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Zenith Insurance Corporation v.

CA
G.R. No. 85296 May 14, 1990
J. Medialdea

Doctrine: It is clear that under the Insurance Code, in case of unreasonable


delay in the payment of the proceeds of an insurance policy, the damages
that may be awarded are: 1) attorney's fees; 2) other expenses incurred by
the insured person by reason of such unreasonable denial or withholding of
payment; 3) interest at twice the ceiling prescribed by the Monetary Board
of the amount of the claim due the injured; and 4) the amount of the claim.

Facts: On January 25, 1983, private respondent Lawrence Fernandez


insured his car for "own damage" with petitioner Zenith Insurance
Corporation. On July 6, 1983, the car figured in an accident and suffered
actual damages in the amount of P3,640. After allegedly being given a run
around by Zenith for two months, Fernandez filed a complaint with the
Regional Trial Court of Cebu for sum of money and damages resulting from
the refusal of Zenith to pay the amount claimed. Aside from actual damages
and interests, Fernandez also prayed for moral damages in the amount of
P10,000.00, exemplary damages of P5,000.00, attorney's fees of P3,000.00
and litigation expenses of P3,000.00.

On September 28, 1983, Zenith filed an answer alleging that it offered to


pay the claim of Fernandez pursuant to the terms and conditions of the
contract which, the private respondent rejected. On June 4, 1986, a decision
was rendered by the trial court in favor of private respondent Fernandez. On
August 17, 1988, the Court of Appeals rendered its decision affirming in toto
the decision of the trial court.
Issue: Whether or not the Court of Appeals had legal basis in awarding
more than the amount prayed for in the complaint?

Held: The award of damages in case of unreasonable delay in the payment


of insurance claims is governed by the Philippine Insurance Code, which
provides:

Sec. 244. In case of any litigation for the enforcement of any policy or
contract of insurance, it shall be the duty of the Commissioner or the Court,
as the case may be, to make a finding as to whether the payment of the
claim of the insured has been unreasonably denied or withheld; and in the
affirmative case, the insurance company shall be adjudged to pay damages
which shall consist of attorney's fees and other expenses incurred by the
insured person by reason of such unreasonable denial or withholding of
payment plus interest of twice the ceiling prescribed by the Monetary Board
of the amount of the claim due the insured, from the date following the time
prescribed in section two hundred forty-two or in section two hundred forty-
three, as the case may be, until the claim is fully satisfied; Provided, That
the failure to pay any such claim within the time prescribed in said sections
shall be considered prima facie evidence of unreasonable delay in payment.

It is clear that under the Insurance Code, in case of unreasonable delay in


the payment of the proceeds of an insurance policy, the damages that may
be awarded are: 1) attorney's fees; 2) other expenses incurred by the
insured person by reason of such unreasonable denial or withholding of
payment; 3) interest at twice the ceiling prescribed by the Monetary Board
of the amount of the claim due the injured; and 4) the amount of the claim.

In the instant case, there was a finding that private respondent was given a
“run-around” for 2 months which is the basis for the award of the damages
granted under the Insurance Code for unreasonable delay in the payment of
the claim. However, such delay is not so wanton as to justify an award of
P20,000 as moral damages. The amount awarded as attorney’s fees and
actual damages were justified under the circumstances, but respondent
court correctly ruled that the deductions claimed by petitioners as agreed
upon in the contract had no basis. The appealed decision is modified.