Sept 02, 2013
In 2007, Castor insured her Toyota Revo with Alpha Insurance (Alpha) for P630k in case of loss or damage during the coverage period. Within the period, Arsenia instructed her driver Lanuza to bring the vehicle to a nearby shop for a tune-up. However, Lanuza never returned it despite diligent efforts to locate it. She reported the incident to the police and notified Alpha of the said loss and demanded the payment of P630k.
Alpha denied the claim citing the signed Policy Exceptions stating that “the company shall not be liable for any malicious damage caused by the Insured or by a person in the insured’s service.”
Arsenia argued that the exception refers to the damage of the vehicle and not to its loss. So she filed a complaint with RTC.
Lower Courts: RTC favored Arsenia.
CA affirmed RTC. Reasons: Because the exception only covers damage and not loss, and since the policy is ambiguous, the meaning should be construed liberally in favor of the assured and strictly against the insurer.
Alpha filed before SC a petition for certiorari under Rule 45
Issues and Ruling
Is the loss of the insured’s vehicle excluded under the insurance policy?
(1) TERMS ARE CLEAR, HENCE MUST BE INTERPRETED IN THEIR ORDINARY SENSE
“Damage” under the “Exceptions to Section III” does not cover “loss” or “theft.” Adverse to Alpha’s claim, “loss” is different from “damage”. Loss means the act of losing or failure to keep possession, while damage means deterioration or damage to property. Therefore, the “malicious damage” only covers “injury” to the motor vehicle caused by the person under the insured’s service (e.g. driver) but it does not contemplate “loss of property” as what happened in this case.
(2) WITH AMBIGUITY, IT SHALL BE CONSTRUED IN FAVOR OF THE INSURED
Alpha has liberally dileanated the words “loss” and “damage” throughout the policy but suddenly went specific by using the word “damage” in the policy exception regarding “malicious damage.” Now, it should be allowed to include the term “theft.” Since the parties themselves disagree about the meaning of particular provisions, the policy will be construed by the courts liberally in favor of the assured and strictly against the insurer. Moreover, contracts of insurance are contract of adhesion, it must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter’s interest. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from non-compliance with its obligations. (MalayanInsurance vs CA) By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer to avoid forfeiture. (Philamcare vs CA)