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COUNTRY BANKERS INSURANCE CORPORATION v. LIANGA BAY

FACTS:

The respondent, Lianga Bay and Community Multi-Purpose Cooperative, Inc., filed an insurance claim with the petitioner, Country Bankers Insurance Corporation, for the loss they incurred due to a fire that destroyed their stocks-in-trade, furniture, fixtures, equipment, and records. The petitioner denied the claim, stating that it was an excepted risk under the fire insurance policy as it was caused by NPA rebels. However, the Regional Trial Court of Lianga, Surigao del Sur ruled in favor of the respondent, ordering the petitioner to fully pay the insurance claim. The court also awarded interest, actual damages, exemplary damages, litigation expenses, attorney's fees, and costs of the suit to the respondent. The Court of Appeals affirmed the decision of the trial court. The petitioner then filed a petition for review before the Supreme Court, challenging three assigned errors.

ISSUES:

  1. Whether the respondent’s loss was due to an excepted risk under the fire insurance policy, thus exculpating the petitioner from liability.

  2. Whether the Court of Appeals erred in holding the petitioner liable for 12% interest per annum on the face value of the policy from the filing of the complaint until fully paid.

  3. Whether the Court of Appeals erred in holding the petitioner liable for actual and exemplary damages, litigation expenses, attorney’s fees, and cost of suit.

RULING:

  1. The Supreme Court ruled that the petitioner failed to prove that the respondent’s loss was due to an excepted risk under the fire insurance policy. The evidence presented by the petitioner was deemed hearsay and was therefore inadmissible.

  2. The Supreme Court held that the interest rate on the adjudged principal amount should be 6% per annum, not 12%, computed from the date of filing of the complaint.

  3. The Supreme Court found no legal and valid basis for awarding actual and exemplary damages, litigation expenses, and attorney’s fees, and therefore deleted these awards.

PRINCIPLES:

  • The burden of proof lies upon the insurer to prove that a loss comes within an exception or limitation of the insurance policy.

  • Hearsay evidence is inadmissible unless it falls under established exceptions, such as entries in official records, which must meet specific requisites.

  • Actual and exemplary damages must be proven with certainty and cannot be presumed.

  • Attorney’s fees and litigation expenses can only be awarded if they are reasonable, just, and equitable, and there must be findings of facts and law to justify such awards.

  • The proper rate of interest on awards of damages, unless stipulated otherwise, should follow the guidelines established in jurisprudence like Eastern Shipping Lines, Inc. v. Court of Appeals and Mercantile Insurance Co., Inc., and should be 6% for non-forbearance of money claims.