Malayan Insurance v. CA, Vallejos et al.

G.R. No. L-36413 September 26, 1988

PADILLA, J.
FACTS:
Sio Choy (insured) insured his jeep with Malayan Insurance Co., Inc. (insurer).
The insurance coverage was for “own damage” and “third-party liability.” The jeep then
collided with a bus while being driven by an employee of San Leon Rice Mill, Inc.
(SLRMI); this resulted to damages to the jeep, and death of the driver, and injuries to
one Vallejos, a passenger of the jeep. Vallejos filed a complaint for damages against
the insured, the insurer and the bus company. The insured then filed a cross-claim
against the insurer on ground that he had actually paid the injured passenger.
Meanwhile, the insurer filed a third-party complaint against SLRMI, as the employer of
the negligent driver. The lower courts held the insurer, insured and driver’s employer
jointly and severally liable.

ISSUE:
Who as between the insurer and the insured of a third party liability insurance
may be held liable to the victim?

RULING:
Both, subject to the right of the insured to demand reimbursement from the
insurer. The SC held that only Sio Choy and SLRMI were solidarily liable to the victim,
but upon payment by the insurer of the insured’s liability, it has a right to demand
reimbursement from SLRMI. Relevantly, the Supreme Court held that the insurer is
entitled to be reimbursed by SLRMI by virtue of subrogation. The Court said:
“[s]ubrogation is a normal incident of indemnity insurance. Upon payment of the loss,
the insurer is entitled to be subrogated pro tanto to any right of action which the insured
may have against the third person whose negligence or wrongful act caused the loss.” It
held that, in the present case, the insurer, upon paying the injured passenger shall
become the subrogee of the insured; it is subrogated to whatever rights the latter has
against SLRMI.