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PAN MALAYAN INSURANCE CORPORATION v. CA

FACTS:

Pan Malayan Insurance Company (Panmalay) filed a complaint for damages against private respondents Erlinda Fabie and her driver. Panmalay alleged that it insured a Mitsubishi Colt Lancer car registered in the name of Canlubang Automotive Resource Corporation (CANLUBANG). The insured car was allegedly hit and damaged by a pick-up truck driven by an unknown driver. Panmalay paid for the repair of the insured car and was subrogated to the rights of CANLUBANG against the driver of the pick-up and his employer, Erlinda Fabie. Despite demands, private respondents failed to pay Panmalay's claim. Private respondents filed a motion to dismiss arguing that payment under the "own damage" clause of the insurance policy precluded subrogation. The trial court dismissed Panmalay's complaint for no cause of action, and this decision was affirmed by the Court of Appeals. Hence, Panmalay filed a petition for review with the Supreme Court.

ISSUES:

  1. Whether the "own damage" coverage under the insurance policy includes damage to the insured vehicle caused by the negligence of third parties.

  2. Whether the coverage of insured risks under Section III-1 of the policy includes damage to the insured vehicle arising from collision or overturning due to the fault or negligence of a third party.

  3. Whether the insurance policy covers damages caused by the negligent acts of third parties.

  4. Whether the insurer can file a complaint for damages against third parties despite making voluntary payment to the insured.

RULING:

  1. The term "own damage" in the insurance policy refers to the insurer's assumption to reimburse the costs for repairing the damage to the insured vehicle caused by any party, including third parties. The "own damage" coverage under the policy includes damage to the insured vehicle caused by the negligence of third parties.

  2. The coverage of insured risks under Section III-1 of the policy, specifically sub-paragraph (a), is comprehensive enough to include damage to the insured vehicle arising from collision or overturning due to the fault or negligence of a third party.

  3. The insurance policy covers damages caused by the negligent acts of third parties. The insurance policy does not specifically exclude damages resulting from the negligence of third parties. Therefore, the insurer's interpretation of the policy for a more comprehensive coverage is in line with the rules of interpreting insurance contracts that favor the assured or beneficiary.

  4. The insurer can file a complaint for damages against third parties despite making voluntary payment to the insured. Even if the insurer is not subrogated to the rights of its assured under Article 2207 of the Civil Code, it can still recover from the third party responsible for the damage to the insured property under Article 1236 of the Civil Code.

PRINCIPLES:

  • The terms of a contract are to be construed according to the sense and meaning of the terms used by the parties. In interpreting property insurance contracts, the evident intention of the parties determines the import of the various terms and provisions.

  • When the terms of a policy are ambiguous, equivocal, or uncertain, the courts will intervene and construe the policy liberally in favor of the assured and strictly against the insurer.

  • The concept of "accident" is not necessarily synonymous with the concept of "no fault." It may be utilized simply to distinguish intentional or malicious acts from negligent or careless acts of man.

  • The rules of interpreting insurance contracts favor the assured or beneficiary to effect the dominant purpose of indemnity or payment.

  • An insurer who made "voluntary" payment may still recover from the third party responsible for the damage to the insured property under Article 1236 of the Civil Code.