FIRST DIVISION
G.R. No. 244407, January 26, 2021
UCPB GENERAL, INSURANCE CO., INC., Petitioner, v. ASGARD CORRUGATED BOX MANUFACTURING CORPORATION, Respondents.
D E C I S I O N
CARANDANG, J.:
Assailed in this Petition for Partial Review on Certiorari1 under Rule 45 of the Rules of Court is the Decision2 dated August 31, 2018 and the Resolution3 dated January 8, 2019 of the Court of Appeals (CA) in CA-G.R. CV No. 109543 which partially granted petitioner UCPB General Insurance Co., Inc.'s (UCPB Insurance) appeal by deleting the awards of exemplary damages and attorney's fees and denied for lack of merit UCPB Insurance's motion for partial reconsideration.
19. EFFECTIVITY AND DURATIONUnder the TMA, Asgard undertook to perform for Milestone toll-manufacturing of paper products in accordance with the volume and specifications as Milestone may define from time to time.9 Milestone shall advise Asgard of its requirements for the products to be toll-manufactured via a purchase order submitted monthly at least fifteen (15) days in advance of Milestone's desired delivery or withdrawal date stated therein to enable Asgard to timely complete production thereof. The toll-manufacturing requirements of Milestone shall be performed at Asgard's premises at Asgard Corrugated Box Manufacturing Corporation, No. 80 P. de la Cruz, Street, San Bartolome, Novaliches (the Plant) with the use of the facilities therein. Milestone shall source materials and supplies and cause the same to be delivered to the Plant.10]
This Agreement shall become effective upon signing hereof and shall be in full force and effect until 31st of January 2008, unless earlier terminated by either Party upon sixty (60) days prior written notice to the other if without cause, or in accordance with the following Clause. In the event the parties fail to execute a new toll manufacturing agreement upon the lapse of time indicated in this paragraph, the term of this Agreement shall be deemed automatically extended on a month to month basis only.
Termination or expiration of this Agreement will not abrogate, impair, release or extinguish any debt, obligation, or liability of either party incurred or arising prior to the date of termination and all undertakings, obligations, releases or indemnities which by their terms or by reasonable implication are to survive, or are to be performed in whole or in part after the termination of this Agreement, will survive such terminations or expiration.
Any renewal of this Agreement, under terms and conditions to be mutually agreed upon, may at the option of the parties be done by a letter-agreement signed by both Parties. Should this Agreement expire without a written renewal thereof, the Parties shall continue their relationship herein and the provisions of this Agreement shall continue to govern them except for the term of the Agreement, which shall henceforth be from month to month.8
Asgard notified UCPB Insurance about the loss and filed an insurance claim under the Policy based on the Malicious Damage Endorsement provision which reads:cralawred
- "Isowa" corrugating machines such as Single Facer "A" and "B" Flutes, "Lechida" Single Facer "A" Flute, "Ishikawa" Single facer "E" Flute and other accessories, originally installed at ground level were dismantled and were dumped at the rear portion of the warehouse.
- "Isowa" dual backer conveyor heater, Slitter station, Cut-Off Station, Akebono Tsusho Printer Slotter Machine were welded to steel pole which appear to be unstable.
- Other machine parts were unaccounted.21
It is hereby declared and agreed that the insurance under the said Riot and Strike endorsement shall extend to include MALICIOUS DAMAGE, which for the purpose of this extension shall mean:UCPB Insurance denied the claim explaining that the Policy had no cross liability cover, and the malicious damage was committed by Milestone, one of the name insured, and not committed by a third party.23]
LOSS OF OR DAMAGE TO THE PROPERTY INSURED DIRECTLY CAUSED BY THE MALICIOUS ACT OF ANY PERSON (WHETHER OR NOT SUCH ACT IS COMMITTED IN THE COURSE OF DISTURBANCE OF THE PUBLIC PEACE) NOT BEING AN ACT AMOUNTING TO OR COMMITTED IN CONNECTION WITH AN OCCURRENCE MENTIONED IN SPECIAL CONDITION NO. 6 OF THE SAID RIOT AND STRIKE ENDORSEMENT.22
Section 87. An insurer is not liable for a loss caused by the willful act or through the connivance of the insured; but he is not exonerated by the negligence of the insured, or of the insurance agents of others.25Hence, Asgard filed a complaint for sum of money with application for writ of preliminary attachment praying for actual damages in the amount of P147,000,000.00 plus legal interest.26 Asgard alleged that it solely owns the damaged corrugating machine and Milestone has no insurable interest therein; thus, Section 87 (now Section 89) of the Insurance Code is inapplicable. Further, UCPB Insurance's consolidation of the building, various machineries, equipment and stocks, which are owned by different entities then occupying one compound, into a single insurance policy may have been resorted to only for convenience, and did not reflect the actual and separate ownership thereof The damaged machine could be repaired for P147,000,000.00 which was paid by Asgard's sister company, Diamond Packaging Industrial Corporation,27 as evidenced by 98 Philippine Business Bank checks issued as payment to Taiphil.28
I. Whether the trial court patently erred in law and in fact when it granted defendant-appellee's motion for summary judgment despite the clear existence of genuine issues of fact.36The CA, in its Decision40 dated April 3, 2014, held that summary judgment cannot be rendered in this case as there are clearly factual issues disputed or contested by the parties. A trial is necessary to ascertain which of the conflicting parties' allegations are true. The issue on the existence of insurable interest is a factual and triable issue which the trial court could not resolve on the basis of the provisions of the Insurance Code. The fact that Asgard admitted that MPPI (Milestone) is a co-insured at the time the Policy was taken does not amount to an admission that Milestone has insurable interest at the time when the machinery and equipment were maliciously damaged. The CA ruled that the core issue is whether Milestone has insurable interest at the time of the loss, not at the time the Policy was taken.
II. Whether the trial court patently erred in law and in fact when it ruled that plaintiff-appellant had impliedly admitted MPPI's insurable interest over plaintiff-appellant's machinery and equipment since plaintiff-appellant admitted MPPI is one of the co-insured and invoked the malicious damage endorsement of the policy.37
III. Whether the trial court patently erred in law and in fact when it absolved defendant-appellee from any liability under the policy.38
IV. Whether the trial court patently erred in law and in fact when it took cognizance of defendant-appellee's motion for summary judgment despite the fact that it failed to comply with Rules 35, Sec 3 of the 1997 Rules of Procedure.39
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff, ordering the defendant to pay the plaintiff:The RTC held that UCPB Insurance is liable for the insurance claim of Asgard. It did not apply Section 87 (now Section 89) of the Insurance Code stressing that Milestone cannot be considered as an insured with respect to the damaged machine as it has no insurable interest either at the time the policy took effect or at the time of the loss considering that the TMA was valid only until January 31, 2008; the rehabilitation petition was denied by the rehabilitation court; and any business relationship with Asgard was effectively terminated when Milestone removed its equipment and left Asgard's premises.47
1. One Hundred Forty-Seven Million Pesos (Php147,000,000.00) as actual damages, with legal interest at the rate of six percent (6%) per annum from date of demand on May 11, 2011;
2. Exemplary damages in the amount of Five Hundred Thousand Pesos (Php500,000.00);
3. Attorney's fees in the amount of Four Hundred Thousand Pesos (Php400,000.00); and
4. Defendant to pay the costs of suit.
SO ORDERED.46
I. THE COURT OF APPEALS ERRED IN RULING THAT MILESTONE DID NOT HAVE INSURABLE INTEREST OVER THE CORRUGATING MACHINES AT THE TIME OF THE LOSS, CONSIDERING THAT BOTH ASCARD AND MILESTONE ARE CO-INSURED UNDER THE INSURANCE POLICY AND THAT THE AGREEMENT, WHICH THE COURT INTERPRETED AS HAVING TERMINATED TO SUPPORT ITS RULING ON LACK OF INSURABLE INTEREST, CLEARLY SUBSISTED AND CONTINUED TO TAKE EFFECT AT THE TIME MILESTONE CAUSED MALICIOUS DAMAGE TO SAID MACHINES.
II. THE COURT OF APPEALS ERRED IN RULING THAT SECTION 87 OF THE INSURANCE CODE (WHICH RELIEVES THE INSURER FROM LIABILITY FOR LOSS CAUSED BY THE WILLFUL ACT OF THE INSURED) IS INAPPLICABLE CONSIDERING THAT MILESTONE WAS A CO-INSURED AND HAD INSURABLE INTEREST OVER THE MACHINES WHICH IT MALICIOUSLY DAMAGED.
III. THE COURT OF APPEALS ERRED IN DISREGARDING UCPB GEN'S ARGUMENT THAT THE MALICIOUS DAMAGE ENDORSEMENT REFERS ONLY TO STRIKES AND LOCK-OUTS GIVEN THE CLEAR AND UNMISTAKABLE TERMS OF THE INSURANCE POLICY THAT SUCH CLAUSE APPLIES ONLY IN CONNECTION WITH THE EXISTENCE OF A STRIKE OR LOCK-OUT. MOREOVER, ASSUMING WITHOUT CONCEDING THAT SAID ARGUMENT WAS RAISED FOR THE FIRST TIME ON APPEAL, THE SME CLEARLY FALLS UNDER THE PUBLIC POLICY EXCEPTION ENUNCIATED BY THE HONORABLE COURT.53
Location of Risk: No. 80 P. Dela Cruz Street, Novaliches, Quezon CityThe business relationship of Milestone and Asgard arose pursuant to the TMA. On February 1, 2006, Asgard and Milestone executed the TMA whereby Asgard undertook to perform for Milestone toll-manufacturing of paper products in accordance with the volume and specifications as Milestone may define from time to time.69 Milestone shall advise Asgard of its requirements for the products to be toll-manufactured via a purchase order submitted monthly at least 15 days in advance of Milestone's desired delivery or withdrawal date stated therein to enable Asgard to timely complete production thereof. The toll-manufacturing requirements of Milestone shall be performed at Asgard's premises at the Plant with the use of the facilities therein. Milestone shall source materials and supplies and cause the same to be delivered to the Plant.70
INTEREST INSURED SUM INSURED
SECTION I - MATERIAL DAMAGE
900,000,000.00
(REFER TO MEMO FOR BREAKDOWN OF ITEMS)
SECTION II - MACHINERY BREAKDOWN
20,000,000.00
SECTION III - BUSINESS INTERRUPTION
10,000,000.00
INSURANCE PROPERTY BREAKDOWN AND DESCRIPTION
ITEM 1
Ps - 35,000,00
ON THE BUILDING ONLY OF ONE LOFTY STOREY IN HEIGHT (2-SPAN) CONSTRUCTED OF CONCRETE FOOTINGS, METAL FRAMED POST ON STEEL TRUSSES FRAMED UNDER LONG SPAN ROOF OCCUPIED AS PAPER MILL PLANT BUILDING.
Ps - 300,000.00
ON VARIOUS MACHINERY AND EQUIPMENT OF EVERY KIND AND DESCRIPTION WHILST CONTAINED IN THE BUILDING DESCRIBE ABOVE.
Ps - 50,000,000.00
ON STOCKS USUAL TO THE INSURED'S BUSINESS WHILST CONTAINED IN THE BUILDING DESCRIBED ABOVE.
ITEM 2
Ps - 30,000,000.00
ON THE BUILDING ONLY OF ONE STOREY IN HEIGHT (2-SPAN CONSTRUCTED OF REINFORCED CONCRETE ON STEEL TRUSSES FRAMED UNDER LONG SPAN ROOF OCCUPIED AS OFFICE, PAPER CORRUGATING, PRINTING, PACKAGING, MANUFACTURING & MILL WAREHOUSE BUILDING.
Ps - 155,000,000.00
ON VARIOUS MACHINERY & EQUIPMENT OF EVERY KIND & DESCRIPTION WHILST CONTAINED IN THE BUILDING DESCRIBED UNDER ITEM 2 ABOVE.
Ps - 100,000,000.00
ON STOCKS USUAL TO THE INSURED'S BUSINESS WHILST CONTAINED IN THE BUILDING DESCRIBED UNDER ITEM 2 ABOVE.
ITEM 3
Ps - 10,000,000.00
ON THE BUILDING ONLY OF ONE LOFTY STOREY IN HEIGHT (2-SPAN) CONSTRUCTED ON REINFORCED CONCRETE ON STEEL TRUSSES FRAMED UNDER LONG SPAN ROOF OCCUPIED AS WAREHOUSE OF PAPER PRODUCTS (IN ROLLS/BOTH LOCALE & IMPORTED) MILLED ROLLED WAREHOUSE PLANT BUILDING.
ITEM 3-A
Ps - 150,000,000.00
ON VARIOUS STOCKS USUAL TO THE INSURED'S BUSINESS WHILST CONTAINED IN BUILDING NUMBER 3 - MILL ROLLED WAREHOUSE PLANT BUILDING DESCRIBED AS ONE LOFTY STOREY IN HEIGHT (TWO-SPAN) CONSTRUCTED OF REINFORCED CONCRETE ON STEEL TRUSSES FRAMED UNDER LONG SPAN ROOF OCCUPIED AS WAREHOUSE OF PAPER PRODUCTS.
PS - 10,000,000.00
ON THE BUILDING ONLY OF ONE LOFTY STOREY IN HEIGHT CONSTRUCTED OF CONCRETE FOOTINGS UNDER LONG SPAN COLOR ROOF ON STEEL, FRAMED OCCUPIED AS NOVABALE PLANT BUILDING.
Ps - 20,000,000.00
ON VARIOUS MACHINERY & EQUIPMENT OF EVERY KIND & DESCRIPTION WHILST CONTAINED IN THE BUILDING DESCRIBED UNDER ITEM 4 ABOVE ITEMS.
Ps - 10,000,000.00
ON THE BUILDING ONLY OF ONE STOREY IN HEIGHT WITH MEZZANINE FLOOR CONSTRUCTED ON REINFORCED CONCRETE UNDER G.I. ROOF OCCUPIED AS MICREX PLANT BUILDING
Ps - 24,000,000.00
ON VARIOUS MACHINERY & EQUIPMENT OF EVERYKIND & DESCRIPTION WHILST CONTAINED IN THE BUILSING DESCRIBED UNDER ITEM 5 ABOVE.
ITEM 6
Ps - 5,000,000.00
ON THREE (3) BUILDINGS ONLY OF ONE STOREY IN HEIGHT CONSTRUCTED OF CONCRETE AND TIMBER UNDER G.I. ROOF OCCUPIED AS WAREHOUSE/BODEGA BUILDING & PARTLY TWO STOREY IN HEIGHT CONSTRUCTED OF CONCRETE AND/OR CONCRETE HOLLOW BLOCKS UNDER G.I. ROOF OCCUPIED AS GUARDHOUSE BUILDING.
Ps - 1,000,000.00
ON VARIOUS MACHINERY & EQUIPMENT OF EVERY KIND & DESCRIPTION WHILST CONTAINED IN THE BUILDING DESCRIBED UNDER ITEM 6 ABOVE.
DESCRIPTION OF COVER
FIRE AND LIGHTNING
EXTENDED COVERAGE ENDORSEMENT
EATHQUAKE FIRE ANTI SHOCK ENDORSEMENT
FLOOD ENDORSEMENT
RIOT AND STRIKE-ENDORSEMENT TYPHOON ENDORSEMENT67
xxxx
INDUSTRIAL ALL RISK COVER
In consideration of the Insured paying the premium to UCPB General Insurance Co., Inc. (hereinafter called "the Company"), the Company agrees, subject to the conditions, provisions and exclusions contained herein or endorsed or otherwise expressed hereon which shall all be deemed to be conditions precedent to the right of the insured to recover hereunder, to Indemnify the insured respect of
ACCIDENTAL PHYSICAL LOSS OF OR DAMAGE TO THE PROPERTY MORE FULLY DESCRIBED IN THE SCHEDULE HERETO DIRECTLY AND WHOLLY ATTRIBUTABLE TO ANY CAUSE, EXCEPT AS HEREINAFTER EXCLUDED, OCCURING DURING THE CURRENCY OF THE POLICY.
In no case shall the liability of the Company in respect of the property or any item thereof exceed the Limits of Liability expressed in the Schedule.
Basis of Indemnification
In the event of the Property Insured under this Policy, other than stocks, being destroyed or damaged by a contingency insured against, the basis upon which the amount payable under the Policy is to be calculated on the cost of replacing or reinstating on the same site with the same kind or type but not superior to or more extensive than the Property Insured when new, subject also to the terms and conditions of the Policy except insofar as the same may be varied hereby.
Reinstatement or Replacement shall mean:
1) Where property is destroyed, the rebuilding of any buildings or the replacement by similar property or any other property, in either case in a condition equal to but not better or more extensive than its condition when new.
2) Where property is damaged, there repair of the damaged and the restoration of the damaged portion of the property to a condition substantially the same as but not better or more extensive than its condition when new.
Special Provisions
a. The work of reinstatement (which may be carried out in another site and in any manner suitable to the requirements of the Insured subject to the liability of the Company not being thereby increased) must be carried out within twelve (12) months of the date of the damage, or within such further time as the Company may (during the said twelve months) in writing allow and may be carried out wholly or partially upon another site subject to the liability of the Company under this extension not being thereby increased.
b. Where any property is damaged or destroyed in part only the liability of the Company shall not exceed the sum representing the cost which the Company could have been called upon to pay for reinstatement if such property had been wholly destroyed.
c. No payment beyond the amount which would have been payable under this Policy if this clause had not been incorporated therein shall be made if at the time of any destruction or damage such property shall be covered by any other insurance affected by or on behalf of the Insured which is not upon the identical basis of reinstatement as stated in this Policy. If as a result of the application of any of these special provisions no payment is to be made beyond the amount which would have been payable under the Policy if this clause had not been incorporated therein, the rights and liabilities of the Insured and the Company in respect of the destruction of same shall be subject to the terms and conditions of the policy including any Condition of Average as if this memorandum had not been incorporated therein.
Average/Co-Insurance Clause
If the property hereby insured shall, on the happening of any loss or damage be collectively or greater value than the total values declared hereon, then the Insured shall be considered as being their own Company for the difference, and shall bear a ratable proportion of the loss accordingly. Every item. If more than one, of the policy shall be separately subject to this condition.
MACHINERY BREAKDOWN COVER
THE INSURERS HEREBY AGREE with the Insured (subject to the terms and conditions contained herein or endorsed herein) that if at any time during the period of insurance stated in the schedule, or during any subsequent period for which the insured pays the premium for the renewal of this policy, there shall occur to the machinery insured (or any part thereof) specified in the said Schedule, whilst on the premises mentioned therein, any unforeseen and sudden physical loss or damage necessitating its repair of replacement due to causes such as defects in casting and material, faulty design, faults at workshop or in erection, bad workmanship, lack of skill, carelessness, sabotage, shortage of water in boiler, physical explosion, tearing a part on account of centrifugal force, short-circuit, or any other cause not specifically excluded herein after.
THE INSURERS WILL INDEMNIFY the Insured in respect of such loss or damage in payment in cash. Replacement or repair (at their own option) as herein after provided, up to an amount not exceeding in any one year of insurance in respect of each of machines specified in the schedule the sum set opposite thereto and not exceeding the whole the total sum insured thereby.
This insurance applies whether the insured machines are at work or at rest, or being dismantled for the purpose of cleaning, overhauling or of being shifted within the said premises, or in the course of the aforesaid operations themselves, or in the course of subsequent re-erection, but in any case only after successful commissioning.THE INSURER SHALL NOT BE LIABLE FOR:
(a) The deductible stated in the schedule to be borne by the insured in any one occurrence; if more than one machine is lost or damaged in one occurrence, the Insured shall not, however, be called upon to bear more than the highest single deductible.
(b) Loss of or damage to belts, ropes, wires, chains, rubber, tyres, dies or exchangeable tool, engraved cylinders, objects made of glass, porcelain, ceramics, felts, sieve or fabrics, all operating media (e.g. lubricating oil, fuel, catalysts);
(c) Loss of or damage arising directly from lightning, directly from fire, the extinguishment of a fire, or clearance of debris and dismantling necessitated thereby, chemical explosion (except fuel gas explosion in boilers), smoke, soot, aggressive substance, theft, subsidence, landslide, rockslide, cyclone, storm, typhoon, flood, inundation, earthquake, volcanic eruption, tsunami, impact of landborne, waterborne or airborne;
(d) Loss or damage directly or indirectly caused by or arising out of war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, mutiny, riot, strike, lock-out, civil commotion, military or usurped power, a group of malicious persons or persons acting on behalf of or in connection with any political organization, conspiracy, confiscation, commandeering requisition or destruction of or damage by order of any government de facto or by any public authority, nuclear reaction, nuclear radiation or radioactive contamination;
(e) Loss or damage caused by any faults or defects existing at the time of commencement of the present insurance within the knowledge of the Insured, or his representative, whether such faults or defects were known to the insurer or not;
(f) Loss or damage arising out of the willful act or gross negligence of the insured or of his representatives;
(g) Loss or damages for which the supplier or manufacturer is responsible either by law or under contract;
(h) Loss or damage as a direct consequence of the continual influence of operation (e.g. wear and tear, cavitation, erosion, corrosion, rust, boiler scale);
(i) Consequential loss or liability of any kind or description, any payments over and above the indemnity for material damage as provided herein.
In any action, suit or other proceedings where the insurers allege that by reason of the provisions of exclusions (d) -(g) above any loss, destruction, damage or liability is not covered by this insurance the burden proving that such loss, destruction, damage or liability is covered shall be upon the insured.68 (Emphasis supplied)
xxxxThe Court notes that in the Order dated October 9, 2002,75 which initially dismissed Asgard's complaint on summary judgment, the RTC ruled that Milestone had insurable interest over the machine and equipment at the time of procurement of the Policy and at the time of the loss. It held that Asgard admitted Milestone's insurable interest when it stated that Milestone is a named insured in the Policy. It "impliedly" admitted Milestone's insurable interest when Asgard interposed the application of the Malicious Damage Endorsement Clause. The RTC stated that Milestone had insurable interest over the property as it would be benefited from the use and preservation of the modified machine. "Milestone had actual and real interest in the preservation of the corrugating machines not only because its maintenance was necessary for Asgard to be able to comply with its prestation to Milestone but also because it owns the parts which was (sic) incorporated into Asgard's corrugating machines."76]
POLICY LIABILITY
In 2007, Asgard agreed with MPPI (Milestone) to replace the parts of its machine with the parts owned by MPPI. All vital parts of the corrugating machine of Asgard were removed and replaced with new parts by MPPI. In July 2010, MPPI left the premises but allegedly failed to restore the original parts that were previously attached to the machined.
In our opinion, the failure of MPPI to restore the original parts of Asgard's machine before it left the latter's premises on July 2010 may not be maliciously done. Milestone merely removed the parts that it owned. There was no contract to the effect that Milestone had to put back the replaced parts.
Moreover, MPPI which allegedly committed malicious mischief is one of the named insured in the policy. As such an insured cannot claim against itself.74
19. EFFECTIVITY AND DURATIONTo restate, the TMA shall be effective until January 31, 2008, unless earlier terminated by either Party upon sixty (60) days prior written notice to the other. In the event the parties fail to execute a new toll manufacturing agreement after its expiry date on January 31, 2008, the term of the Agreement shall be deemed automatically extended on a month-to-month basis only. If the termination is for cause, the Agreement may, by notice in writing, be terminated with immediate effect at the option of the Terminating Party. Thus, the termination of the TMA, for any reason whatsoever, should be by notice in writing. It is well-settled that when the words of a contract are plain and readily understood, there is no room for construction.84
This Agreement shall become effective upon signing hereof and shall be in full force and effect until 31st of January 2008, unless earlier terminated by either Party upon sixty (60) days prior written notice to the other if without cause, or in accordance with the following Clause. In the event the parties fail to execute a new toll manufacturing agreement upon the lapse of time indicated in this paragraph, the term of this Agreement shall be deemed automatically extended on a month to month basis only.
Termination or expiration of this Agreement will not abrogate, impair, release or extinguish any debt, obligation, or liability of either party incurred or arising prior to the date of termination and all undertakings, obligations, releases or indemnities which by their terms or by reasonable implication are to survive, or are to be performed in whole or in part after the termination of this Agreement, will survive such terminations or expiration.
Any renewal of this Agreement, under terms and conditions to be mutually agreed upon, may at the option of the parties be done by a letter-agreement signed by both Parties. Should this Agreement expire without a written renewal thereof, the Parties shall continue their relationship herein and the provisions of this Agreement shall continue to govern them except for the term of the Agreement, which shall henceforth be from month to month.
20. TERMINATION FOR CAUSE
Notwithstanding the provisions in Clause 19, this Agreement may, by notice in writing, be terminated with immediate effect at the option of either Party (for purposes of this and the succeeding Clause, the "Terminating Party") in any of the following events:
(a) If the other Party (for purposes of this and the succeeding Clause, the "Defaulting Party") shall go into liquidation other than a voluntary liquidation for the purpose of reconstruction or amalgamation, or shall commit an act of bankruptcy or shall compound with its creditors generally, or if a receiver or juridical manager shall be appointed over the whole or a substantial part of the assets of the Defaulting Party; (b) If the Defaulting Party shall commit any material or substantial breach of its obligations hereunder and/or suffer any default to occur on any of the provisions of this Agreement and shall fail within thirty (30) days from being notified thereof in writing to remedy such breach or default; (c) If the Defaulting Party or all or substantially all of its assets shall pass under the control of any authority, or of a competitor of the Terminating Party (as determined by the latter), or other person or corporation which the Terminating Party shall have reasonable cause to disapprove.83 (Emphasis supplied)
Section 89. An insurer is not liable for a loss caused by the willful act or through the connivance of the insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others.The insurer is not liable for a loss caused by the intentional act of the insured or through his connivance. Such damage/loss is not an insurable risk because the occurrence of the loss was subject to the control of one of the parties and not merely caused by the negligence of the insured.91
(f) Loss or damage arising out of the willful act or gross negligence of the insured or of his representatives; (Emphasis supplied)97Since the damage or loss caused by Milestone to Asgard's corrugating machines was willful or intentional, UCPB Insurance is not liable under the Policy. To permit Asgard to recover from the Policy for a loss caused by the willful act of the insured is contrary to public policy, i.e., denying liability for willful wrongs.
INDUSTRIAL ALL RISK COVEREven Asgard described the act done by Milestone as malicious; therefore, it is intentional and not accidental. Consequently, the paragraph on Industrial All Risk which covers accidental physical loss or damage to the property will likewise not apply.
In consideration of the Insured paying the premium to UCPB General Insurance Co., Inc. (hereinafter called "the Company"), the Company agrees, subject to the conditions, provisions and exclusions contained herein or endorsed or otherwise expressed hereon which shall all be deemed to be conditions precedent to the right of the insured to recover hereunder, to Indemnify the insured in respect of
ACCIDENTAL PHYSICAL LOSS OF OR DAMAGE TO THE PROPERTY MORE FULLY DESCRIBED IN THE SCHEDULE HERETO DIRECTLY AND WHOLLY ATTRIBUTABLE TO ANY CAUSE, EXCEPT AS HEREINAFTER EXCLUDED, OCCURING DURING THE CURRENCY OF THE POLICY.
In no case shall the liability of the Company in respect of the property or any item thereof exceed the Limits of Liability expressed in the Schedule.98
The cause of the loss or damage to the corrugating machines is not a covered risk under the Policy |
MACHINERY BREAKDOWN COVERIf at any time during the period of insurance stated in the schedule, or during any subsequent period for which the insured pays the premium for the renewal of the Policy, there shall occur to the machinery insured any unforeseen and sudden physical loss or damage necessitating its repair of replacement due to causes such as defects in casting and material, faulty design, faults at workshop or in erection, bad workmanship, lack of skill, carelessness, sabotage, shortage of water in boiler, physical explosion, tearing apart on account of centrifugal force, short-circuit, or any other cause not specifically excluded herein after, the insurer will indemnify the insured in respect of such loss or damage by paying in cash, by replacing or repairing the machinery. The insurance applies whether the insured machines are at work or at rest, or being dismantled for cleaning purposes, overhauling or being shifted within the premises, or in the course of aforesaid operations themselves, or in the course of subsequent re-erection but only after successful commissioning.
THE INSURERS HEREBY AGREE with the Insured (subject to the terms and conditions contained herein or endorsed herein) that if at any time during the period of insurance stated in the schedule, or during any subsequent period for which the insured pays the premium for the renewal of this policy, there shall occur to the machinery insured (or any part thereof) specified in the said Schedule, whilst on the premises mentioned therein, any unforeseen and sudden physical loss or damage necessitating its repair of replacement due to causes such as defects in casting and material, faulty design, faults at workshop or in erection, bad workmanship, lack of skill, carelessness, sabotage, shortage of water in boiler, physical explosion, tearing a part (sic) on account of centrifugal force, short-circuit, or any other cause not specifically excluded herein after.
THE INSURERS WILL INDEMNIFY the Insured in respect of such loss or damage in payment in cash replacement or repair (at their own option) as herein after provided, up to an amount not exceeding in any one year of insurance in respect of each of machines specified in the schedule the sum set opposite thereto and not exceeding the whole the total sum insured thereby.
This insurance applies whether the insured machines are at work or at rest, or being dismantled for the purpose of cleaning, overhauling or of being shifted within the said premises, or in the course of the aforesaid operations themselves, or in the course of subsequent re-erection, but in any case only after successful commissioning.103 (Emphasis supplied)
The Malicious Damage Endorsement under the Policy does not apply to the loss of or damage caused herein. |
xxxxIn filing its insurance claim with UCPB Insurance, Asgard relied upon the above quoted provision in the Policy.
It is hereby declared and agreed that the insurance under the said Riot and Strike endorsement shall extend to include MALICIOUS DAMAGE, which for the purpose of this extension shall mean:
LOSS OF OR DAMAGE TO THE PROPERTY INSURED DIRECTLY CAUSED BY THE MALICIOUS ACT OF ANY PERSON (WHETHER OR NOT SUCH ACT IS COMMITTED IN THE COURSE OF DISTURBANCE OF THE PUBLIC PEACE) NOT BEING AN ACT AMOUNTING TO OR COMMITTED IN CONNECTION WITH AN OCCURRENCE MENTIONED IN SPECIAL CONDITION NO. 6 OF THE SAID RIOT AND STRIKE ENDORSEMENT.
but the Company shall not be liable under this extension for any loss or damage by fire or explosion nor for any loss or damage arising out of or in the course of burglary, housebreaking, theft or larceny or any attempt thereat or caused by any person taking part therein.
Provided always that all the conditions and provisions of said Riot and Strike Endorsement shall apply to this extension as if they had been incorporated therein.104
xxxx
CONDITION 6
This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly, of any of the following occurrences namely:
(a) War, invasion, act of foreign enemy, hostilities or warlike operations (whether war be declared or not), civil war. (b) Mutiny, civil commotion, assuming the proportions of or amounting to a popular rising, military rising, insurrection, rebellion, revolution, military or usurped power, or any act of any person acting on behalf of or in connection with any organization with activities directed towards the overthrow by force of the government "de jure" or "de facto" or to the influencing of it by terrorism or violence.
In any action, suit or other proceeding, where the Company alleges that by reason of the provisions of this Condition, any loss or damage is not covered by this insurance, the burden of proving that such loss or damage is covered shall be upon the insured.105
Asgard failed to discharge its burden as to the proof of loss/damage to justify the grant of its insurance claim. |
Aside from the foregoing, Asgard did not explain the extent of the damage of its corrugating machines. It failed to show whether the damaged machines are integral part of the stocks, machinery and equipment pulled out by Milestone; whether these damaged machines are independent machinery, i.e., it can operate on its own without the parts installed by Milestone; and whether the stocks, machinery and equipment installed by Milestone are detachable, or it will not cause any damage when detached.
- "Isowa" corrugating machines such as Single Facer "A" and "B" Flutes, "Lechida" Single Facer "A" Flute, "Ishikawa" Single facer "E" Flute and other accessories, originally installed at ground level were dismantled and were dumped at the rear portion of the warehouse.
- "Isowa" dual backer conveyor heater, Slitter station, Cut-Off Station, Akebono Tsusho Printer Slatter Machine were welded to steel pole which appear to be unstable.
- Other machine parts were unaccounted.112
Endnotes:
1Rollo, pp. 3-29.
2 Penned by Associate Justice Pedro B. Corales, with the concurrence of Associate Justices Nina G. Antonio-Valenzuela and Ma. Luisa Quijano-Padilla; id. at 34-39.
3 Id. at 51-52.
4 Id. at 54-61.
5 Id.
6 Id. at 64-76.
7 Id. at 54-55.
8 Id. at 71.
9 Id. at 64.
10 Id. at 65.
11 Id. at 35.
12 Id. at 408-409. No New Agreement (aside from the TMA) was attached or offered as evidence.
13 Id. at 77-94.
14 Id. at 102.
15 Id. at 95-105.
16 Id. at 104-105.
17 CA rollo, p. 57.
18 Records, pp. 151-188.
19 Id.
20Rollo, p. 37.
21 Id. at 56.
22 Id. at 55-56.
23 Id. at 149-150.
24 Id. at 154.
25 Id.
26 Id. at 59.
27 Id. at 57.
28 CA rollo, pp. 97-99.
29Rollo, pp. 178-183.
30 Id. at 180-181.
31 Records, pp. 280-299.
32 Id. at 285-287.
33Rollo, pp. 187-200.
34 Records, pp. 413-415.
35 Id. at 417.
36 Id. at 423.
37 Id. at 428.
38 Id. at 429.
39 Id. at 434.
40 Penned by Associate Justice Magdangal M. De Leon, with the concurrence of Associate Justices Stephen C. Cruz and Eduardo B. Peralta, Jr.; records, Vol. II, pp. 5-20.
41 Judicial Affidavit of Claire U. Ong, Exh. "NNNNN."
42 Judicial Aftidavit of Ms. Agripina de Luna, Exh. "8."
43Rollo, p. 177.
44 Id.
45 Id. at 216-224.
46 Id. at 224.
47 Id. at 220-224.
48 Id. at 242.
49 Supra note 2.
50Rollo, p. 46.
51 Id. at 43-45.
52 Supra note 3.
53Rollo, pp. 12-13.
54 Id. at 13-15.
55 Id. at 15-16.
56 Id. at 17-18.
57 Id. at 20.
58 Id. at 27.
59 Id. at 324.
60 Id. at 325.
61 Id. at 329-331.
62 Id. at 331.
63 Id. at 332.
64 Id. at 335.
65 Id. at 351-353.
66Gaisano Cagayan. Inc. v. Insurance Company of North America, 523 Phil. 677, 690-691 (2006); The Insular Life Assurance Company, Ltd. v. Court of Appeals, 472 Phil. 11 (2004).
67 Records, pp. 151-153.
68 Id. at 179-182.
69Rollo, pp. 54-55.
70 Id. at 65.
71 Records, pp. 408-409.
72Rollo, p. 37.
73 Records, Vol. II, pp. 377-379.
74 Id.
75 Records, pp. 408-422.
76 Id. at 417.
77 Id. at 418-419.
78Rollo, pp. 216-224.
79 Id. at 221.
80 Id. at 223.
81 Id. at 43-44.
82 Id. at 14-15.
83 Id. at 71-72.
84Alpha Insurance and Surety Co. v. Castor, 717 Phil. 132 (2013).
85 CIVIL CODE OF THE PHILIPPINES, Article 1308.
86Quesada v. Bonanza Restaurants, Inc., 799 Phil. 498, 509 (2016).
87 Campos, Maria Clara L., Insurance, 1983, p. 58.
88Gaisano Cagayan. Inc. v. Insurance Company of North America, 523 Phil. 677, 690-691 (2006).
89 Supra note 87.
90 Id.
91 De Leon, Hector S., The Law on Insurance (with Allied Laws), 11th edition, 2017, p. 139.
92 Perez, Hernando B., The Insurance Code and Insolvency Law with Comment and Annotations, Fifth Edition, 2006, pp. 168-169.
93 Id.
94 Id. at 169.
95Heirs of San Miguel v. Court of Appeals, 416 Phil. 943 (2001).
96 Id.
97 Records, p. 181.
98 Id. at 179.
99 James A. Fischer, The Exclusion from Insurance Coverage of Losses Caused by the Intentional Acts of the Insured: A Policy in Search of a Justification, 30 SANTA CLARA LAW REVIEW 95 (1990), pp. 110-111.
100 Id.
101 Section 51. A policy of insurance must specify:
(a) The parties between whom the contract is made;
(b) The amount to be insured except in the cases of open or running policies;
(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined;
(d) The property or life insured;
(e) The interest of the insured in property insured, if he is not the absolute owner thereof;
(f) The risks insured against; and
(g) The period during which the insurance is to continue.
102 Supra note 87 at 154.
103 Id. at 180.
104 Records, pp. 165-166.
105 Id. at 173.
106 See RTC Decision, p. 4, rollo, p. 219.
107 Records, pp. 166.
108 Records, Volume II, pp. 164-261.
109Sps. De Leon v. Bank of the Philippines, 721 Phil. 839, 848 (2013).
110 Guevara, Sulpicio, The Philippine Insurance Law, Fourth Edition (Revised), 1961, p. 126.
111Loadstar Shipping Co. v. Malayan Insurance Co. Inc., 748 Phil. 569, 586 (2014).
112 See Complaint; rollo, p. 56.
113 Exhs. "OOOOO" to "OOOOO-11", Records, Volume I, pp. 116-121.