as pertinent to this case are, as found by the
Court of Appeals in its decision which findings of fact were adopted by the Supreme
Court, as follows:

"...that on the way to the Ojeda residence (which was then being
robbed by armed men), the policeman and Atty. Ojeda passed by
 Basilio (the insured) and somehow or other invited the latter to come
along; that as the three approached the Ojeda residence and stood in
front of the main gate which was covered by galvanized iron, the
fence itself being partly concrete and partly adobe stone, a shot was
fired; ... that it turned out afterwards that the special watchman
Melencio Basilio was hit in the abdomen, the wound causing his
instantaneous death ..."

The Court of Appeals arrived at the conclusion that the death of Basilio, although
unexpected, was not caused by an accident, being a voluntary and intentional act on
the part of the one who robbed, or one of those who robbed, the house of Atty.
Ojeda.

In reversing this conclusion of the Court of Appeals, the Supreme Court said in part:

"... Nor can it be said that the killing was intentional for there is the
possibility that the malefactors had fired the shot merely to scare
away the people around for his own protection and not necessarily to
kill or hit the victim. In any event, while the act may not exempt the
triggerman from ability for the damage done, the fact remains that the
happening was a pure accidentt on the part of the victim."

With this ruling of the Supreme Court, and the utter absence of evidence in this case
as to the real intention of the malefactors in making a thrust with their sharp-pointed
instrument on any person, the victim in particular, the case falls squarely within the
ruling in the Calanoc vs. Court of Appeals case.

It is the considered view of this Court that the insured died because of an

accident which happened on the occasion of the robbery being committed in his
house. His death was not sought (at least no evidence was presented to show it
was), and therefore was fortuitous. "Accident" was defined as that which happens by
chance or fortuitously, without intention or design, and which is unexpected, unusual
and unforeseen, or 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. (29 Am. Jur. 706).

There is no question that the defense set up by the defendant company is one of
those included among the risks excluded in the supplementary contract. However,
there is no evidence here that the thrusts with sharp-pointed instrument (which led to
the death of the insured) was "intentional," (sic) so as to exempt the company from
liability. It could safely be assumed that it was purely accidental considering that the
principal motive of the culprits was robbery, the thrusts being merely intended to
scare away persons who might offer resistance or might obstruct them from pursuing
their main objective which was robbery. 5

It is respectfully submitted that the lower court committed no error in law in holding defendant
insurance company liable to plaintiffs-beneficiaries under its accidental death benefit clause, by
virtue of the following considerations:

1. The case of Calanoc cited by the lower court is indeed controlling here.  This Court, there
6

construing a similar clause, squarely ruled that fatal injuries inflicted upon an insured by a
malefactor(s) during the latter's commission of a crime are deemed accidental and within the
coverage of such accidental death benefit clauses and the burden of proving that the killing was
intentional so as to have it fall within the stipulated exception of having resulted from injuries
"intentionally inflicted by a third party" must be discharged by the insurance company. This Court
there clearly held that in such cases where the killing does not amount to murder, it must be held to
be a "pure accident" on the part of the victim, compensable with double-indemnity, even though the
malefactor is criminally liable for his act. This Court rejected the insurance-company's contrary claim,
thus:

Much less can it be pretended that Basilio died in the course of an assault or murder
considering the very nature of these crimes. In the first place, there is no proof that
the death of Basilio is the result of either crime for the record is barren of any
circumstance showing how the fatal shot was fired. Perhaps this may be clarified in
the criminal case now pending in court a regards the incident but before that is done
anything that might be said on the point would be a mere conjecture. Nor can it be
said that the killing was intentional for there is the possibility that the malefactor had
fired the shot merely to scare away the people around for his own protection and not
necessarily to kill or hit the victim. In any event, while the act may not exempt the
triggerman from liability for the damage done, the fact remains that the happening
was a pure accident on the part of the victim. The victim could have been either the
policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed at the
deceased precisely because he wanted to take his life . 7

2. Defendant company patently failed to discharge its burden of proving that the fatal injuries were inflicted upon the deceased intentionally,
i.e. deliberately. The lower court correctly held that since the case was submitted upon the parties' stipulation of facts which did not cover the
malefactors' intent at all, there was an "utter absence of evidence in this case as to the real intention of the malefactors in making a thrust
with their sharp-pointed instrument(s) on any person, the victim in particular." From the undisputed facts, supra,8 the robbers had "rushed
towards the doors of the second floor room, where they suddenly met a person ... who turned out to be the insured Juan S. Biagtan who
received thrusts from their pointed instruments." The thrusts were indeed properly termed "purely accidental" since they seemed to be a
reflex action on the robbers' part upon their being surprised by the deceased. To argue, as defendant does, that the robbers' intent to kill
must necessarily be deduced from the four mortal wounds inflicted upon the deceased is to beg the question. Defendant must suffer the
consequences of its failure to discharge its burden of proving by competent evidence, e.g. the robbers' or eyewitnesses' testimony, that the
fatal injuries were intentionally inflicted upon the insured so as to exempt itself from liability.

3. Furthermore, plaintiffs-appellees properly assert in their brief that the sole error assigned by
defendant company, to wit, that the fatal injuries were not accidental as held by the lower court but
should be held to have been intentionally inflicted, raises a question of fact — which defendant is
now barred from raising, since it expressly limited its appeal to this Court purely "on questions of
law", per its noitice of appeal,  Defendant is therefore confined to "raising only questions of law" and
9

"no other questions" under Rule 42, section 2 of the Rules of Court   and is deemed to have 10

conceded the findings of fact of the trial court, since he thereby waived all questions of facts.  11

4. It has long been an established rule of construction of so-called contracts of adhesion such as
insurance contracts, where the insured is handed a printed insurance policy whose fine-print
language has long been selected with great care and deliberation by specialists and legal advisers
employed by and acting exclusively in the interest of the insurance company, that the terms and
phraseology of the policy, particularly of any exception clauses, must be clearly expressed so as to
be easily understood by the insured and any "ambiguous, equivocal or uncertain terms" are to be
"construed strictly and most strongly against the insurer and liberally in favor of the insured so as to
effect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is
involved.

The Court so expressly held in Calanoc that:

... While as a general rule "the parties may limit the coverage of the policy to certain
particular accidents and risks or causes of loss, and may expressly except other risks
 or causes of loss therefrom" (45 C.J.S. 781-782), however, it is to be desired that the
terms and phraseology of the exception clause be clearly expressed so as to be
within the easy grasp and understanding of the insured, for if the terms are doubtful
or obscure the same must of necessity be interpreted or resolved against the one
who has caused the obscurity. (Article 1377, new Civil Code) And so it has been
generally held that the "terms in an insurance policy, which are ambiguous,
equivocal, or uncertain ... are to be construed strictly and most strongly against the
insurer, and liberally in favor of the insured so as to effect the dominant purpose of
indemnity or payment to the insured, especially where a forfeiture is involved" (29
AM. Jur., 181), and the reason for this rule is that the "insured usually has no voice in
the selection or arrangement of the words employed and that the language of the
contract is selected with great care and deliberation by experts and legal advisers
employed by, and acting exclusively in the interest of, the insurance company." (44
C.J.S., p. 1174)

Insurance is, in its nature, complex and difficult for the layman to
understand. Policies are prepared by experts who know and can anticipate the
bearing and possible complications of every contingency. So long as insurance
companies insist upon the use of ambiguous, intricate and technical provisions,
which conceal rather than frankly disclose, their own intentions, the courts must, in
fairness to those who purchase insurance construe every ambiguity in favor of the
insured." (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324 LRA 1917A, 1237.)

"An insurer should not be allowed, by the use of obscure phrases and exceptions, to

defeat the very purpose for which the policy was procured." (Moore vs. Aetna Life
Insurance Co., LRA 1915D, 164).  12

The Court has but recently reiterated this doctrine in Landicho vs. GSIS   and again applied the
13

provisions of Article 1377 of our Civil Code that "The interpretation of obscure words or stipulations
in a contract shall not favor the party who caused the obscurity."

5. The accidental death benefit clause assuring the insured's beneficiaries of double indemnity, upon
payment of an extra premium, in the event that the insured meets violent accidental death is
contractually stipulated as follows in the policy: "that the death of the insured resulted directly from
bodily injury effected solely through external and violent means sustained in an accident," supra.
The policy then lists numerous exceptions, which may be classified as follows:

— Injuries effected through non-external means which are excepted: self-destruction, bodily or

mental infirmity or disease, poisoning or infection, injuries with no visible contusions or exterior
wounds (exceptions 1 to 4 of policy clause);

— Injuries caused by some act of the insured which is proscribed by the policy, and are therefore
similarly exepted: injuries received while on police duty, while travelling in any form of submarine
transportation, or in any violation of law by the insured or assault provoked by the insured, or in any
aircraft if the insured is a pilot or crew member; [exceptions 5 (a), (c) and (d), and 6 of the policy
clause]; and

— Accidents expressly excluded: where death resulted in any riot, civil commotion, insurrection or
war or atomic energy explosion. (Exceptions 5[b] and 7 of policy clause).

The only exception which is not susceptible of classification is that provided in paragraph 5 (e), the
very exception herein involved, which would also except injuries "inflicted intentionally by a third
party, either with or without provocation on the part of the insured, and whether or not the attack or
the defense by the third party was caused by a violation of the law by the insured."

This ambiguous clause conflicts with all the other four exceptions in the same paragraph 5
particularly that immediately preceding it in item (d) which excepts injuries received where the
insured has violated the law or provoked the injury, while this clause, construed as the insurance
company now claims, would seemingly except also all other injuries, intentionally inflicted by a third
party, regardless of any violation of law or provocation by the insured, and defeat the very purpose
of the policy of giving the insured double indemnity in case of accidental death by "external and
violent means" — in the very language of the policy."

It is obvious from the very classification of the exceptions and applying the rule of noscitus a
sociis that the double-indemnity policy covers the insured against accidental death, whether caused
by fault, negligence or intent of a third party which is unforeseen and unexpected by the insured. All
the associated words and concepts in the policy plainly exclude the accidental death from the
coverage of the policy only where the injuries are self-inflicted or attended by some proscribed act of
the insured or are incurred in some expressly excluded calamity such as riot, war or atomic
explosion.

Finally, the untenability of herein defendant insurer's claim that the insured's death fell within the
exception is further heightened by the stipulated fact that two other insurance companies which
likewise covered the insured for which larger sums under similar accidental death benefit clauses
promptly paid the benefits thereof to plaintiffs-beneficiaries.

I vote accordingly for the affirmance in toto of the appealed decision, with costs against defendant-
appellant.

Concepcion, C.J. and Reyes, J.B.L., J., concur.

Separate Opinions

BARREDO, J., concurring —

During the deliberations in this case, I entertained some doubts as to the correctness and validity of
the view upheld in the main opinion penned by Justice Makalintal. Further reflection has convinced
me, however, that there are good reasons to support it.

At first blush, one would feel that every death not suicidal should be considered accidental, for the
purposes of an accident insurance policy or a life insurance policy with a double indemnity clause in
case death results from accident. Indeed, it is quite logical to think that any event whether caused by
fault, negligence, intent of a third party or any unavoidable circumstance, normally unforeseen by the
insured and free from any possible connivance on his part, is an accident in the generally accepted
sense of the term. And if I were convinced that in including in the policy the provision in question,
both the insurer and the insured had in mind to exclude thereby from the coverage of the policy only
suicide whether unhelped or helped somehow by a third party, I would disregard the American
decisions cited and quoted in the main opinion as not even persuasive authorities. But examining the
unequivocal language of the provision in controversy and considering that the insured accepted the
policy without asking that it be made clear that the phrase "injury intentionally inflicted by a third
party" should be understood to refer only to injuries inflicted by a third party without any wilful
intervention on his part (of the insured) or, in other words, without any connivance with him (the
insured) in order to augment the proceeds of the policy for his benificiaries, I am inclined to agree
that death caused by criminal assault is not covered by the policies of the kind here in question,
specially if the assault, as a matter of fact, could have been more or less anticipated, as when the
insured happens to have violent enemies or is found in circumstances that would make his life fair
game of third parties.

As to the rest, I have no doubt that the killing of the insured in this case is as intentional as any
intentional act can be, hence this concurrence.

TEEHANKEE, J., dissenting:

The sole issue at bar is the correctness in law of the lower court's appealed decision adjudging
defendant insurance company liable, under its supplementary contract denominated "Accidental
Death Benefit Clause" with the deceased insured, to plaintiffs-beneficiaries (excluding plaintiff Emilia
T. Biagtan) in an additional amount of P5,000.00 (with corresponding legal interest) and ruling that
defendant company had failed to present any evidence to substantiate its defense that the insured's
death came within the stipulated exceptions.

Defendant's accidental death benefit clause expressly provides:

ACCIDENTAL DEATH BENEFIT. (hereinafter called the benefit). Upon receipt and
approval of due proof that the death of the Insured resulted directly from bodily injury
effected solely through external and violent means sustained in an accident, within
ninety days after the date of sustaining such injury, and independently of all other
causes, this Company shall pay, in addition to the sum insured specified on the first
page of this Policy, a further sum equal to said sum insured payable at the same time
and in the same manner as said sum insured, provided, that such death occurred
during the continuance of this Clause and of this Policy and before the sixtieth
birthday of the Insured." 1

A long list of exceptions and an Automatic Discontinuance clause immediately follow thereafter,
thus:

EXCEPTIONS. The Benefit shall not apply if the Insured's death shall result, either
directly or indirectly, from any one of the following causes:

(1) Self-destruction or self-inflicted injuries, whether the Insured be sane or insane;

(2) Bodily or mental infirmity or disease of any kind;

(3) Poisoning or infection, other than infection occurring simultaneously with and in
consequence of a cut or wound sustained in an accident;

(4) Injuries of which there is no visible contusions or wound on the exterior of the
body, drowning and internal injuries revealed by autopsy excepted;

(5) Any injuries received (a) while on police duty in any military, naval or police
organization; (b) in any riot, civil commotion, insurrection or war or any act incident
 thereto; (c) while travelling as a passenger or otherwise in any form of submarine
transportation, or while engaging in submarine operations; (d) in any violation of the
law by the Insured or assault provoked by the Insured; (e) that has been inflicted
intentionally by a third party, either with or without provocation on the part of the
Insured, and whether or not the attack or the defense by the third party was caused
by a violation of the law by the Insured;

(6) Operating or riding in or descending from any kind of aircraft if the Insured is a
pilot, officer or member of the crew of the aircraft or is giving or receiving any kind of
training or instruction or has any duties aboard the aircraft or requiring descent
therefrom; and

(7) Atomic energy explosion of any nature whatsoever.

The Company, before making any payment under this Clause, shall have the right
and opportunity to examine the body and make an autopsy thereof.

AUTOMATIC DISCONTINUANCE. This Benefit shall automatically terminate and the

additional premium therefor shall cease to be payable when and if:

(1) This Policy is surrendered for cash, paid-up insurance or extended term
insurance; or

(2) The benefit under the Total and Permanent Disability Waiver of Premium
Certificate is granted to the insured; or

(3) The Insured engages in military, naval or aeronautic service in time of war; or

(4) The policy anniversary immediately preceding the sixtieth birthday of the Insured
is reached. 2

It is undisputed that, as recited in the lower court's decision, the insured met his death, 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 of the second floor, rushed towards the doors of the second floor room, where they
suddenly met a person near the door of one of the rooms who turned out to be the insured Juan S.
Biagtan who received thrust 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. " 3

Defendant company, while admitting the above-recited circumstances under which the insured met
his death, disclaimed liability under its accidental death benefit clause under paragraph 5 of its
stipulated "Exceptions" on its theory that the insured's death resulted from injuries "intentionally
inflicted by a third party," i.e. the robbers who broke into the insured's house and inflicted fatal
injuries on him.

The case was submitted for decision upon the parties' stipulation of facts that (1) insurance
companies such as the Lincoln National Life Insurance Co. and Sun Life Assurance Co. of Canada
with which the deceased insured Juan S. Biagtan was also insured for much larger sums under
similar contracts with accidental death benefit provisions have promptly paid the benefits thereunder
to plaintiffs-beneficiaries; (2) the robbers who caused the insured's death were charged in and
convicted by the Court of First Instance of Pangasinan for the crime of robbery with homicide; and
(3) the injuries inflicted on the insured by the robbers consisted of five mortal and four non-mortal
wounds. 4

The lower court thereafter rendered judgment against defendant, as follows:

There is no doubt that the insured, Juan S. Biagtan, met his death as a result of the
wounds inflicted upon him by the malefactors on the early morning of May 21, 1964
by means of thrusts from sharp-pointed instruments delivered upon his person, and
there is likewise no question that the thrusts were made on the occasion of the
robbery. However, it is defendants' position that the killing of the insured was
intentionally done by the malefactors, who were charged with and convicted of the
crime of robbery with homicide by the Court of First Instance of Pangasinan.

It must be noted here that no evidence whatsoever was presented by the parties
who submitted the case for resolution upon the stipulation of facts presented by
them. Thus, the court does not have before it proof that the act of receiving thrust(s)
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. It was held that where a provision of the policy
excludes intentional injury, it is the intention of the person inflicting the injury that is
controlling ... and to come within the exception, the act which causes the injury must
be wholly intentional, not merely partly.

The case at bar has some similarity with the case of Virginia Calanoc vs. Court of
Appeals, et al., L-8151, promulgated December 16, 1965, where the Supreme Court
ruled that "the shot (which killed the insured) was merely to scare away the people
around for his own protection and not necessarily to kill or hit the victim."

In the Calanoc case, one Melencio Basilio, a watchman of a certain company, took
out life insurance from the Philippine American Life Insurance Company in the
amount of P2,000.00 to which was attached a supplementary contract covering
death by accident. Calanoc died of gunshot wounds on the occasion of a robbery
committed in the house of a certain Atty. Ojeda in Manila. The insured's widow was
paid P2,000.00, the face value of the policy, but when she demanded payment of the
additional sum of P2,000.00 representing the value of the supplemental policy, the
company refused alleging, as main defense, that the deceased died because he was
murdered by a person who took part in the commission of the robbery and while
making an arrest as an officer of the law which contingencies were (as in this case)
expressly excluded in the contract and have the effect of exempting the company
from liability.

The facts in the Calanoc case insofar as pertinent to this case are, as found by the
Court of Appeals in its decision which findings of fact were adopted by the Supreme
Court, as follows:

"...that on the way to the Ojeda residence (which was then being
robbed by armed men), the policeman and Atty. Ojeda passed by
Basilio (the insured) and somehow or other invited the latter to come
along; that as the three approached the Ojeda residence and stood in
 front of the main gate which was covered by galvanized iron, the
fence itself being partly concrete and partly adobe stone, a shot was
fired; ... that it turned out afterwards that the special watchman
Melencio Basilio was hit in the abdomen, the wound causing his
instantaneous death ..."

The Court of Appeals arrived at the conclusion that the death of Basilio, although
unexpected, was not caused by an accident, being a voluntary and intentional act on
the part of the one who robbed, or one of those who robbed, the house of Atty.
Ojeda.

In reversing this conclusion of the Court of Appeals, the Supreme Court said in part:

"... Nor can it be said that the killing was intentional for there is the
possibility that the malefactors had fired the shot merely to scare
away the people around for his own protection and not necessarily to
kill or hit the victim. In any event, while the act may not exempt the
triggerman from ability for the damage done, the fact remains that the
happening was a pure accidentt on the part of the victim."

With this ruling of the Supreme Court, and the utter absence of evidence in this case
as to the real intention of the malefactors in making a thrust with their sharp-pointed
instrument on any person, the victim in particular, the case falls squarely within the
ruling in the Calanoc vs. Court of Appeals case.

It is the considered view of this Court that the insured died because of an

accident which happened on the occasion of the robbery being committed in his
house. His death was not sought (at least no evidence was presented to show it
was), and therefore was fortuitous. "Accident" was defined as that which happens by
chance or fortuitously, without intention or design, and which is unexpected, unusual
and unforeseen, or 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. (29 Am. Jur. 706).

There is no question that the defense set up by the defendant company is one of
those included among the risks excluded in the supplementary contract. However,
there is no evidence here that the thrusts with sharp-pointed instrument (which led to
the death of the insured) was "intentional," (sic) so as to exempt the company from
liability. It could safely be assumed that it was purely accidental considering that the
principal motive of the culprits was robbery, the thrusts being merely intended to
scare away persons who might offer resistance or might obstruct them from pursuing
their main objective which was robbery. 5

It is respectfully submitted that the lower court committed no error in law in holding defendant
insurance company liable to plaintiffs-beneficiaries under its accidental death benefit clause, by
virtue of the following considerations:

1. The case of Calanoc cited by the lower court is indeed controlling here.  This Court, there
6

construing a similar clause, squarely ruled that fatal injuries inflicted upon an insured by a
malefactor(s) during the latter's commission of a crime are deemed accidental and within the
coverage of such accidental death benefit clauses and the burden of proving that the killing was
intentional so as to have it fall within the stipulated exception of having resulted from injuries
"intentionally inflicted by a third party" must be discharged by the insurance company. This Court
there clearly held that in such cases where the killing does not amount to murder, it must be held to
be a "pure accident" on the part of the victim, compensable with double-indemnity, even though the
malefactor is criminally liable for his act. This Court rejected the insurance-company's contrary claim,
thus:

Much less can it be pretended that Basilio died in the course of an assault or murder
considering the very nature of these crimes. In the first place, there is no proof that
the death of Basilio is the result of either crime for the record is barren of any
circumstance showing how the fatal shot was fired. Perhaps this may be clarified in
the criminal case now pending in court a regards the incident but before that is done
anything that might be said on the point would be a mere conjecture. Nor can it be
said that the killing was intentional for there is the possibility that the malefactor had
fired the shot merely to scare away the people around for his own protection and not
necessarily to kill or hit the victim. In any event, while the act may not exempt the
triggerman from liability for the damage done, the fact remains that the happening
was a pure accident on the part of the victim. The victim could have been either the
policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed at the
deceased precisely because he wanted to take his life . 7

2. Defendant company patently failed to discharge its burden of proving that the fatal injuries were
inflicted upon the deceased intentionally, i.e. deliberately. The lower court correctly held that since
the case was submitted upon the parties' stipulation of facts which did not cover the malefactors'
intent at all, there was an "utter absence of evidence in this case as to the real intention of the
malefactors in making a thrust with their sharp-pointed instrument(s) on any person, the victim in
particular." From the undisputed facts, supra,  the robbers had "rushed towards the doors of the
8

second floor room, where they suddenly met a person ... who turned out to be the insured Juan S.
Biagtan who received thrusts from their pointed instruments." The thrusts were indeed properly
termed "purely accidental" since they seemed to be a reflex action on the robbers' part upon their
being surprised by the deceased. To argue, as defendant does, that the robbers' intent to kill must
necessarily be deduced from the four mortal wounds inflicted upon the deceased is to beg the
question. Defendant must suffer the consequences of its failure to discharge its burden of proving by
competent evidence, e.g. the robbers' or eyewitnesses' testimony, that the fatal injuries
were intentionally inflicted upon the insured so as to exempt itself from liability.

3. Furthermore, plaintiffs-appellees properly assert in their brief that the sole error assigned by
defendant company, to wit, that the fatal injuries were not accidental as held by the lower court but
should be held to have been intentionally inflicted, raises a question of fact — which defendant is
now barred from raising, since it expressly limited its appeal to this Court purely "on questions of
law", per its noitice of appeal,  Defendant is therefore confined to "raising only questions of law" and
9

"no other questions" under Rule 42, section 2 of the Rules of Court   and is deemed to have
10

conceded the findings of fact of the trial court, since he thereby waived all questions of facts. 11

4. It has long been an established rule of construction of so-called contracts of adhesion such as
insurance contracts, where the insured is handed a printed insurance policy whose fine-print
language has long been selected with great care and deliberation by specialists and legal advisers
employed by and acting exclusively in the interest of the insurance company, that the terms and
phraseology of the policy, particularly of any exception clauses, must be clearly expressed so as to
be easily understood by the insured and any "ambiguous, equivocal or uncertain terms" are to be
"construed strictly and most strongly against the insurer and liberally in favor of the insured so as to
effect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is
involved.
The Court so expressly held in Calanoc that:

... While as a general rule "the parties may limit the coverage of the policy to certain
particular accidents and risks or causes of loss, and may expressly except other risks
or causes of loss therefrom" (45 C.J.S. 781-782), however, it is to be desired that the
terms and phraseology of the exception clause be clearly expressed so as to be
within the easy grasp and understanding of the insured, for if the terms are doubtful
or obscure the same must of necessity be interpreted or resolved against the one
who has caused the obscurity. (Article 1377, new Civil Code) And so it has been
generally held that the "terms in an insurance policy, which are ambiguous,
equivocal, or uncertain ... are to be construed strictly and most strongly against the
insurer, and liberally in favor of the insured so as to effect the dominant purpose of
indemnity or payment to the insured, especially where a forfeiture is involved" (29
AM. Jur., 181), and the reason for this rule is that the "insured usually has no voice in
the selection or arrangement of the words employed and that the language of the
contract is selected with great care and deliberation by experts and legal advisers
employed by, and acting exclusively in the interest of, the insurance company." (44
C.J.S., p. 1174)

Insurance is, in its nature, complex and difficult for the layman to
understand. Policies are prepared by experts who know and can anticipate the
bearing and possible complications of every contingency. So long as insurance
companies insist upon the use of ambiguous, intricate and technical provisions,
which conceal rather than frankly disclose, their own intentions, the courts must, in
fairness to those who purchase insurance construe every ambiguity in favor of the
insured." (Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324 LRA 1917A, 1237.)

"An insurer should not be allowed, by the use of obscure phrases and exceptions, to

defeat the very purpose for which the policy was procured." (Moore vs. Aetna Life
Insurance Co., LRA 1915D, 164).  12

The Court has but recently reiterated this doctrine in Landicho vs. GSIS   and again applied the
13

provisions of Article 1377 of our Civil Code that "The interpretation of obscure words or stipulations
in a contract shall not favor the party who caused the obscurity."

5. The accidental death benefit clause assuring the insured's beneficiaries of double indemnity, upon
payment of an extra premium, in the event that the insured meets violent accidental death is
contractually stipulated as follows in the policy: "that the death of the insured resulted directly from
bodily injury effected solely through external and violent means sustained in an accident," supra.
The policy then lists numerous exceptions, which may be classified as follows:

— Injuries effected through non-external means which are excepted: self-destruction, bodily or

mental infirmity or disease, poisoning or infection, injuries with no visible contusions or exterior
wounds (exceptions 1 to 4 of policy clause);

— Injuries caused by some act of the insured which is proscribed by the policy, and are therefore
similarly exepted: injuries received while on police duty, while travelling in any form of submarine
transportation, or in any violation of law by the insured or assault provoked by the insured, or in any
aircraft if the insured is a pilot or crew member; [exceptions 5 (a), (c) and (d), and 6 of the policy
clause]; and
— Accidents expressly excluded: where death resulted in any riot, civil commotion, insurrection or
war or atomic energy explosion. (Exceptions 5[b] and 7 of policy clause).

The only exception which is not susceptible of classification is that provided in paragraph 5 (e), the
very exception herein involved, which would also except injuries "inflicted intentionally by a third
party, either with or without provocation on the part of the insured, and whether or not the attack or
the defense by the third party was caused by a violation of the law by the insured."

This ambiguous clause conflicts with all the other four exceptions in the same paragraph 5
particularly that immediately preceding it in item (d) which excepts injuries received where the
insured has violated the law or provoked the injury, while this clause, construed as the insurance
company now claims, would seemingly except also all other injuries, intentionally inflicted by a third
party, regardless of any violation of law or provocation by the insured, and defeat the very purpose
of the policy of giving the insured double indemnity in case of accidental death by "external and
violent means" — in the very language of the policy."

It is obvious from the very classification of the exceptions and applying the rule of noscitus a
sociis that the double-indemnity policy covers the insured against accidental death, whether caused
by fault, negligence or intent of a third party which is unforeseen and unexpected by the insured. All
the associated words and concepts in the policy plainly exclude the accidental death from the
coverage of the policy only where the injuries are self-inflicted or attended by some proscribed act of
the insured or are incurred in some expressly excluded calamity such as riot, war or atomic
explosion.

Finally, the untenability of herein defendant insurer's claim that the insured's death fell within the
exception is further heightened by the stipulated fact that two other insurance companies which
likewise covered the insured for which larger sums under similar accidental death benefit clauses
promptly paid the benefits thereof to plaintiffs-beneficiaries.

I vote accordingly for the affirmance in toto of the appealed decision, with costs against defendant-
appellant.

Concepcion, C.J. and Reyes, J.B.L., J., concur.

[G.R. No. 100970. September 2, 1992.]

FINMAN GENERAL ASSURANCE CORPORATION, Petitioner, v. THE HONORABLE COURT OF

APPEALS and JULIA SURPOSA, Respondents.

Aquino and Associates for Petitioner.

Public Attorney’s Office for Private Respondent.

SYLLABUS

1. COMMERCIAL LAW; INSURANCE; ‘ACCIDENT’ AND ‘ACCIDENTAL’; DEFINED. — "The terms ‘accident’ and
‘accidental’, as used in insurance contracts have not acquired any technical meaning, and are construed by
the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which
happen by chance or fortuitously, without intention and design, and which is unexpected, unusual, and
unforeseen. 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 cause and, therefore, not expected." ".
. . The generally accepted rule is that, death or injury does not result from accident or accidental means
within the terms of an accident-policy if it is, the natural result of the insured’s voluntary act,
unaccompanied by anything unforeseen except the death or injury. There is no accident when a deliberate
act is performed unless some additional, unexpected, independent, and unforeseen happening occurs which
produces or brings about the result of injury or death. In other words, where the death or injury is not the
natural or probable result of the insured’s voluntary act, or if something unforeseen occurs in the doing of
the act which produces the injury, the resulting death is within the protection of the policies insuring against
death or injury from accident." [De la Cruz v. Capital Insurance & Surety Co., Inc., 17 SCRA 559 (1966)].

2. ID.; ID.; PRINCIPLE OF EXPRESSO UNIUS EXCLUSIO ALTERIUS; APPLICATION IN CASE AT BAR. — The
personal accident insurance policy involved herein specifically enumerated only ten (10) circumstances
wherein no liability attaches to petitioner insurance company for any injury, disability or loss suffered by the
insured as a result of any of the stipulated causes. The principle of "expresso unius exclusio alterius" — the
mention of one thing implies the exclusion of another thing — is therefore applicable in the instant case
since murder and assault, not having been expressly included in the enumeration of the circumstances that
would negate liability in said insurance policy cannot be considered by implication to discharge the petitioner
insurance company from liability for any injury, disability or loss suffered by the insured. Thus, the failure of
the petitioner insurance company to include death resulting from murder or assault among the prohibited
risks leads inevitably to the conclusion that it did not intend to limit or exempt itself from liability for such
death.

3. CIVIL LAW; CONTRACTS; INTERPRETATION OF OBSCURE WORDS OR STIPULATIONS THEREIN; RULE. —

Article 1377 of the Civil Code of the Philippines provides that: "The interpretation of obscure words or
stipulations in a contract shall not favor the party who caused the obscurity." cralaw virtua1aw library

4. ID.; ID.; ID.; ID.; APPLICATION IN CONTRACT OF INSURANCE; RULE. — Moreover, "it is well settled that
contracts of insurance are to be construed liberally in favor of the insured and strictly against the insurer.
Thus ambiguity in the words of an insurance contract should be interpreted in favor of its beneficiary."
[National Power Corporation v. Court of Appeals, 145 SCRA 533 (1986)].

DECISION

NOCON, J.:

This is a petition for certiorari with a prayer for the issuance of a restraining order and preliminary
mandatory injunction to annul and set aside the decision of the Court of Appeals dated July 11, 1991 1
affirming the decision dated March 20, 1990 of the Insurance Commission 2 in ordering petitioner Finman
General Assurance Corporation to pay private respondent Julia Surposa the proceeds of the personal
accident insurance policy with interest.chanrobles.com : virtual law library

It appears on record that on October 22, 1986, deceased Carlie Surposa was insured with petitioner Finman
General Assurance Corporation under Finman General Teachers Protection Plan Master Policy No. 2005 and
Individual Policy No. 08924 with his parents, spouses Julia and Carlos Surposa, and brothers Christopher,
Charles, Chester and Clifton, all surnamed Surposa, as beneficiaries. 3 

While said insurance policy was in full force and effect, the insured, Carlie Surposa, died on October 18,
1988 as a result of a stab wound inflicted by one of the three (3) unidentified men without provocation and
warning on the part of the former as he and his cousin, Winston Surposa, were waiting for a ride on their
way home along Rizal-Locsin Streets, Bacolod City after attending the celebration of the "Maskarra Annual
Festival."
cralaw virtua1aw library

Thereafter, private respondent and the other beneficiaries of said insurance policy filed a written notice of
claim with the petitioner insurance company which denied said claim contending that murder and assault are
not within the scope of the coverage of the insurance policy.

On February 24, 1989, private respondent filed a complaint with the Insurance Commission which
subsequently rendered a decision, the pertinent portion of which reads: jgc:chanrobles.com.ph

"In the light of the foregoing, we find respondent liable to pay complainant the sum of P15,000.00
representing the proceeds of the policy with interest. As no evidence was submitted to prove the claim for
mortuary aid in the sum of P1,000.00, the same cannot be entertained.

"WHEREFORE, judgment is hereby rendered ordering respondent to pay complainant the sum of P15,000.00
with legal interest from the date of the filing of the complaint until fully satisfied. With costs." 4 

On July 11, 1991, the appellate court affirmed said decision.

Hence, petitioner filled this petition alleging grave abuse of discretion on the part of the appellate court in
applying the principle of "expresso unius exclusio alterius" in a personal accident insurance policy since
death resulting from murder and/or assault are impliedly excluded in said insurance policy considering that
the cause of death of the insured was not accidental but rather a deliberate and intentional act of the
assailant in killing the former as indicated by the location of the lone stab wound on the insured. Therefore,
said death was committed with deliberate intent which, by the very nature of a personal accident insurance
policy, cannot be indemnified. chanrobles virtual lawlibrary

We do not agree.

"The terms ‘accident’ and ‘accidental’, as used in insurance contracts have not acquired any technical
meaning, and are construed by the courts in their ordinary and common acceptation. Thus, the terms have
been taken to mean that which happen by chance or fortuitously, without intention and design, and which is
unexpected, unusual, and unforeseen. 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 cause
and, therefore, not expected." cralaw virtua1aw library

". . . The generally accepted rule is that, death or injury does not result from accident or accidental means
within the terms of an accident-policy if it is, the natural result of the insured’s voluntary act,
unaccompanied by anything unforeseen except the death or injury. There is no accident when a deliberate
act is performed unless some additional, unexpected, independent, and unforeseen happening occurs which
produces or brings about the result of injury or death. In other words, where the death or injury is not the
natural or probable result of the insured’s voluntary act, or if something unforeseen occurs in the doing of
the act which produces the injury, the resulting death is within the protection of the policies insuring against
death or injury from accident." 5 

As correctly pointed out by the respondent appellate court in its decision: chanrobles virtual lawlibrary

"In the case at bar, it cannot be pretended that Carlie Surposa died in the course of an assault or murder as
a result of his voluntary act considering the very nature of these crimes. In the first place, the insured and
his companion were on their way home from attending a festival. They were confronted by unidentified
persons. The record is barren of any circumstance showing how the stab wound was inflicted. Nor can it be
pretended that the malefactor aimed at the insured precisely because the killer wanted to take his life. In
any event, while the act may not exempt the unknown perpetrator from criminal liability, the fact remains
that the happening was a pure accident on the part of the victim. The insured died from an event that took
place without his foresight or expectation, an event that proceeded from an unusual effect of a known cause
and, therefore, not expected. Neither can it be said that there was a capricious desire on the part of the
accused to expose his life to danger considering that he was just going home after attending a festival." 6 

Furthermore, the personal accident insurance policy involved herein specifically enumerated only ten (10)
circumstances wherein no liability attaches to petitioner insurance company for any injury, disability or loss
suffered by the insured as a result of any of the stipulated causes. The principle of "expresso unius exclusio
alterius" — the mention of one thing implies the exclusion of another thing — is therefore applicable in the
instant case since murder and assault, not having been expressly included in the enumeration of the
circumstances that would negate liability in said insurance policy cannot be considered by implication to
discharge the petitioner insurance company from liability for any injury, disability or loss suffered by the
insured. Thus, the failure of the petitioner insurance company to include death resulting from murder or
assault among the prohibited risks leads inevitably to the conclusion that it did not intend to limit or exempt
itself from liability for such death. chanrobles.com:cralaw:red

Article 1377 of the Civil Code of the Philippines provides that: jgc:chanrobles.com.ph

"The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity."cralaw virtua1aw library
Moreover,

"it is well settled that contracts of insurance are to be construed liberally in favor of the insured and strictly
against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted in favor of
its beneficiary." 7 

WHEREFORE, finding no irreversible error in the decision of the respondent Court of Appeals, the petition
for certiorari with restraining order and preliminary injunction is hereby DENIED for lack of merit.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Melo, JJ., concur.

[G.R. No. L-4611. December 17, 1955.]

QUA CHEE GAN, Plaintiff-Appellee, v. LAW UNION AND ROCK INSURANCE CO., LTD., represented
by its agent, WARNER, BARNES AND CO., LTD., Defendant-Appellant. 

Delgado, Flores & Macapagal for Appellant. 

Andres Aguilar, Zacarias Gutierrez Lora, Gregorio Sabater and Perkins, Ponce Enrile & Contreras
for Appellee.

SYLLABUS

1. INSURANCE; BREACH OF WARRANTY; WHEN INSURER BARRED FROM CLAIMING POLICIES VOID "AB
INITIO." — The insurer is barred by estoppel to claim violation of the so-called fire hydrant warranty where,
knowing fully well that the number of hydrants demanded in the warranty never existed from the very
beginning, it nevertheless issued the policies subject to such warranty, and received the corresponding
premiums. 

2. ID.; ID.; EVIDENCE; PAROL EVIDENCE RULE NOT APPLICABLE. — The parol evidence rule is not
applicable to the present case. It is not a question here whether or not the parties may vary a written
contract by oral evidence; but whether testimony is receivable so that a party may be, by reason of
inequitable contract shown, estopped from enforcing forfeitures in its favor, in order to forestall fraud or
imposition on the insured. 

3. ID.; AMBIGUITIES IN THE TERMS OF THE CONTRACT, HOW CONSTRUED. — The contract of insurance is
one of perfect good faith (uberrimae fidei) not for the insured alone, but equally so for the insurer; in fact, it
is more so for the latter, since its dominant bargaining position carries with it stricter responsibility. By
reason of the exclusive control of the insurance company over the terms and phraseology of the insurance
contract, the ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured,
specially to avoid a forfeiture (44 C. J. S., pp. 1166-1175; 29 Am. Jur. 180). 

4. ID.; ID.; WARRANTY AGAINST STORAGE OF GASOLINE. — In the present case, gasoline is not specifically
mentioned among the prohibited articles listed in the so-called "hemp warranty." The clause relied upon by
the insurer speaks of "oils" and is decidedly ambiguous and uncertain; for in ordinary parlance, "oils" mean
"lubricants" and not gasoline or kerosene. Besides, the gasoline kept by the insured was only incidental to
his business, being no more than a customary 2 days supply for the five or six motor vehicles used for
transporting of the stored merchandise, and it is well settled rule that the keeping of inflammable oils on the
premises, through prohibited by the policy, does not void it if such keeping is incidental to the business.
(Bachrach v. British American Ass. Co., 17 Phil. 555, 660.) 

5. ID.; FALSE CLAIMS THAT AVOIDS THE POLICY. — The rule is that to avoid a policy, the claim filed by the
insured must contain false and fraudulent statements with intent to defraud the insurer. 

6. CRIMINAL PROCEDURE; ACQUITTAL OF INSURED IN ARSON CASE EFFECT ON CIVIL ACTION. — While
the acquittal of the insured in the arson is not res judicata on the present civil action, the insurer’s evidence,
to judge from the decision in the criminal case, is practically identical in both cases and must lead to the
same result, since the proof to establish the defense if connivance at the fire in order to defraud the insurer
"cannot be materially less convincing than that required in order to convict the insured of the crime of
arson" (Bachrach v. British American Assurance Co., 17 Phil. 536).

DECISION

REYES, J. B. L., J.:

Qua Chee Gan, a merchant of Albay, instituted this action in 1940, in the Court of First Instance of said
province, seeking to recover the proceeds of certain fire insurance policies totalling P370,000, issued by the
Law Union & Rock Insurance Co., Ltd., through its agent, Warner, Barnes & Co., Ltd., upon certain bodegas
and merchandise of the insured that were burned on June 21, 1940. The records of the original case were
destroyed during the liberation of the region, and were reconstituted in 1946. After a trial that lasted several
years, the Court of First Instance rendered a decision in favor of the plaintiff, the dispositive part whereof
reads as follows: jgc:chanrobles.com.ph

"Wherefore, judgment is rendered for the plaintiff and against the defendant condemning the latter to pay
the former —

(a) Under the first cause of action, the sum of P146,394.48;

(b) Under the second cause of action, the sum of P150,000;

(c) Under the third cause of action, the sum of P5,000;

(d) Under the fourth cause of action, the sum of P15,000; and

(e) Under the fifth cause of action, the sum of P40,000;

all of which shall bear interest at the rate of 80% per annum in accordance with Section 91 (b) of the
Insurance Act from September 26, 1940, until each is paid, with costs against the defendant. 

The complaint in intervention of the Philippine National Bank is dismissed without costs." (Record on Appeal,
166-167.) 

From the decision, the defendant Insurance Company appealed directly to this Court. 

The record shows that before the last war, plaintiff-appellee owned four warehouses or bodegas (designated
as Bodegas nos. 1 to 4) in the municipality of Tabaco, Albay, used for the storage of stocks of copra and of
hemp, baled and loose, in which the appellee dealt extensively. They had been, with their contents, insured
with the defendant Company since 1937, and the lose made payable to the Philippine National Bank as
mortgage of the hemp and copra, to the extent of its interest. On June, 1940, the insurance stood as
follows:chanrob1es virtual 1aw library

Policy No. Property Insured Amount

2637164 (Exhibit "LL") Bodega No. 1 (Building) P15,000.00

2637165 (Exhibit "JJ") Bodega No. 2 (Building) 10,000.00

Bodega No. 3 (Building) 25,000.00

Bodega No. 4 (Building) 10,000.00

Hemp Press — moved by

steam engine 5,000.00

2637345 (Exhibit "X") Merchandise contents

(copra and empty sacks of

Bodega No. 1) 150,000.00

2637346 (Exhibit "Y") Merchandise contents

(hemp) of Bodega No. 3 150,000.00

2637067 (Exhibit "GG") Merchandise contents

(loose hemp) of Bodega

No. 4 5,000.00

______________

Total P370,000.00

Fire of undetermined origin that broke out in the early morning of July 21, 1940, and lasted almost one
week, gutted and completely destroyed Bodegas Nos. 1, 3 and 4, with the merchandise stored therein.
Plaintiff-appellee informed the insurer by telegram on the same date; and on the next day, the fire adjusters
engaged by appellant insurance company arrived and proceeded to examine and photograph the premises,
pored over the books of the insured and conducted an extensive investigation. The plaintiff having
submitted the corresponding fire claims, totalling P398,562.81 (but reduced to the full amount of the
insurance, P370,000), the Insurance Company resisted payment, claiming violation of warranties and
conditions, filing of fraudulent claims, and that the fire had been deliberately caused by the insured or by
other persons in connivance with him. 

With counsel for the insurance company acting as private prosecutor, Qua Chee Gan, with his brother, Qua
Chee Pao, and some employees of his, were indicted and tried in 1940 for the crime of arson, it being
claimed that they had set fire to the destroyed warehouses to collect the insurance. They were, however,
acquitted by the trial court in a final decision dated July 9, 1941 (Exhibit WW). Thereafter, the civil suit to
collect the insurance money proceeded to its trial and termination in the Court below, with the result noted
at the start of this opinion. The Philippine National Bank’s complaint in intervention was dismissed because
the appellee had managed to pay his indebtedness to the Bank during the pendency of the suit, and despite
the fire losses. 

In its first assignment of error, the insurance company alleges that the trial Court should have held that the
policies were avoided for breach of warranty, specifically the one appearing on a rider pasted (with other
similar riders) on the face of the policies (Exhibits X, Y, JJ and LL). These riders were attached for the first
time in 1939, and the pertinent portions read as follows: jgc:chanrobles.com.ph

"Memo. of Warranty. — The undernoted Appliances for the extinction of fire being kept on the premises
insured hereby, and it being declared and understood that there is an ample end constant water supply with
sufficient pressure available at all seasons for the same, it is hereby warranted that the said appliances shall
be maintained in efficient working order during the currency of this policy, by reason whereof a discount of 2
1/2 per cent is allowed on the premium chargeable under this policy. 

Hydrants in the compound, not less in number than one for each 150 feet of external wall measurement of
buildings, protected, with not less than 100 feet of hose piping and nozzles for every two hydrants kept
under cover in convenient places, the hydrants being supplied with water pressure by a pumping engine, or
from some other source, capable of discharging at the rate of not less than 200 gallons of water per minute
into the upper story of the highest building protected, and a trained brigade of not less than 20 men to work
the same.’" 

It is argued that since the bodegas insured had an external wall perimeter of 500 meters or 1,640 feet, the
appellee should have eleven (11) fire hydrants in the compound, and that he actually had only two (2), with
a further pair nearby, belonging to the municipality of Tabaco. 
We are in agreement with the trial Court that the appellant is barred by waiver (or rather estoppel) to claim
violation of the so- called fire hydrants warranty, for the reason that knowing fully all that the number of
hydrants demanded therein never existed from the very beginning, the appellant nevertheless issued the
policies in question subject to such warranty, and received the corresponding premiums. It would be
perilously close to conniving at fraud upon the insured to allow appellant to claims now as void ab initio the
policies that it had issued to the plaintiff without warning of their fatal defect, of which it was informed, and
after it had misled the defendant into believing that the policies were effective. 

The insurance company was aware, even before the policies were issued, that in the premises insured there
were only two fire hydrants installed by Qua Chee Gan and two others nearby, owned by the municipality of
Tabaco, contrary to the requirements of the warranty in question. Such fact appears from positive testimony
for the insured that appellant’s agents inspected the premises; and the simple denials of appellant’s
representative (Jamiczon) can not overcome that proof. That such inspection was made is moreover
rendered probable by its being a prerequisite for the fixing of the discount on the premium to which the
insured was entitled, since the discount depended on the number of hydrants, and the fire fighting
equipment available (See "Scale of Allowances" to which the policies were expressly made subject). The law,
supported by a long line of cases, is expressed by American Jurisprudence (Vol. 29, pp. 611-612) to be as
follows:jgc:chanrobles.com.ph

"It is usually held that where the insurer, at the time of the issuance of a policy of insurance, has knowledge
of existing facts which, if insisted on, would invalidate the contract from its very inception, each knowledge
constitutes a waiver of conditions in the contract inconsistent with the known facts, and the insurer is
stopped thereafter from asserting the breach of such conditions. The law is charitable enough to assume, in
the absence of any showing to the contrary, that an insurance company intends to execute a valid contract
in return for the premium received; and when the policy contains a condition which renders it voidable at its
inception, and this result is known to the insurer, it will be presumed to have intended to waive the
conditions and to execute a binding contract, rather than to have deceived the insured into thinking he is
insured when in fact he is not, and to have taken his money without consideration." (29 Am. Jur., Insurance,
section 807, at pp. 611-612.) 

The reason for the rule is not difficult to find. 

"The plain, human justice of this doctrine is perfectly apparent. To allow a company to accept one’s money
for a policy of insurance which it then knows to be void and of no effect, though it knows as it must, that the
assured believes it to be valid and binding, is so contrary to the dictates of honesty and fair dealing, and so
closely related to positive fraud, as to be abhorrent to fairminded men. It would be to allow the company to
treat the policy as valid long enough to get the premium on it, and leave it at liberty to repudiate it the next
moment. This cannot be deemed to be the real intention of the parties. To hold that a literal construction of
the policy expressed the true intention of the company would be to indict it, for fraudulent purposes and
designs which we cannot believe it to be guilty of" (Wilson v. Commercial Union Assurance Co., 96 Atl. 540,
543-544). 

The inequitableness of the conduct observed by the insurance company in this case is heightened by the fact
that after the insured had incurred the expense of installing the two hydrants, the company collected the
premiums and issued him a policy so worded that it gave the insured a discount much smaller than that he
was normally entitled to. According to the "Scale of Allowances," a policy subject to a warranty of the
existence of one fire hydrant for every 150 feet of external wall entitled the insured to a discount of 7 1/2
per cent of the premium; while the existence of "hydrants, in compound" (regardless of number) reduced
the allowance on the premium to a mere 2 1/2 per cent. This schedule was logical, since a greater number
of hydrants and fire fighting appliances reduced the risk of loss. But the appellant company, in the particular
case now before us, so worded the policies that while exacting the greater number of fire hydrants and
appliances, it kept the premium discount at the minimum of 2 1/2 per cent, thereby giving the insurance
company a double benefit. No reason is shown why appellant’s premises, that had been insured with
appellant for several years past, suddenly should be regarded in 1939 as so hazardous as to be accorded a
treatment beyond the limits of appellant’s own scale of allowances. Such abnormal treatment of the insured
strongly points at an abuse of the insurance company’s selection of the words and terms of the contract,
over which it had absolute control. 

These considerations lead us to regard the parol evidence rule, invoked by the appellant as not applicable to
the present case. It is not a question here whether or not the parties may vary a written contract by oral
evidence; but whether testimony is receivable so that a party may be, by reason of inequitable conduct
shown, estopped from enforcing forfeitures in its favor, in order to forestall fraud or imposition on the
insured. 

"Receipt of Premiums or Assessments after Cause for Forfeiture Other than Nonpayment. — It is a well
settled rule of law that an insurer which with knowledge of facts entitling it to treat a policy as no longer in
force, receives and accepts a premium on the policy, estopped to take advantage of the forfeiture. It cannot
treat the policy as void for the purpose of defense to an action to recover for a loss thereafter occurring and
at the same time treat it as valid for the purpose of earning and collecting further premiums." (29 Am. Jur.,
653, p. 657.) 

"It would be unconscionable to permit a company to issue a policy under circumstances which it knew
rendered the policy void and then to accept and retain premiums under such a void policy. Neither law nor
good morals would justify such conduct and the doctrine of equitable estoppel is peculiarly applicable to the
situation." (McGuire v. Home Life Ins. Co. 94 Pa. Super Ct. 457.) 

Moreover, taking into account the well known rule that ambiguities or obscurities must be strictly interpreted
against the party that caused them, 1 the "memo of warranty" invoked by appellant bars the latter from
questioning the existence of the appliances called for in the insured premises, since its initial expression,
"the undernoted appliances for the extinction of fire being kept on the premises insured hereby, . . . it is
hereby warranted . . .", admits of interpretation as an admission of the existence of such appliances which
appellant cannot now contradict, should the parol evidence rule apply. 

The alleged violation of the warranty of 100 feet of fire hose for every two hydrants, must be equally
rejected, since the appellant’s argument thereon is based on the assumption that the insured was bound to
maintain no less than eleven hydrants (one per 150 feet of wall), which requirement appellant is estopped
from enforcing. The supposed breach of the water pressure condition is made to rest on the testimony of
witness Serra, that the water supply could fill a 5-gallon can in 3 seconds; appellant thereupon inferring that
the maximum quantity obtainable from the hydrants was 100 gallons a minute, when the warranty called for
200 gallons a minute. The transcript shows, however, that Serra repeatedly refused and professed inability
to estimate the rate of discharge of the water, and only gave the "5-gallon per 3-second" rate because the
insistence of appellant’s counsel forced the witness to hazard a guess. Obviously, the testimony is worthless
and insufficient to establish the violation claimed, specially since the burden of its proof lay on Appellant. 

As to maintenance of a trained fire brigade of 20 men, the record is preponderant that the same was
organized, and drilled, from time to give, altho not maintained as a permanently separate unit, which the
warranty did not require. Anyway, it would be unreasonable to expect the insured to maintain for his
compound alone a fire fighting force that many municipalities in the Islands do not even possess. There is
no merit in appellant’s claim that subordinate membership of the business manager (Co Cuan) in the fire
brigade, while its direction was entrusted to a minor employee, renders the testimony improbable. A
business manager is not necessarily adept at fire fighting, the qualities required being different for both
activities. 

Under the second assignment of error, appellant insurance company avers that the insured violated the
"Hemp Warranty" provisions of Policy No. 2637165 (Exhibit JJ), against the storage of gasoline, since
appellee admitted that there were 36 cans (latas) of gasoline in the building designed as "Bodega No. 2"
that was a separate structure not affected by the fire. It is well to note that gasoline is not specifically
mentioned among the prohibited articles listed in the so- called "hemp warranty." The cause relied upon by
the insurer speaks of "oils (animal and/or vegetable and/or mineral and/or their liquid products having a
flash point below 300� Fahrenheit", and is decidedly ambiguous and uncertain; for in ordinary parlance,
"Oils" mean "lubricants" and not gasoline or kerosene. And how many insured, it may well be wondered, are
in a position to understand or determine "flash point below 003� Fahrenheit. Here, again, by reason of the
exclusive control of the insurance company over the terms and phraseology of the contract, the ambiguity
must be held strictly against the insurer and liberally in favor of the insured, specially to avoid a forfeiture
(44 C. J. S., pp. 1166-1175; 29 Am. Jur. 180). 

"Insurance is, in its nature, complex and difficult for the layman to understand. Policies are prepared by
experts who know and can anticipate the bearing and possible complications of every contingency. So long
as insurance companies insist upon the use of ambiguous, intricate and technical provisions, which conceal
rather than frankly disclose, their own intentions, the courts must, in fairness to those who purchase
insurance, construe every ambiguity in favor of the insured." (Algoe v. Pacific Mut. L. Ins. Co., 91 Wash.
324, LRA 1917A, 1237.) 
"An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the very purpose
for which the policy was procured" (Moore v. Aetna Life Insurance Co., LRA 1915D, 264). 

We see no reason why the prohibition of keeping gasoline in the premises could not be expressed clearly
and unmistakably, in the language and terms that the general public can readily understand, without resort
to obscure esoteric expression (now derisively termed "gobbledygook"). We reiterate the rule stated in
Bachrach v. British American Assurance Co. (17 Phil. 555, 561): jgc:chanrobles.com.ph

"If the company intended to rely upon a condition of that character, it ought to have been plainly expressed
in the policy."
cralaw virtua1aw library

This rigid application of the rule on ambiguities has become necessary in view of current business practices.
The courts cannot ignore that nowadays monopolies, cartels and concentrations of capital, endowed with
overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared
"agreements" that the weaker party may not change one whit, his participation in the "agreement" being
reduced to the alternative to take it or leave it" labelled since Raymond Baloilles "contracts by adherence"
(con tracts d’adhesion), in contrast to these entered into by parties bargaining on an equal footing, such
contracts (of which policies of insurance and international bills of lading are prime examples) obviously call
for greater strictness and vigilance on the part of courts of justice with a view to protecting the weaker party
from abuses and imposition, and prevent their becoming traps for the unwarry (New Civil Code, Article 24;
Sent. of Supreme Court of Spain, 13 Dec. 1934, 27 February 1942). 

"Si pudiera estimarse que la condicion 18 de la poliza de seguro envolvia alguna oscuridad, habra de ser
tenido en cuenta que al seguro es, praticamente un contrato de los llamados de adhesion y por consiguiente
en caso de duda sobre la significacion de las clausulas generales de una poliza — redactada por las
compafiias sin la intervencion alguna de sus clientes — se ha de adoptar de acuerdo con el articulo 1268 del
Codigo Civil, la interpretacion mas favorable al asegurado, ya que la obscuridad es imputable a la empresa
aseguradora, que debia haberse explicado mas claramante." (Dec. Trib. Sup. of Spain 13 Dec. 1934). 

The contract of insurance is one of perfect good faith (ufferrimal fidei) not for the insured alone, but equally
so for the insurer; in fact, it is mere so for the latter, since its dominant bargaining position carries with it
stricter responsibility. 

Another point that is in favor of the insured is that the gasoline kept in Bodega No. 2 was only incidental to
his business, being no more than a customary 2 day’s supply for the five or six motor vehicles used for
transporting of the stored merchandise (t.s.n., pp. 1447-1448). "It is well settled that the keeping of
inflammable oils on the premises, though prohibited by the policy, does not void it if such keeping is
incidental to the business." Bachrach v. British American Ass. Co., 17 Phil. 555, 560); and "according to the
weight of authority, even though there are printed prohibitions against keeping certain articles on the
insured premises the policy will not be avoided by a violation of these prohibitions, if the prohibited articles
are necessary or in customary use in carrying on the trade or business conducted on the premises." (45 C.
J. S., p. 311; also 4 Couch on Insurance, section 966b). It should also be noted that the "Hemp Warranty"
forbade storage only "in the building to which this insurance applies and/or in any building communicating
therewith", and it is undisputed that no gasoline was stored in the burned bodegas, and that "Bodega No. 2"
which was not burned and where the gasoline was found, stood isolated from the other insured bodegas. 

The charge that the insured failed or refused to submit to the examiners of the insurer the books, vouchers,
etc. demanded by them was found unsubstantiated by the trial Court, and no reason has been shown to
alter this finding. The insured gave the insurance examiner all the data he asked for (Exhibits AA, BB, CCC
and Z), and the examiner even kept and photographed some of the examined books in his possession. What
does appear to have been rejected by the insured was the demand that he should submit "a list of all books,
vouchers, receipts and other records" (Page 4, Exhibit 9-c); but the refusal of the insured in this instance
was well justified, since the demand for a list of all the vouchers (which were not in use by the insured) and
receipts was positively unreasonable, considering that such listing was superfluous because the insurer was
not denied access to the records, that the volume of Qua Chee Gan’s business ran into millions, and that the
demand was made just after the fire when everything was in turmoil. That the representatives of the
insurance company were able to secure all the data they needed is proved by the fact that the adjuster
Alexander Stewart was able to prepare his own balance sheet (Exhibit L of the criminal case) that did not
differ from that submitted by the insured (Exhibit J) except for the valuation of the merchandise, as
expressly found by the Court in the criminal case for arson. (Decision, Exhibit WW). 

How valuations may differ honestly, without fraud being involved, was strikingly illustrated in the decision of
the arson case (Exhibit WW) acquitting Qua Choc Gan, appellee in the present proceedings. The decision
states (Exhibit WW, p. 11): jgc:chanrobles.com.ph

"Alexander D. Stewart declaro que ha examinado los libros de Qua Choc Gan en Tabaco asi como su
existencia de copra y abaca en las bodegas al tiempo del incendio durante el periodo comprendido desde el
1. � de enero al 21 de junio de 1940 y ha encontrado que Qua Choc Gan ha sufrido una perdida de
P1,750.76 en su negocio en Tabaco. Segun Stewart al llegar a este conclusion el ha tenido en cuenta el
balance de comprobacion Exhibit ’J’ que le ha entregado el mismo acusado Que Choc Gan en relacion con
sus libros y lo ha encontrado correcto a excepcion de los precios de abaca y copra que alli aparecen que no
estan de acuerdo con los precios en el mercado. Esta comprobacion aparece en el balance mercado exhibit J
que fue preparado por al mismo testigo." cralaw virtua1aw library

In view of the discrepancy in the valuations between the insured and the adjuster Stewart for the insurer,
the Court referred the controversy to a government auditor, Apolonio Ramos; but the latter reached a
different result from the other two. Not only that, but Ramos reported two different valuations that could be
reached according to the methods employed (Exhibit WW, p. 35): jgc:chanrobles.com.ph

"La ciencia de la contabilidad es buena, pues ha tenido sus muchos usos buenos para promover el comercio
y la finanza, pero en el caso presente ha resultado un tanto cumplicada y acomodaticia, como lo prueba el
resultado del examen hecho por los contadores Stewart y Ramos, pues el juzgado no alcanza a ver como
habiendo examinado las mismas partidas y los mismos libros dichos contadores hayan de llegara dos
conclusiones que difieron sustancialmente entre si. En otras palabras, no solamente la comprobacion hecha
por Stewart difiere de la comprobacion hecha por Ramos sino que, segun este ultimo, su comprobacion ha
dado lugar a dos resultados diferentes dependiendo del metodo que se emplea." cralaw virtua1aw library

Clearly then, the charge of fraudulent overvaluation cannot be seriously entertained. The insurer attempted
to bolster its case with alleged photographs of certain pages of the insurance book (destroyed by the war) of
insured Qua Chee Gan (Exhibits 26-A and 26-B) and allegedly showing abnormal purchases of hemp and
copra from June 11 to June 20, 1940. The Court below remained unconvinced of the authenticity of those
photographs, and rejected them, because they were not mentioned nor introduced in the criminal case; and
considering the evident importance of said exhibits in establishing the motive of the insured in committing
the arson charged, and the absence of adequate explanation for their omission in the criminal case, we
cannot say that their rejection in the civil case constituted reversible error. 

The next two defenses pleaded by the insurer, — that the insured connived at the loss and that he
fraudulently inflated the quantity of the insured stock in the burnt bodegas, — are closely related to each
other. Both defenses are predicted on the assumption that the insured was in financial difficulties and set
the fire to defraud the insurance company, presumably in order to pay off the Philippine National Bank, to
which most of the insured hemp and copra was pledged. Both defenses are fatally undermined by the
established fact that, notwithstanding the insurer’s refusal to pay the value of the policies the extensive
resources of the insured (Exhibit WW) enabled him to pay off the National Bank in a short time; and if he
was able to do so, no motive appears for attempt to defraud the insurer. While the acquittal of the insured
in the arson case is not res judicata on the present civil action, the insurer’s evidence, to judge from the
decision in the criminal case, is practically identical in both cases and must lead to the same result, since the
proof to establish the defense of connivance at the fire in order to defraud the insurer "cannot be materially
less convincing than that required in order to convict the insured of the crime of arson" (Bachrach v. British
American Assurance Co., 17 Phil. 536). 

As to the defense that the burned bodegas could not possibly have contained the quantities of copra and
hemp stated in the fire claims, the insurer’s case rests almost exclusively on the estimates, inferences and
conclusions of its adjuster investigator, Alexander D. Stewart, who examined the premises during and after
the fire. His testimony, however, was based on inferences from the photographs and traces found after the
fire, and must yield to the contradictory testimony of engineer Andres Bolinas, and specially of the then
Chief of the Loan Department of the National Bank’s Legaspi branch, Porfirio Barrios, and of Bank Appraiser
Loreto Samson, who actually saw the contents of the bodegas shortly before the fire, while inspecting them
for the mortgagee Bank. The lower Court was satisfied of the veracity and accuracy of these witnesses, and
the appellant insurer has failed to substantiate its charges against their character. In fact, the insurer’s
repeated accusations that these witnesses were later "suspended for fraudulent transactions" without giving
any details, is a plain attempt to create prejudice against them, without the least support in fact. 

Stewart himself, in testifying that it is impossible to determine from the remains the quantity of hemp
burned (t. s. n., pp. 1468, 1470), rebutted appellant’s attacks on the refusal of the Court below to accept its
inferences from the remains shown in the photographs of the burned premises. It appears, likewise, that the
adjuster’s calculations of the maximum contents of the destroyed warehouses rested on the assumption that
all the copra and hemp were in sacks, and on the result of his experiments to determine the space occupied
by definite amounts of sacked copra. The error in the estimates thus arrived at proceeds from the fact that a
large amount of the insured’s stocks were in loose form, occupying less space than when kept in sacks; and
from Stewart’s obvious failure to give due allowance for the compression of the material at the bottom of
the piles (t. s. n., pp. 1964, 1967) due to the weight of the overlying stock, as shown by engineer Bolinas. It
is probable that the errors were due to inexperience (Stewart himself admitted that this was the first copra
fire he had investigated); but it is clear that such errors render valueless Stewart’s computations. These
were in fact twice passed upon and twice rejected by different judges (in the criminal and civil cases) and
their concordant opinion is practically conclusive. 

The adjusters’ reports, Exhibits 9-A and 9-B, were correctly disregarded by the Court below, since the
opinions stated therein were based on ex parte investigations made at the back of the insured; and the
appellant did not present at the trial the original testimony and documents from which the conclusions in the
report were drawn. 

Appellant insurance company also contends that the claims filed by the insured contained false and
fraudulent statements that avoided the insurance policy. But the trial Court found that the discrepancies
were a result of the insured’s erroneous interpretation of the provisions of the insurance policies and claim
forms, caused by his imperfect knowledge of English, and that the misstatements were innocently made and
without intent to defraud. Our review of the lengthy record fails to disclose reasons for rejecting these
conclusions of the Court below. For example, the occurrence of previous fires in the premises insured in
1939, altho omitted in the claims, Exhibits EE and FF, were nevertheless revealed by the insured in his
claims Exhibits Q (filed simultaneously with them), KK and WW. Considering that all these claims were
submitted to the same agent, and that this same agent had paid the loss caused by the 1939 fire, we find
no error in the trial Court’s acceptance of the insured’s explanation that the omission in Exhibits EE and FF
was due to inadvertance, for the insured could hardly expect under such circumstances, that the 1939 would
pass unnoticed by the insurance agents. Similarly, the 20 per cent overclaim on 70 per cent of the hemp
stock, was explained by the insured as caused by his belief that he was entitled to include in the claim his
expected profit on the 70 per cent of the hemp, because the same was already contracted for and sold to
other parties before the fire occurred. Compared with other cases of over-valuation recorded in our judicial
annals, the 20 per cent excess in the case of the insured is not by itself sufficient to establish fraudulent
intent. Thus, in Yu Cua v. South British Ins. Co., 41 Phil. 134, the claim was fourteen (14) times (1,400 per
cent) bigger than the actual loss; in Go Lu v. Yorkshire Insurance Co., 43 Phil., 633, eight (8) times (800
per cent); in Tuason v. North China Ins. Co., 47 Phil. 14, six (6) times (600 per cent); in Tan It v. Sun
Insurance, 51 Phil. 212, the claim totalled P31,860.85 while the goods insured were inventoried at P13,113.
Certainly, the insured’s overclaim of 20 per cent in the case at bar, duly explained by him to the Court a
quo, appears puny by comparison, and can not be regarded as "more than misstatement, more than
inadvertence of mistake, more than a mere error in opinion, more than a slight exaggeration" (Tan It v. Sun
Insurance Office, ante) that would entitle the insurer to avoid the policy. It is well to note that the
overcharge of 20 per cent was claimed only on a part (70 per cent) of the hemp stock; had the insured
acted with fraudulent intent, nothing prevented him from increasing the value of all of his copra, hemp and
buildings in the same proportion. This also applies to the alleged fraudulent claim for burned empty sacks,
that was likewise explained to our satisfaction and that of the trial Court. The rule is that to avoid a policy,
the false swearing must be willful and with intent to defraud (29 Am. Jur., pp. 849-851) which was not the
cause. Of course, the lack of fraudulent intent would not authorize the collection of the expected profit under
the terms of the policies, and the trial Court correctly deducted the same from its award. 

We find no reversible error in the judgment appealed from, wherefore the same is hereby affirmed. Costs
against the appellant. So ordered. 

Paras, C.J., Padilla, Montemayor, Reyes, A., Jugo, Labrador and Concepcion, JJ., concur. 

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. L-16215             June 29, 1963

SIMEON DEL ROSARIO, plaintiff-appellee, 

vs.
THE EQUITABLE INSURANCE AND CASUALTY CO., INC., defendant-appellant.

Vicente J. Francisco and Jose R. Francisco for plaintiff-appellee.

K. V. Faylona for defendant-appellant.

PAREDES, J.:

On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc., issued Personal
Accident Policy No. 7136 on the life of Francisco del Rosario, alias Paquito Bolero, son of herein
plaintiff-appellee, binding itself to pay the sum of P1,000.00 to P3,000.00, as indemnity for the death
of the insured. The pertinent provisions of the Policy, recite:

Part I. Indemnity For Death

If the insured sustains any bodily injury which is effected solely through violent, external,
visible and accidental means, and which shall result, independently of all other causes and
within sixty (60) days from the occurrence thereof, in the Death of the Insured, the Company
shall pay the amount set opposite such injury:

Section 1. Injury sustained other than those specified

below unless excepted hereinafter. . . . . . . . P1,000.00
Section 2. Injury sustained by the wrecking or disablement
of a railroad passenger car or street railway car in or on
which the Insured is travelling as a farepaying
passenger. . . . . . . . P1,500.00
Section 3. Injury sustained by the burning of a church,
theatre, public library or municipal administration building
while the Insured is therein at the commencement of the
fire. . . . . . . . P2,000.00
Section 4. Injury sustained by the wrecking or disablement
of a regular passenger elevator car in which the Insured is
being conveyed as a passenger (Elevator in mines
excluded) P2,500.00
Section 5. Injury sustained by a stroke of lightning or by a
cyclone. . . . . . . . P3,000.00

xxx     xxx     xxx

Part VI. Exceptions

This policy shall not cover disappearance of the Insured nor shall it cover Death, Disability,
Hospital fees, or Loss of Time, caused to the insured:
 . . . (h) By drowning except as a consequence of the wrecking or disablement in the
Philippine waters of a passenger steam or motor vessel in which the Insured is travelling as
a farepaying passenger; . . . .

A rider to the Policy contained the following:

IV. DROWNING

It is hereby declared and agreed that exemption clause Letter (h) embodied in PART VI of the policy
is hereby waived by the company, and to form a part of the provision covered by the policy.

On February 24, 1957, the insured Francisco del Rosario, alias Paquito Bolero, while on board the
motor launch "ISLAMA" together with 33 others, including his beneficiary in the Policy, Remedios
Jayme, were forced to jump off said launch on account of fire which broke out on said vessel,
resulting in the death of drowning, of the insured and beneficiary in the waters of Jolo. 1äwphï1.ñët

On April 13, 1957, Simeon del Rosario, father of the insured, and as the sole heir, filed a claim for
payment with defendant company, and on September 13, 1957, defendant company paid to him
(plaintiff) the sum of P1,000.00, pursuant to Section 1 of Part I of the policy. The receipt signed by
plaintiff reads —

RECEIVED of the EQUITABLE INSURANCE & CASUALTY CO., INC., the sum of
PESOS — ONE THOUSAND (P1,000.00) Philippine Currency, being settlement in
full for all claims and demands against said Company as a result of an accident
which occurred on February 26, 1957, insured under out ACCIDENT Policy No.
7136, causing the death of the Assured.

In view of the foregoing, this policy is hereby surrendered and CANCELLED.

LOSS COMPUTATION

Amount of Insurance                 P1,000.00

__________
vvvvv

On the same date (September 13, 1957), Atty. Vicente J. Francisco, wrote defendant company
acknowledging receipt by his client (plaintiff herein), of the P1,000.00, but informing said company
that said amount was not the correct one. Atty. Francisco claimed —

The amount payable under the policy, I believe should be P1,500.00 under the provision of
Section 2, part 1 of the policy, based on the rule of pari materia as the death of the insured
occurred under the circumstances similar to that provided under the aforecited section.

Defendant company, upon receipt of the letter, referred the matter to the Insurance Commissioner,
who rendered an opinion that the liability of the company was only P1,000.00, pursuant to Section 1,
Part I of the Provisions of the policy (Exh. F, or 3). Because of the above opinion, defendant
insurance company refused to pay more than P1,000.00. In the meantime, Atty. Vicente Francisco,
in a subsequent letter to the insurance company, asked for P3,000.00 which the Company refused,
to pay. Hence, a complaint for the recovery of the balance of P2,000.00 more was instituted with the
Court of First Instance of Rizal (Pasay City, Branch VII), praying for it further sum of P10,000.00 as
attorney's fees, expenses of litigation and costs.
Defendant Insurance Company presented a Motion to Dismiss, alleging that the demand or claim is
set forth in the complaint had already been released, plaintiff having received the full amount due as
appearing in policy and as per opinion of the Insurance Commissioner. An opposition to the motion
to dismiss, was presented by plaintiff, and other pleadings were subsequently file by the parties. On
December 28, 1957, the trial court deferred action on the motion to dismiss until termination of the
trial of the case, it appearing that the ground thereof was not indubitable. In the Answer to the
complaint, defendant company practically admitted all the allegations therein, denying only those
which stated that under the policy its liability was P3,000.00.

On September 1, 1958, the trial court promulgated an Amended Decision, the pertinent portions of
which read —

xxx     xxx     xxx

Since the contemporaneous and subsequent acts of the parties show that it was not their
intention that the payment of P1,000.00 to the plaintiff and the signing of the loss receipt
exhibit "1" would be considered as releasing the defendant completely from its liability on the
policy in question, said intention of the parties should prevail over the contents of the loss
receipt "1" (Articles 1370 and 1371, New Civil Code).

". . . . Under the terms of this policy, defendant company agreed to pay P1,000.00 to
P3,000.00 as indemnity for the death of the insured. The insured died of drowning. Death by
drowning is covered by the policy the pertinent provisions of which reads as follows:

xxx     xxx     xxx

"Part I of the policy fixes specific amounts as indemnities in case of death resulting
from "bodily injury which is effected solely thru violence, external, visible and
accidental means" but, Part I of the Policy is not applicable in case of death by
drowning because death by drowning is not one resulting from "bodily injury which is
affected solely thru violent, external, visible and accidental means" as "Bodily Injury"
means a cut, a bruise, or a wound and drowning is death due to suffocation and not
to any cut, bruise or wound."

xxx     xxx     xxx

Besides, on the face of the policy Exhibit "A" itself, death by drowning is a ground for
recovery apart from the bodily injury because death by bodily injury is covered by Part I of
the policy while death by drowning is covered by Part VI thereof. But while the policy
mentions specific amounts that may be recovered for death for bodily injury, yet, there is not
specific amount mentioned in the policy for death thru drowning although the latter is, under
Part VI of the policy, a ground for recovery thereunder. Since the defendant has bound itself
to pay P1000.00 to P3,000.00 as indemnity for the death of the insured but the policy does
not positively state any definite amount that may be recovered in case of death by drowning,
there is an ambiguity in this respect in the policy, which ambiguity must be interpreted in
favor of the insured and strictly against the insurer so as to allow greater indemnity.

xxx     xxx     xxx
 . . . plaintiff is therefore entitled to recover P3,000.00. The defendant had already paid the
amount of P1,000.00 to the plaintiff so that there still remains a balance of P2,000.00 of the
amount to which plaintiff is entitled to recover under the policy Exhibit "A".

The plaintiff asks for an award of P10,000.00 as attorney's fees and expenses of litigation.
However, since it is evident that the defendant had not acted in bad faith in refusing to pay
plaintiff's claim, the Court cannot award plaintiff's claim for attorney's fees and expenses of
litigation.

IN VIEW OF THE FOREGOING, the Court hereby reconsiders and sets aside its decision
dated July 21, 1958 and hereby renders judgment, ordering the defendant to pay plaintiff the
sum of Two Thousand (P2,000.00) Pesos and to pay the costs.

The above judgment was appealed to the Court of Appeals on three (3) counts. Said Court, in a
Resolution dated September 29, 1959, elevated the case to this Court, stating that the genuine issue
is purely legal in nature.

All the parties agree that indemnity has to be paid. The conflict centers on how much should the
indemnity be. We believe that under the proven facts and circumstances, the findings and
conclusions of the trial court, are well taken, for they are supported by the generally accepted
principles or rulings on insurance, which enunciate that where there is an ambiguity with respect to
the terms and conditions of the policy, the same will be resolved against the one responsible thereof.
It should be recalled in this connection, that generally, the insured, has little, if any, participation in
the preparation of the policy, together with the drafting of its terms and Conditions. The interpretation
of obscure stipulations in a contract should not favor the party who cause the obscurity (Art. 1377,
N.C.C.), which, in the case at bar, is the insurance company.

. . . . And so it has been generally held that the "terms in an insurance policy, which are
ambiguous, equivocal or uncertain . . . are to be construed strictly against, the insurer, and
liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment
to the insured, especially where a forfeiture is involved," (29 Am. Jur. 181) and the reason for
this rule is that the "insured usually has no voice in the selection or arrangement of the words
employed and that the language of the contract is selected with great care and deliberation
by expert and legal advisers employed by, and acting exclusively in the interest of, the
insurance company" (44 C.J.S. 1174). Calanoc v. Court of Appeals, et al., G.R. No. L-8151,
Dec. 16, 1955.

. . . . Where two interpretations, equally fair, of languages used in an insurance policy may
be made, that which allows the greater indemnity will prevail. (L'Engel v. Scotish Union &
Nat. F. Ins. Co., 48 Fla. 82, 37 So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann. Cas. 749).

At any event, the policy under consideration, covers death or disability by accidental means, and the
appellant insurance company agreed to pay P1,000.00 to P3,000.00. is indemnity for death of the
insured.

In view of the conclusions reached, it would seem unnecessary to discuss the other issues raised in
the appeal.

The judgment appealed from is hereby affirmed. Without costs.

Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Dizon and Regala, JJ.,
concur.
Makalintal, J., reserves his vote.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 75605 January 22, 1993

RAFAEL (REX) VERENDIA, petitioner, 

vs.
COURT OF APPEALS and FIDELITY & SURETY CO. OF THE PHILIPPINES, respondents.

G.R. No. 76399 January 22, 1993

FIDELITY & SURETY CO. OF THE PHILIPPINES, INC., petitioner, 

vs.
RAFAEL VERENDIA and THE COURT OF APPEALS, respondents.

B.L. Padilla for petitioner.

Sabino Padilla, Jr. for Fidelity & Surety, Co.

MELO, J.:

The two consolidated cases involved herein stemmed from the issuance by Fidelity and
Surety Insurance Company of the Philippines (Fidelity for short) of its Fire Insurance Policy
No. F-18876 effective between June 23, 1980 and June 23, 1981 covering Rafael (Rex)
Verendia's residential building located at Tulip Drive, Beverly Hills, Antipolo, Rizal in the
amount of P385,000.00. Designated as beneficiary was the Monte de Piedad & Savings Bank.
Verendia also insured the same building with two other companies, namely, The Country
Bankers Insurance for P56,000.00 under Policy No. PDB-80-1913 expiring on May 12, 1981,
and The Development Insurance for P400,000.00 under Policy No. F-48867 expiring on June
30, 198l.

While the three fire insurance policies were in force, the insured property was completely
destroyed by fire on the early morning of December 28, 1980. Fidelity was accordingly
informed of the loss and despite demands, refused payment under its policy, thus prompting
Verendia to file a complaint with the then Court of First Instance of Quezon City, praying for
payment of P385,000.00, legal interest thereon, plus attorney's fees and litigation expenses.
The complaint was later amended to include Monte de Piedad as an "unwilling defendant" (P.
16, Record).
Answering the complaint, Fidelity, among other things, averred that the policy was avoided
by reason of over-insurance; that Verendia maliciously represented that the building at the
time of the fire was leased under a contract executed on June 25, 1980 to a certain Roberto
Garcia, when actually it was a Marcelo Garcia who was the lessee.

On May 24, 1983, the trial court rendered a decision, per Judge Rodolfo A. Ortiz, ruling in
favor of Fidelity. In sustaining the defenses set up by Fidelity, the trial court ruled that
Paragraph 3 of the policy was also violated by Verendia in that the insured failed to inform
Fidelity of his other insurance coverages with Country Bankers Insurance and Development
Insurance.

Verendia appealed to the then Intermediate Appellate Court and in a decision promulgated on
March 31, 1986, (CA-G.R. No. CV No. 02895, Coquia, Zosa, Bartolome, and Ejercito (P), JJ.),
the appellate court reversed for the following reasons: (a) there was no misrepresentation
concerning the lease for the contract was signed by Marcelo Garcia in the name of Roberto
Garcia; and (b) Paragraph 3 of the policy contract requiring Verendia to give notice to Fidelity
of other contracts of insurance was waived by Fidelity as shown by its conduct in attempting
to settle the claim of Verendia (pp. 32-33, Rollo of G.R. No. 76399).

Fidelity received a copy of the appellate court's decision on April 4, 1986, but instead of
directly filing a motion for reconsideration within 15 days therefrom, Fidelity filed on April 21,
1986, a motion for extension of 3 days within which to file a motion for reconsideration. The
motion for extension was not filed on April 19, 1986 which was the 15th day after receipt of
the decision because said 15th day was a Saturday and of course, the following day was a
Sunday (p. 14., Rollo of G.R. No. 75605). The motion for extension was granted by the
appellate court on April 30, 1986 (p. 15. ibid.), but Fidelity had in the meantime filed its motion
for reconsideration on April 24, 1986 (p. 16, ibid.).

Verendia filed a motion to expunge from the record Fidelity's motion for reconsideration on
the ground that the motion for extension was filed out of time because the 15th day from
receipt of the decision which fell on a Saturday was ignored by Fidelity, for indeed, so
Verendia contended, the Intermediate Appellate Court has personnel receiving pleadings
even on Saturdays.

The motion to expunge was denied on June 17, 1986 (p. 27, ibid.) and after a motion for
reconsideration was similarly brushed aside on July 22, 1986 (p. 30, ibid .), the petition herein
docketed as G.R. No. 75605 was initiated. Subsequently, or more specifically on October 21,
1986, the appellate court denied Fidelity's motion for reconsideration and account thereof.
Fidelity filed on March 31, 1986, the petition for review on certiorari now docketed as G.R. No.
76399. The two petitions, inter-related as they are, were consolidated
(p. 54, Rollo of G.R. No. 76399) and thereafter given due course.

Before we can even begin to look into the merits of the main case which is the petition for
review on certiorari, we must first determine whether the decision of the appellate court may
still be reviewed, or whether the same is beyond further judicial scrutiny. Stated otherwise,
before anything else, inquiry must be made into the issue of whether Fidelity could have
legally asked for an extension of the 15-day reglementary period for appealing or for moving
for reconsideration.

As early as 1944, this Court through Justice Ozaeta already pronounced the doctrine that the
pendency of a motion for extension of time to perfect an appeal does not suspend the
running of the period sought to be extended (Garcia vs. Buenaventura 74 Phil. 611 [1944]). To
the same effect were the rulings in Gibbs vs. CFI of Manila (80 Phil. 160 [1948]) Bello vs.
Fernando (4 SCRA 138 [1962]), and Joe vs. King (20 SCRA 1120 [1967]).

The above cases notwithstanding and because the Rules of Court do not expressly prohibit
the filing of a motion for extension of time to file a motion for reconsideration in regard to a
final order or judgment, magistrates, including those in the Court of Appeals, held sharply
divided opinions on whether the period for appealing which also includes the period for
moving to reconsider may be extended. The matter was not definitely settled until this Court
issued its Resolution in Habaluyas Enterprises, Inc. vs. Japson (142 SCRA [1986]), declaring
that beginning one month from the promulgation of the resolution on May 30, 1986 —

. . . the rule shall be strictly enforced that no motion for extension of time to
file a motion for new trial or reconsideration shall be filed . . . (at p. 212.)

In the instant case, the motion for extension was filed and granted before June 30, 1986,
although, of course, Verendia's motion to expunge the motion for reconsideration was not
finally disposed until July 22, 1986, or after the dictum in Habaluyas had taken effect.
Seemingly, therefore, the filing of the motion for extension came before its formal
proscription under Habaluyas, for which reason we now turn our attention to G.R. No. 76399.

Reduced to bare essentials, the issues Fidelity raises therein are: (a) whether or not the
contract of lease submitted by Verendia to support his claim on the fire insurance policy
constitutes a false declaration which would forfeit his benefits under Section 13 of the policy
and (b) whether or not, in submitting the subrogation receipt in evidence, Fidelity had in
effect agreed to settle Verendia's claim in the amount stated in said receipt. 1

Verging on the factual, the issue of the veracity or falsity of the lease contract could have been better
resolved by the appellate court for, in a petition for review on certiorari under Rule 45, the jurisdiction
of this Court is limited to the review of errors of law. The appellate court's findings of fact are,
therefore, conclusive upon this Court except in the following cases: (1) when the conclusion is a
finding grounded entirely on speculation, surmises, or conjectures; (2) when the inference made is
manifestly absurd, mistaken, or impossible; (3) when there is grave abuse of discretion in the
appreciation of facts; (4) when the judgment is premised on a misapprehension of facts; (5) when
the findings of fact are conflicting; and (6) when the Court of Appeals in making its findings went
beyond the issues of the case and the same are contrary to the admissions of both appellant and
appellee (Ronquillo v. Court of Appeals, 195 SCRA 433 [1991]). In view of the conflicting findings of
the trial court and the appellate court on important issues in these consolidated cases and it
appearing that the appellate court judgment is based on a misapprehension of facts, this Court shall
review the evidence on record.

The contract of lease upon which Verendia relies to support his claim for insurance benefits, was
entered into between him and one Robert Garcia, married to Helen Cawinian, on June 25, 1980
(Exh. "1"), a couple of days after the effectivity of the insurance policy. When the rented residential
building was razed to the ground on December 28, 1980, it appears that Robert Garcia (or Roberto
Garcia) was still within the premises. However, according to the investigation report prepared by Pat.
Eleuterio M. Buenviaje of the Antipolo police, the building appeared to have "no occupant" and that
Mr. Roberto Garcia was "renting on the otherside (sic) portion of said compound"
(Exh. "E"). These pieces of evidence belie Verendia's uncorroborated testimony that Marcelo Garcia,
whom he considered as the real lessee, was occupying the building when it was burned (TSN, July
27, 1982, p.10).
Robert Garcia disappeared after the fire. It was only on October 9, 1981 that an adjuster was able to
locate him. Robert Garcia then executed an affidavit before the National Intelligence and Security
Authority (NISA) to the effect that he was not the lessee of Verendia's house and that his signature
on the contract of lease was a complete forgery. Thus, on the strength of these facts, the adjuster
submitted a report dated December 4, 1981 recommending the denial of Verendia's claim (Exh. "2").

Ironically, during the trial, Verendia admitted that it was not Robert Garcia who signed the lease
contract. According to Verendia, it was signed by Marcelo Garcia, cousin of Robert, who had been
paying the rentals all the while. Verendia, however, failed to explain why Marcelo had to sign his
cousin's name when he in fact was paying for the rent and why he (Verendia) himself, the lessor,
allowed such a ruse. Fidelity's conclusions on these proven facts appear, therefore, to have
sufficient bases; Verendia concocted the lease contract to deflect responsibility for the fire towards
an alleged "lessee", inflated the value of the property by the alleged monthly rental of P6,500 when
in fact, the Provincial Assessor of Rizal had assessed the property's fair market value to be only
P40,300.00, insured the same property with two other insurance companies for a total coverage of
around P900,000, and created a dead-end for the adjuster by the disappearance of Robert Garcia.

Basically a contract of indemnity, an insurance contract is the law between the parties (Pacific
Banking Corporation vs. Court of Appeals 168 SCRA 1 [1988]). Its terms and conditions constitute
the measure of the insurer's liability and compliance therewith is a condition precedent to the
insured's right to recovery from the insurer (Oriental Assurance Corporation vs. Court of Appeals,
200 SCRA 459 [1991], citing Perla Compania de Seguros, Inc. vs. Court of Appeals, 185 SCRA 741
[1991]). As it is also a contract of adhesion, an insurance contract should be liberally construed in
favor of the insured and strictly against the insurer company which usually prepares it (Western
Guaranty Corporation vs. Court of Appeals, 187 SCRA 652 [1980]).

Considering, however, the foregoing discussion pointing to the fact that Verendia used a false lease
contract to support his claim under Fire Insurance Policy No. F-18876, the terms of the policy should
be strictly construed against the insured. Verendia failed to live by the terms of the policy, specifically
Section 13 thereof which is expressed in terms that are clear and unambiguous, that all benefits
under the policy shall be forfeited "If the claim be in any respect fraudulent, or if any false declaration
be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or
anyone acting in his behalf to obtain any benefit under the policy". Verendia, having presented a
false declaration to support his claim for benefits in the form of a fraudulent lease contract, he
forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity
waived such provision (Pacific Banking Corporation vs. Court of Appeals, supra). Worse yet, by
presenting a false lease contract, Verendia, reprehensibly disregarded the principle that insurance
contracts are uberrimae fidae and demand the most abundant good faith (Velasco vs. Apostol, 173
SCRA 228 [1989]).

There is also no reason to conclude that by submitting the subrogation receipt as evidence in court,
Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in consideration of the
amount of P142,685.77. While the said receipt appears to have been a filled-up form of Fidelity, no
representative of Fidelity had signed it. It is even incomplete as the blank spaces for a witness and
his address are not filled up. More significantly, the same receipt states that Verendia had received
the aforesaid amount. However, that Verendia had not received the amount stated therein, is proven
by the fact that Verendia himself filed the complaint for the full amount of P385,000.00 stated in the
policy. It might be that there had been efforts to settle Verendia's claims, but surely, the subrogation
receipt by itself does not prove that a settlement had been arrived at and enforced. Thus, to interpret
Fidelity's presentation of the subrogation receipt in evidence as indicative of its accession to its
"terms" is not only wanting in rational basis but would be substituting the will of the Court for that of
the parties.
WHEREFORE, the petition in G.R. No. 75605 is DISMISSED. The petition in G.R. No. 76399 is
GRANTED and the decision of the then Intermediate Appellate Court under review is REVERSED
and SET ASIDE and that of the trial court is hereby REINSTATED and UPHELD.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

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

x x x           x x x          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. . . .

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   promulgated on 3 May 1994, it affirmed in toto the appealed decision.
4

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.   It asserts that the power of control over Magalong and Atiga was vested in and
6

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   that a finding that a contractor is a "labor-only" contractor is
7

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,   to wit:
8

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."   Persons frequently excluded
10

under such provisions are those in the insured's service and employment.   The purpose of the
11

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
12

their meaning as understood in common speech.   The terms "service" and "employment" are
13

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,   or it should be construed liberally in favor of the insured and strictly against the
15

insurer.   Limitations of liability should be regarded with extreme jealousy and must be construed 
16

in such a way, as to preclude the insurer from non-compliance with its obligation.   It goes without
17

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.   It 19

is settled that the terms of the policy constitute the measure of the insurer's liability.   In the absence
20

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

x x x           x x x          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. . . . (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,   or as statutorily declared even in a limited sense as in the
21
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.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-21380             May 20, 1966

MISAMIS LUMBER CORPORATION, plaintiff and appellee, 

vs.
CAPITAL INSURANCE and SURETY CO., INC., defendant and appellant.

Achacoso, Nera and Ocampo for defendant and appellant.

F. Capistrano, Jr. for plaintiff and appellee.

REYES, J.B.L., J.:

Plaintiff-appellee Misamis Lumber Corporation, under its former name, Lanao Timber Mills, Inc.,
insured its Ford Falcon motor car for the amount of P14,000 with the defendant-appellant, Capital
Insurance & Surety Company, Inc. The pertinent provisions of the policy provided, as follows:

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

2. (a) by accidental collision or overturning or collision or overturning consequent when

mechanical breakdown or consequent upon wear and tear.

xxx     xxx     xxx

3. At its option, the Company may pay in cash the amount of the loss or damage or may
repair, reinstate or replace the Motor Vehicle or any part thereof or its accessories or spare
parts. The liability of the Company shall not exceed the value of the parts lost or damaged
and the reasonable cost of fitting such parts or the value of the Motor Vehicle at the time of
the loss or damage whichever is the loss. The Insured's estimate of value stated in the
schedule shall be the maximum amount payable by the Company in respect of any claim for
loss or damage. 1äwphï1.ñët

xxx     xxx     xxx

4. The Insured may authorize the repair of the Motor Vehicle necessitated by damage for
which the Company may be liable under this policy provided that:

(a) the estimated cost of such repair does not exceed the authorized Repair Limit.

(b) a detailed estimate of the cost is forwarded to the Company without delay.

and providing also that the authorized repair limit is P150.00.

At around eleven o'clock in the evening of 25 November 1961, and while the above-mentioned
insurance policy was in force, the insured car, while traveling along in Aurora Boulevard in front of
the Pepsi-Cola plant in Quezon City, passed over a water hole which the driver did not see because
an oncoming car did not dim its light. The crankcase and flywheel housing of the car broke when it
hit a hollow block lying alongside the water hole. At the instance of the plaintiff-appellee, the car was
towed and repaired by Morosi Motors at its shop at 1906 Taft Avenue Extension at a total cost of
P302.27.

On 29 November 1961, when the repairs on the car had already been made, the plaintiff-appellee
made a report of the accident to the defendant-appellant Capital Insurance & Surety Company.

Since the defendant-appellant refused to pay for the total cost of to wage and repairs, suit was filed
in the municipal court originally.

The case before Us is now a direct appeal on a point of law from the judgment of the Court of First
Instance of Manila finding for the plaintiff and against the defendant-insurer in its Civil Case No.
51757. Per our resolution on 13 February 1964, it was resolved to proceed with the case without the
appellee's brief, which was filed late.

The defendant-appellant admits liability in the amount of P150, but not for any excess thereof.

The lower court did not exonerate the said appellant for the excess because, according to it, the
company's absolution would render the insurance contract one-sided and that the said insurer had
not shown that the cost of repairs in the sum of P302.27 is unreasonable, excessive or padded, nor
had it shown that it could have undertaken the repairs itself at less expense.

The above reasoning is beside the point, because the insurance policy stipulated in paragraph 4 that
if the insured authorizes the repair the liability of the insurer, per its sub-paragraph (a), is limited to
P150.00. The literal meaning of this stipulation must control, it being the actual contract, expressly
and plainly provided for in the policy (Art. 1370, Civil Code; Young vs. Midland Textile Ins. Co., 30
Phil. 617; Ty vs. First Nat. Surety & Assur. Co., Inc., L-16138-45, 29 April 1961).

The lower court's recourse to legal hermeneutics is not called for because paragraph 4 of the policy
is clear and specific and leaves no room for interpretation. The interpretation given is even
unjustified because it opposes what was specifically stipulated. Thus, it will be observed that the
policy drew out not only the limits of the insurer's liability but also the mechanics that the insured had
to follow to be entitled to full indemnity of repairs. The option to undertake the repairs is accorded to
the insurance company per paragraph 2. The said company was deprived of the option because the
insured took it upon itself to have the repairs made, and only notified the insurer when the repairs
were done. As a consequence, paragraph 4, which limits the company's liability to P150.00, applies.

The insurance contract may be rather onerous ("one-sided", as the lower court put it), but that in
itself does not justify the abrogation of its express terms, terms which the insured accepted or
adhered to and which is the law between the contracting parties.

Finally, to require the insurer to prove that the cost of the repairs ordered by the insured is
unreasonable, as the appealed decision does, when the insurer was not given an opportunity to
inspect and assess the damage before the repairs were made, strikes Us as contrary to elementary
justice and equity.

For the foregoing reasons, the appealed decision is hereby modified by ordering the defendant-
appellant Capital Insurance & Surety Company, Inc. to pay not more than P150.00 to the plaintiff-
appellee Misamis Lumber Corporation. Each party shall bear its own costs and attorney's fees.
Bengzon, C.J., Bautista Angelo, Concepcion, Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., and
Sanchez, JJ., concur.
Zaldivar, J., took no part.