FORTUNE INSURANCE AND SURETY CO., INC.

, petitioner,
vs.
COURT OF APPEALS and PRODUCERS BANK OF THE PHILIPPINES, respondents.
G.R. No. 115278. May 23, 1995.
DAVIDE, JR.,  J.

Rule Synopsis

Manpower supplied by agencies may be considered employees or

authorized representatives of the employer for purposes of
construing exceptions to a robbery and theft policy exempting the
insurer from liability for any loss caused by any dishonest,
fraudulent or criminal act of its employees or authorized
representatives, among others.

Case Summary

Producers Bank had a Money, Security, and Payroll Robbery policy

with Fortune Insurance and Surety Co., Inc. The policy states that
the insurer shall not be liable for: “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.” Producers then allegedly lost a sum of
P725k during a robbery of its armored vehicle while it was in transit
to transfer the money from Pasay to Makati. The vehicle was driven
by one Magalong (assigned by PRC Management Systems). The
security guard, Atiga, was assigned by Unicorn Security Services,
Inc. The driver and the security guard, along with others, were
charged with highway robbery. The criminal case was still pending
as of writing of this decision. Producers filed a claim Fortune.
Fortune denied on the ground that the robbery was due to the acts
of Producers’ own employees, thus an excluded loss under the
general exceptions in the policy.

Producers filed a case against Fortune for the recovery of the

insurance proceeds.
The trial court ruled in favor of Producers Bank. The CA affirmed.
The lower courts found that both Magalong and Atiga were not
employees of the Bank. The SC reversed.

Issues resolved —

Was Fortune Insurance liable under the Money, Security, and

Payroll Robbery policy it issued to Producers Bank or was the
recovery thereunder is precluded under the general exceptions
clause thereof?

HELD – RECOVERY PRECLUDED. FORTUNE NOT LIABLE.

On the applicable law. The Court said that theft or robbery

insurance policy, as with the case at bar, is a form of casualty
insurance governed by Sec. 174 of the Insurance Code. The Court
also noted that the Code contains no provisions specifically
applicable to casualty insurance. Thus, this shall be governed by
the general provisions applicable to all types of insurance.

On the usual exceptions in robbery and theft policies. The

numerous restrictions in the robbery and theft policies were
intended to reduce the moral hazard. It was noted that in these
types of insurance, the opportunity to defraud the insurer is so great
(e.g. through conspiracy, etc.). Usually, losses occasioned on the
acts of the persons under the insured’s service and employment,
are excepted risks. The purpose of the exception is to guard against
liability should the theft be committed by one having unrestricted
access to the property. “Service” and “employment” in this case are
to be understood in their ordinary sense.

On whether Magalong and Atiga were Producers’ employees,

given that they were merely supplied by agencies. The Court
held that Magalong and Atiga may be considered employees of
Producers. This is under the assumption that the contract of
Producers with the providers of concerned manpower were “labor-
only.” And under the Labor Code, employees under labor-only
contract are considered employees of the party employing them and
not of the party who supplied them to the employer, the former
merely acting as an agent for the latter.

However, the Court noted that there was still lack of evidence as to
the real nature of the contract between producers and its suppliers
of manpower, since the parties merely entered into stipulation
without submitting additional evidence other than the insurance
policy. Nevertheless, the Court held that even if Magalong and Atiga
were not to be considered employees of Producers, then may still
be deemed its authorized representatives for purposes of
transferring the money in question. For the said particular task, the
subject employees acted as agents of Producers.