On February 21, 2013, Barrack entered into a contract of insurance with Matino Insurance Company (Matino) involving a motor vehicle. The policy obligates Matino to pay Barrack the amount of Six Hundred Thousand Pesos (P600,000.00) in case of loss or damage to said vehicle during the period covered, which is from February 26, 2013 to February 26, 2014.
On April 16, 2013, at about 9:00 a.m., Barrack instructed his driver, JJ, to bring the motor vehicle to a near by auto shop for tune-up. However, JJno longer returned and despite diligent efforts to locate the said vehicle, the efforts proved futile. Resultantly, Barrack promptly notified Matino of the said loss and demanded payment of the insurance proceeds of P600,000.00.
In a letter dated July 5, 2013. Matino denied the claim, reasoning as stated in the contract that “the company shall not be liable for any malicious damage caused by the insured, any member of his family or by a person in the insured’s service. Is Matino correct in denying the claim? (4%)
Suggested answer only. Not an official answer and not legal advice.
No, Matino Insurance is not correct in denying the claim. Under Philippine insurance law and jurisprudence, a 'malicious damage' clause excluding liability for damage caused by a person in the insured's service does not apply to theft.
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Quick check
Does a 'malicious damage' exclusion clause in a comprehensive motor vehicle policy apply to theft committed by the insured's driver?
A malicious damage exclusion clause covers physical destruction or impairment and does not apply to theft of the vehicle.
How are exclusion clauses in insurance contracts interpreted under Philippine insurance jurisprudence?
Exclusion clauses are construed strictly against the insurer and liberally in favor of the insured.
When an insured instructs a driver to take a car to a repair shop and the driver disappears with the car, what insurable risk has occurred?
The driver's unlawful taking and permanent conversion of the motor vehicle constitutes theft under the insurance policy.
Who bears the legal burden of proving that an insurance loss falls within an exclusion clause of a policy?
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Which primary statute governs motor vehicle insurance policies, coverage exclusions, and theft claims in the Philippines?
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Learn more about these topics
1. Malicious Damage Clause
Under Philippine insurance jurisprudence, a malicious damage clause in a motor vehicle insurance policy excludes coverage only for deliberate physical injury, destruction, or impairment of the insured vehicle. It does not apply to cases of theft or unlawful taking. Where an insurance policy covers both theft and malicious damage, an exception excluding liability for malicious damage caused by a person in the insured's service cannot be extended to negate theft coverage, as theft involves the complete taking of the vehicle with intent to gain rather than mere physical damage.
2. Theft by Employees
Under the Insurance Code of the Philippines (Republic Act Number 10607), theft committed by an employee or domestic driver of the insured is fully compensable under a comprehensive motor vehicle insurance policy unless specifically and unambiguously excluded by the contract. When an employee tasked with taking a vehicle to a service shop unlawfully converts the property and disappears, the taking constitutes theft. Because insurance policies are contracts of adhesion, any ambiguity or exclusion clause must be construed strictly against the insurer and liberally in favor of the insured.
3. Construction of Exclusions
Under Philippine commercial law, exceptions and exclusion clauses in insurance contracts must be strictly interpreted against the insurer who prepared the contract. An insurer seeking to avoid liability under a policy exception bears the burden of proving that the loss falls squarely within the plain and clear terms of that exception. Because malicious damage and theft are distinct insurable risks under comprehensive motor vehicle coverage, an insurer cannot defeat a valid theft claim by misclassifying an employee's theft as malicious damage.