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CASUALTY INSURANCE 1.

) Liability for quasi-delict or non-fulfillment of


contract
Section 176. Casualty insurance is insurance covering loss - Liability involving the commission of a quasi-
or liability arising from accident or mishap, // excluding delict or tort is a civil injury, and not a felony or
certain types of loss which by law or custom are crime which is a public injury. (liability, is
considered as falling exclusively within the scope of other financial responsibility that one party has to
types of insurance such as fire or marine. // It includes, another party as a consequence of doing or failing
but is not limited to, // employer’s liability insurance, to do something)
motor vehicle liability insurance, plate glass insurance, 2.) Liability for criminal negligence
burglary and theft insurance, // personal accident and - Liabilities arising out of acts of negligence
health insurance as written by non-life insurance which are also criminal are also insurable on the
companies, and other substantially similar kinds of ground that such acts are accidental.
insurance.
Note: liability consequences of deliberate criminal acts are not
CASUALTY INSURANCE DEFINED insurable
Includes all forms of insurance against loss or liability arising INSURABLE INTEREST IN LIABILITY
from accident or mishap excluding certain types of loss or INSURANCE
liability which are not within the scope of other types of
insurance, namely: marine, fire, suretyship, and life. The insurable interest is to be found in the interest the insured
has in the safety of persons who may maintain, or in the
RISKS OR LOSSES COVERED freedom from damage of property which may become the
basis of suits against him in case of their injury or destruction.
Note: Without the exclusion of the other types of insurance,
casualty insurance would apply to almost any kind of insurance. WHEN LIABILITY INSURANCE IN POLICY IS
PAYABLE
1.) Accepting “casualty” to mean “accident” – a violent
mishap proceeding from an unknown or unexpected The general distinction between an insurance against liability
cause. and one against actual loass is that the coverage or liability of
- Casualty insurance might be presumed to include the insurer under the first attaches when the liability of the
any loss or damage when an accident is the cause insured to the injures third party attaches, regardless of actual
of the loss. loss at that time. While under the second, an action against the
2.) Except with respect to compulsory motor vehicle insurer does not lie until an actual loss is sustained by the
liability insurance, the Insurance Code contains no insured.
other provisions applicable to casualty insurance or to
robbery insurance in particular. These contracts are, RIGHT OF INJURED PERSON TO SUE INSURER
therefore, governed by the general provisions OF PARTY AT FAULT
applicable to all types of insurance. The right of the person injured to sue the insurer of the party
TWO GENERAL DIVISIONS OF CASUALTUY at fault depends on whether the contract of insurance is
INSURANCE intended to benefit third persons also or only the insured.

1.) Insurance against specified perils which may affect the 1.) Indemnity against third party liability
person and/or property of the insured. - Where the contract provides for indemnity
2.) Insurance against specified perils which may give rise against liability to third persons, then third
to liability on the part of the insured for claims for persons to whom the insured is liable, can sue
injuries to others or for damage to their property. directly the insurer upon the occurrence of the
injury or event upon which the liability depends.
LIABILITY INSURANCE DEFINED To protect injured party from insolvency of the
insured.
A contract of indemnity for the benefit of the insured and 2.) Indemnity against actual loss or payment
those in privity with him, or those to whom the law upon the - Where the contract is for indemnity against actual
grounds of public policy extends the indemnity against liability.
loss or payment, then third persons cannot
LIABILITY INSURABLE proceed against the insurer, the contract being
solely to reimburse the insured for liability
actually discharged by him through payment to

MNM III 1
third persons, said third person’s recourse being - The terms do not, without qualification, exclude
thus limited to the insured alone. events resulting in damage or loss due to the fault,
recklessness or negligence of third parties.
BASIS AND EXTENT OF INSURER’S LIABILITY
RULE AS TO DEATH OR INJURY RESULTING
1.) Contract of insurance FROM ACCIDENTAL OR ACCIDENTAL MEANS
- The liability of the insurer to the third party is
based on contract particularly, the insurance 1.) Terms considered as legally synonymous
policy while that of the insured is based on tort in - The two concepts are so difficult to distinguish
accordance with the provisions of the Civil Code. that they will be treated as essentially the same in
2.) Sum limited in the contract their jurisdictions.
- the third party liability of the insurer is only up to 2.) General rule
the extent of the insurance policy and that - Death or injury does not result from accident or
required by law. Any award beyond the insurance accidental means within the terms of an accident
coverage would already be the sole liability of the policy if it is the natural result of the insured’s
insured and/or the other parties, if any, at fault. voluntary act, unaccompanied by anything
unforeseen except the death or injury.
ACCIDENT AND HEALTH INSURANCE 3.) Exception
1.) Closely related purpose of coverages - Where the death or injury is not the natural or
- In both kinds of insurance, the insured is probable result of the insured’s voluntary act, or
reimbursed for medical and hospital expenses if something unforeseen occurs in the doing of
and, in the case of accident insurance and the act which produces the injury, the resulting
sometimes health insurance, earnings as a result death is within the protection of policies insuring
of the incapacity against death or injury from accident.
2.) Combination of coverages SUICIDE AND WILLFUL EXPOSURE TO
- Accident and health coverages are often NEEDLESS PERIL
combined in the same policy thereby protecting
the insured from loss from either kind of The only difference is in degree, as suicide imports a positive
disability. Also, accident insurance is frequently act of ending such life whereas the second act indicates a
offered as a supplement to life insurance. reckless risking of it that it is almost suicidal in intent.
3.) Burden of proof
- In accident insurance, the insured’s beneficiary NOTE: Voluntary exposure to a known danger is generally
has the burden of proof in determining that the held to negate the accidental character of whatever followed
cause of death is due to the covered peril. from the known danger.

MEANING OF “ACCIDENT” AND “ACCIDENTAL” MEANING OF “INTENTIONAL” AS USED IN


AS USEDIN ACCIDENT POLICY ACCIDENT POLICY

The terms have been taken to mean that which happens by Implies the exercise of the reasoning faculties, consciousness,
chance or fortuitously, without intention or design, and which and volition. If the injuries suffered by the insured clearly
is unexpected, unusual and unforeseen. This presupposes the resulted from the intentional act of a third person, the insurer
lack of intention to commit the wrong resulting from the event is relieved from liability as stipulated.
that happens. EFFECT OF “NO ACTION” CLAUSE IN POLICY OF
1.) Happening from known or unknown cause LIABILITY INSURANCE
unusual and unexpected “No action” clause in the policy cannot prevail over the Rules
- It is an event which happens without any human of Court provisions aimed at avoiding multiplicity of suits.
agency or, if happening through human agency,
an event which, under the circumstances, is
unusual to and not expected by the person to
CASES
whom it happens. It need not be an event that is
sudden. Biagtan vs. The Insular Life Assurance Company
2.) Cause may be attributable to fault or negligence
GR No. L-25579

MNM III 2
March 29, 1972 Zenith Insurance Corporation vs. CA and Lawrence
Fernandez
FACTS:
GR. No. 85296
Juan S. Biagtan was insured with defendant Insular Life
Assurance company for the sume of P5,000 and, under a May 14, 1990
supplementary contract denominated “Accidental Death
benefit Clause” for and additional sum of P5,000 if the “The FACTS:
death of thee insured resulted directly from bodily injury On January 25, 1983, private respondent Lawrence Fernandez
effected solely through external and violent means insured his car for “own damage” with petitioner Zenith
sustained in an accident .. and independently of all other Incurance Corporation. On July 6, 1983, the care figured in an
causes.” The clause, however expressly provided that it accident and suffered actual damages in the amount of P3,640.
would not apply where the death resulted from an injury After allegedly being given a run around by Zenith for 2
“intentionally inflicted by another party.” months, Fernandez filed a complaint for sum of money and
On the night of May 20, 1964, or during the first hours of the damages resulting from the refusal of the petitioner to pay the
following day a band of robbers entered the house of the amount claimed.
insured Juan S. Biagtan, in the course of the said robbery, the Zenith filed an answer alleging that it offered to pay the claim
latter died from the thrusts made by the robbers to the body of Fernandez pursuant to the terms and conditions of the
of the insured. contract which, the private respondent rejected.
Plaintiffs, as beneficiaries of the insured, filed a claim under the ISSUE
policy. The insurance company paid the basic amount of
P5,000 but refused to pay the additional sum of P5,000 Whether or not the award of moral and exemplary
under the accidental death benefit clause, on the ground damages should be upheld.
that the insured’s death resulted from injuries
HELD: YES
intentionally inflicted by third parties and therefore was
not covered. As regards the award of moral and exemplary damages, the
rules under the civil code shall govern.
ISSUE:
The purpose of moral damages is essentially indemnity or
Whether or not the petitioners are entitled to the said
reparation, not punishment or correction, moral damages are
proceeds under the accidental death benefit clause.
emphatically not intended to enrich a complaint at theexpense
HELD: NO of a defendant, they are awarded only to enable the injured
party to obtain means, diversions, or amusements that will
It should be noted that the exception in the accidental benefit serve to elleviate the moral suffering he has undergone by
clause invoked by the appellant does not speak of the purpose reason of the defendant’s culpable action.
– whether homicidal or not – of a third party in causing the
injuries, but only of the fact that such injuries have been In the instant case, there was a finding that private respondent
“intentionally” inflicted – this obviously to distinguish them was given a “run-around” for two months, which is the basis
from injuries which, although received at the hands of a third for the award of the damages granted under the Insurance
party, are purely accidental. This construction is the basic idea Code for unreasonably delay in the payment of the claim.
expressed in the coverage of the clause itself, namely, that “the However, the act of petitioner of delaying payment for two
death of the insured resulted directly from bodily injury months cannot be considered as so wanton or malevolent to
effected solely through external and violent means justify an award of P20,000 as moral damages, taking into
sustained in an accident. And independently of all other consideration also the fact that the actual damage on the car
causes.” Where a gang of robbers enter a house and coming was only P3,460. The reason for petitioner’s failure to
face to face with the owner, even if unexpectedly, stab him indemnify private respondent within the two0month period
repeatedly, it is contrary to all reason and logic to say that his was that the parties could not come to an agreement as regards
injuries are not intentionally inflicted, regardless of whether the amount of the actual damage on the car. The amount of
they prove fatal or not. As it was, in the present case they did P10,000 prayed for by private respondent as moral damages is
prove fatal, and the robbers have been accused and convicted equitable.
of the crime of robbery with homicide.

MNM III 3
Perla Compania De Seguros, Inc. vs. HON. Jose The judgment debtor, who is the original creditor of the
Ramolete, Honorato Borbon garnishee is, through service of the writ of garnishment,
substituted by the judgment creditor who thereby becomes
GR No. L-60887 creditor of the garnishee. Garnishment has also been described
November 13, 1991 as a warning to a person having in possession of property or
credits of the judgment debtor, not to pay the money or deliver
FACTS: the property to the latter, but rather to appear and answer to
the plaintiff’s suit.
In the afternoon of June 1 1976, a Cimarron PUJ owned and
registered in the name of Nelia Enriquez, and driven by Cosme In order that the trial court may validly acquire jurisdiction to
Casas, was travelling from Cebu City to Danao City. While bind the person of the garnishee, it is not necessary that
passing through Lilao, Cebu, the Cimmaron PUJ collided with summons be served upon him. The garnishee need not be
a private jeep owned by the late Calixtio Palmes who was then impleaded as a party to the case. All that is necessary for the
driving the private jeep. The impact of the collissionwas such trial court lawfully to bind the person of the garnishee or any
that the private jeep was flung away to a distance of about thirty person who has in his possession credits belonging to the
feet and then fell on its right side pinning down Clalixto judgment debtor is service upon him of the writ of
Palmes. He died as a result of cardio-respiratory arrest due to garnishment.
a crushed heart. The accident also caused physical injuries on
the part of Adeudatus Borbon who was then only 2 years old. In the instant case, the judgment debtor Nelia Enriquez
clearly had an interest in the proceeds of third-party
Respondents filed a compliant against Cosme Casas and Nelia liability insurance contract. In a third-party liability
Enriquez as a result of the accident. insurance contract, the insurer assumes the obligation of
paying the injured third party to whom the insured is
The claim of private respondent Honorato Borbon being
liable. The insurer becomes liable as soon as the liability
distinct and separate from that of co-plaintiff Primitiva Palmes,
if the insured to the injured third person attaches. Prior
and the amount thereof falling properly within the jurisdiction
payment by the insured to the injured third person is not
of the inferior court respondent Judge Jose Ramlete ordered
necessary in order that the obligation of the insurer may
the Borbon claim excluded from the Complaint, without
arise. From the moment that the insured became liable to
prejudice to its being filed with the proper inferior court.
third person, the insured acquired an interest in the
The court of First instance rendered a decision in favor of insurance contract, which interest may be garnished like
private respondent Primitiva Palmes, ordering common carrier any other credit.
Nelia Enriquez to pay her damages.
On 6 August 1979, respondent Judge issued an order directing
the Provincial Sheriff or his deputy to garnish the third-party
liability insurance policy. Sun Insurance Office LTD vs. CA and Nerissa Lim
Petitioner then appeared and contended that the writ was void GR No. 92383
on the ground that it was not a party to the case and that
jurisdiction over its person had never been acquired by the trial July 17, 1992
court by service of summons or by any process. Perla further FACTS:
argues that the writ of garnishment had been issued solely on
the basis of the testimony of the judgment debtor during the The petitioner issued Personal Accident Policy to Felix Lim, Jr.
examination on 23 July 1979 to the effect that the Cimarron with a face value of P200,000. Two months later, he was dead
PUJ was covered by a third party liability insurance issued by with a bullet wound on his head. As beneficiary, his wife
Perla, without granting it the opportunity to set up any Nerissa Lim sought payment on the policy but her claim was
defenses which it may have under the insurance contract. rejected. The petitioner agreed that there was no suicide. It
argued, however that there was no accident either.
ISSUE:
According to the Assistant of Lim, the latter was in a happy
Whether or not the respondent judge committed grave mood and was playing with his handgun, from which he had
abuse of discretion, thus making the petitioner NOT previously removed the magazine. As she watched television,
liable. he stood in front of her and pointed the gun at her. She pushed
HELD: NO. it aside and said it might be loaded. He assured her it was not
and then pointed it to his temple. The next moment there was

MNM III 4
an explosion and Lim slumped to the floor. He was dead FACTS:
before he fell.
Complainant [petitioner] was the owner of a Colt Lancer,
ISSUE: Model 1976, insured with respondent company under Private
Car Policy No. MBI/PC-0704 for P35,000.00 — Own
Whether or not the event is considered to be an accident Damage; P30,000.00 — Theft; and P30,000.00 — Third Party
making the petitioner liable. Liability, effective May 16, 1977 to May 16, 1978. On May 9,
HELD: YES 1978, the vehicle was brought to the Sunday Machine Works,
Inc., for general check-up and repairs. On May 11, 1978, while
The words “accident” and “accidental” have never acquired it was in the custody of the Sunday Machine Works, the car
any technical signification in law, and when used in an was allegedly taken by six (6) persons and driven out to
insurance contract are to be construed and considered Montalban, Rizal. While travelling along Mabini St., Sitio
according to the ordinary understanding and common usage Palyasan, Barrio Burgos, going North at Montalban, Rizal, the
and speech of people generally. In substance, the courts are car figured in an accident, hitting and bumping a gravel and
practically agreed that the words “accident” and “accidental” sand truck parked at the right side of the road going south. As
mean that which happens by chance or fortuitously, without a consequence, the gravel and sand truck veered to the right
intention or design, and which is unexpected, unusual, and side of the pavement going south and the car veered to the
unforeseen. right side of the pavement going north. The driver, Benito
Mabasa, and one of the passengers died and the other four
An accident is an event which happens without any
sustained physical injuries. The car, as well, suffered extensive
human agency or, if happening through human agency,
damage. Complainant, thereafter, filed a claim for total loss
an event which, under the circumstances, is unusual to
with the respondent company but claim was denied. Hence,
and not expected by the person to whom it happens. It
complainant, was compelled to institute the present action.
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. The comprehensive motor car insurance policy for P35,000.00
issued by respondent Empire Insurance Company admittedly
In light of these definitions, the Court is convinced that the undertook to indemnify the petitioner-insured against loss or
incident that resulted in Lim’s death was indeed an accident. damage to the car (a) by accidental collision or overturning, or
collision or overturning consequent upon mechanical
The petitioner contends that the insured willfully exposed breakdown or consequent upon wear and tear; (b) by fire,
himself to needless peril and thus removed himself from the external explosion, self-ignition or lightning or burglary,
coverage of the insurance policy. By the mere act of pointing housebreaking or theft; and (c) by malicious act.
the gun to his temple, Lim had willfully exposed himself to
needless peril and so came under the exception. The theory is Respondent insurance commission, however, dismissed
that a gun per se is dangerous and should therefore be handled petitioner's complaint for recovery of the total loss of the
cautiously in every case. vehicle against private respondent, sustaining respondent
insurer's contention that the accident did not fall within the
As the secretary testified, Lim had removed the magazine from provisions of the policy either for the Own Damage or Theft
the gun and believed it was no longer dangerous. He expressly coverage, invoking the policy provision on "Authorized
assured her that the gun was not loaded. It is submitted that Driver" clause.1
Lim did not willfully expose himself to needless peril when he
pointed the gun to his temple because the fact is that he ISSUE:
thought it was not unsafe to do so. The act was precisely
Whether or not the insurance company should be held
intended to assure Nalagon that the gun was indeed harmless.
liable despite the “authorized driver” clause.
HELD: YES

First, respondent commission's ruling that the person who


Jewel Villacorta vs. The Insurance Commission and drove the vehicle in the person of Benito Mabasa, who,
Empire Insurance Company according to its finding, was one of the residents of the Sunday
Machine Works, Inc. to whom the car had been entrusted for
GR No L-54171 general check-up and repairs was not an "authorized driver" of
October 28, 1980 petitioner-complainant is too restrictive and contrary to the
established principle that insurance contracts, being contracts

MNM III 5
of adhesion where the only participation of the other party is FACTS:
the signing of his signature or his "adhesion" thereto,
"obviously call for greater strictness and vigilance on the part On May 26, 1994, respondents insured with petitioner their
of courts of justice with a view of protecting the weaker party 1994 Toyota Corolla sedan under a comprehensive motor
from abuse and imposition, and prevent their becoming traps vehicle insurance policy for one year.
for the unwary.2
During the effectivity of said insurance, respondents’ car was
The main purpose of the "authorized driver" clause, as may be unlawfully taken. Hence, they immediately reported the theft
seen from its text, supra, is that a person other than the insured to the Traffic Management Command of the PNP who made
owner, who drives the car on the insured's order, such as his them accomplish a complaint sheet. In said complaint sheet,
regular driver, or with his permission, such as a friend or respondents alleged that a certain Ricardo Sales (Sales) took
member of the family or the employees of a car service or possession of the subject vehicle to add accessories and
repair shop must be duly licensed drivers and have no improvements thereon, however, Sales failed to return the
disqualification to drive a motor vehicle. subject vehicle within the agreed three-day period.

A car owner who entrusts his car to an established car service As a result, respondents notified petitioner to claim for the
and repair shop necessarily entrusts his car key to the shop reimbursement of their lost vehicle. However, petitioner
owner and employees who are presumed to have the insured's refused to pay.
permission to drive the car for legitimate purposes of checking
or road-testing the car. The mere happenstance that the
Accordingly, respondents lodged a complaint for a sum of
employee(s) of the shop owner diverts the use of the car to his
money against petitioner before the Regional Trial Court of
own illicit or unauthorized purpose in violation of the trust Makati City (trial court) praying for the payment of the insured
reposed in the shop by the insured car owner does not mean
value of their car plus damages on April 21, 1995.
that the "authorized driver" clause has been violated such as to
bar recovery, provided that such employee is duly qualified to
drive under a valid driver's license. TRIAL COURT

The situation is no different from the regular or family driver, They alleged the loss of the vehicle and claimed the same to
who instead of carrying out the owner's order to fetch the be covered by the policy’s provision on "Theft." Defendant
children from school takes out his girl friend instead for a joy disagreed and refused to pay.
ride and instead wrecks the car. There is no question of his
It appears, however, that plaintiff had successfully prosecuted
being an "authorized driver" which allows recovery of the loss
although his trip was for a personal or illicit purpose without and had been awarded the amount claimed in this action, in
the owner's authorization. another action (Civil Case No. 95-1524 entitled Sps. Yves and
Maria Teresa Remondeulaz versus Standard Insurance
Assuming, despite the totally inadequate evidence, that the Company, Inc.), which involved the loss of the same vehicle
taking was "temporary" and for a "joy ride", the Court sustains under the same circumstances although under a different
as the better view that which holds that when a person, either policy and insurance company. This, considered with the
with the object of going to a certain place, or learning how to principle that an insured may not recover more than its interest
drive, or enjoying a free ride, takes possession of a vehicle in any property subject of an insurance, leads the court to
belonging to another, without the consent of its owner, he is dismiss this action.
guilty of theft because by taking possession of the personal In its Decision dated April 12, 2005, the appellate court
property belonging to another and using it, his intent to gain is reversed and set aside the Order issued by the trial court.
evident since he derives therefrom utility, satisfaction,
enjoyment and pleasure. Justice Ramon C. Aquino cites in his Petitioner argues that the loss of respondents’ vehicle is not a
work Groizard who holds that the use of a thing constitutes peril covered by the policy. It maintains that it is not liable for
gain and Cuello Calon who calls it "hurt de uso. " the loss, since the car cannot be classified as stolen as
respondents entrusted the possession thereof to another
person.
ISSUE:
Paramount Insurance Corporation vs. Spouses Yves Whether or not the Court of Appeals decided the case a quo
GR No. 173773 in a way not in accord with law and/or applicable jurisprudence
when it promulgated in favor of the respondents
November 28, 2012

MNM III 6
Remondeulaz, making Paramount liable for the alleged "theft"
of respondents’ vehicle.
HELD:

In the instant case, Sales did not have juridical possession over
the vehicle. Hence, it is apparent that the taking of repondents’
vehicle by Sales is without any consent or authority from the
former.

Records would show that respondents entrusted possession of


their vehicle only to the extent that Sales will introduce repairs
and improvements thereon, and not to permanently deprive
them of possession thereof. Since, Theft can also be
committed through misappropriation, the fact that Sales failed
to return the subject vehicle to respondents constitutes
Qualified Theft. Hence, since repondents’ car is undeniably
covered by a Comprehensive Motor Vehicle Insurance Policy
that allows for recovery in cases of theft, petitioner is liable
under the policy for the loss of respondents’ vehicle under the
"theft clause."

All told, Sales’ act of depriving respondents of their motor


vehicle at, or soon after the transfer of physical possession of
the movable property, constitutes theft under the insurance
policy, which is compensable.

MNM III 7