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ALPHA INSURANCE v. ARSENIA SONIA CASTOR

FACTS:

The respondent entered into a contract of insurance with the petitioner for her motor vehicle. The respondent reported the loss of her vehicle to the police and informed the petitioner, demanding payment of the insurance proceeds. The petitioner denied the insurance claim, citing an exception in the policy. The respondent filed a complaint for sum of money with damages, and the RTC ruled in favor of the respondent. The petitioner appealed to the Court of Appeals, but its appeal was denied. The petitioner filed a motion for reconsideration, which was also denied. The petitioner argues in the present petition that the loss of the respondent's vehicle is excluded under the insurance policy.

ISSUES:

  1. Whether or not the loss of the respondent's vehicle, stolen by her driver, is excluded under the insurance policy.

RULING:

  1. The Supreme Court ruled in the negative. The loss of the respondent's vehicle is not excluded under the insurance policy. The Court found that the exclusions mentioned in the policy only refer to "damage" and not "loss." Therefore, theft perpetrated by the respondent's driver does not exempt the insurer from liability.

PRINCIPLES:

  • Interpretation of Insurance Contracts: Contracts of insurance should be construed liberally in favor of the insured and strictly against the insurer, especially when there is ambiguity.

  • Difference Between Loss and Damage: In common usage, "loss" refers to the act of losing or failure to keep possession, while "damage" means injury or deterioration of property.

  • Contracts of Adhesion: Insurance policies are considered contracts of adhesion and ambiguities should be resolved against the party that prepared the contract, which is generally the insurer.

  • Exclusions in Insurance Contracts: Exclusions and limitations on liability in insurance contracts should be construed strictly and in a way that favors the insured.

  • Fraud or Breach of Warranty: Theft committed by the insured themselves would exempt the insurer from liability due to fraud or breach of warranty under Section 69 of the Insurance Code.