Calanoc vs. Court of Appeals

An insurer cannot rely on an ambiguous or obscure exception clause to defeat liability; such clauses are construed strictly against the insurer and liberally in favor of the insured, and a watchman’s death during a robbery is not excluded as death while making an arrest as an officer of the law or by assault or murder absent proof that he acted in such capacity or that the fatal shot resulted from those crimes.

Melencio Basilio, a watchman of Manila Auto Supply, secured from Philippine American Life Insurance Company a P2,000 life insurance policy with a supplementary contract covering death by accident. Virginia Calanoc is his widow and the claimant of the supplemental benefit. The supplementary contract contained exceptions for death while making an arrest as an officer of the law and for death from assault or murder, and the dispute concerns whether those exceptions apply to Basilio’s death.

Melencio Basilio was a watchman of the Manila Auto Supply located at the corner of Avenida Rizal and Zurbaran. He secured from the Philippine American Life Insurance Company a life insurance policy in the amount of P2,000, to which was attached a supplementary contract covering death by accident. On January 25, 1951, he died of a gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at the corner of Oroquieta and Zurbaran streets. Virginia Calanoc, his widow, was paid the P2,000 face value of the policy, but when she demanded the additional P2,000 representing the value of the supplemental policy, the company refused, alleging as its main defense that the deceased died because he was murdered by a person who took part in the commission of the robbery and while making an arrest as an officer of the law, contingencies expressly excluded in the contract and having the effect of exempting the company from liability.

The circumstances surrounding the death showed that at about seven o’clock in the night of January 25, 1951, Basilio was on duty as watchman of the Manila Auto Supply. Atty. Antonio Ojeda, who had his residence at the corner of Zurbaran and Oroquieta, a block away from Basilio’s station, came home that night and found that his house was well-lighted but with the windows closed. Getting suspicious that there were culprits in his house, Ojeda retreated to look for a policeman and, finding Basilio in khaki uniform, asked him to accompany him to the house. Basilio refused on the ground that he was not a policeman, but suggested that Ojeda ask the traffic policeman on duty at the corner of Rizal Avenue and Zurbaran. Ojeda went to the traffic policeman at that corner and reported the matter, asking the policeman to come along with him, to which the policeman agreed. On the way to the Ojeda residence, the policeman and Ojeda passed by Basilio and somehow or other invited him to come along.

As they approached the Ojeda residence and stood in front of the main gate, which was covered with galvanized iron, the fence itself being partly concrete and partly adobe stone, a shot was fired. Immediately after the shot, Ojeda and the policeman sought cover. The policeman, at the request of Ojeda, left the premises to look for reinforcement. It turned out afterwards that the special watchman Basilio was hit in the abdomen, the wound causing his instantaneous death. The shot must have come from inside the yard of Ojeda, the bullet passing through a hole waist-high in the galvanized iron gate. Upon inquiry, Ojeda found out that the savings of his children in the amount of P30 in coins kept in his aparador contained in stockings were taken away, the aparador having been ransacked. A month thereafter, the corresponding investigation conducted by the police authorities led to the arrest and prosecution of four persons in Criminal Case No. 15104 of the Court of First Instance of Manila for “Robbery in an Inhabited House and in Band with Murder.”

The Court of Appeals found that Basilio was a watchman of the Manila Auto Supply and, as such, was not bound to leave his place and go with Atty. Ojeda and Policeman Magsanoc to see the trouble or robbery that occurred in Ojeda’s house. According to that court, Ojeda, finding Basilio in uniform, asked him to accompany him to his house, but Basilio refused on the ground that he was not a policeman and suggested that Ojeda ask help from the traffic policeman on duty at the corner of Rizal Avenue and Zurbaran; after Ojeda secured the help of the traffic policeman, Basilio went with Ojeda and the traffic policeman to Ojeda’s residence, and while Basilio was standing in front of the main gate of said residence, he was shot and died. The record was barren of any circumstance showing how the fatal shot was fired.

• Exclusion — Making an Arrest as an Officer of the Law: The company contended that Basilio was killed while making an arrest as an officer of the law, one of the risks expressly excluded by the supplementary contract, thereby exempting it from liability.
• Exclusion — Assault or Murder: The company contended that Basilio died as a result of an assault or murder committed in the place, another expressly excluded risk under the supplementary contract, thereby exempting it from liability.

• Making an Arrest as an Officer of the Law: Whether Basilio’s death fell within the supplementary policy’s exception for death while making an arrest as an officer of the law.
• Assault or Murder: Whether Basilio’s death fell within the exception for death caused by assault or murder.
• Accidental Death: Whether Basilio’s death was accidental within the coverage of the supplementary policy.
• Construction of Ambiguous Exceptions: Whether the exception clause should be construed against the insurer and in favor of the insured because its terms were ambiguous or obscure.

• Making an Arrest as an Officer of the Law: No. Basilio was a mere watchman who accompanied the traffic policeman and Atty. Ojeda; he did not go to make an arrest as an officer of the law, nor was he asked by the policeman to do so.
• Assault or Murder: No. The record is barren of proof that the fatal shot resulted from assault or murder; no circumstance shows how the shot was fired, and the killing could have been accidental as to the victim.
• Accidental Death: Yes. The death was a pure accident on the part of the victim and did not come within the purview of the exception clause of the supplementary policy.
• Construction of Ambiguous Exceptions: Yes. Ambiguous, equivocal, or uncertain terms in an insurance policy are construed strictly and most strongly against the insurer and liberally in favor of the insured; obscure exceptions cannot defeat the policy’s purpose.

• Making an Arrest as an Officer of the Law: The Court disagreed with the Court of Appeals’ finding that Basilio’s death was excluded. Basilio was a watchman of Manila Auto Supply, which was a block away from Atty. Ojeda’s house. Although he initially declined Ojeda’s invitation because he was not a regular policeman, he later agreed to come along when prompted by the traffic policeman. The circumstance that he was a mere watchman and had no duty to heed Ojeda’s call should not be taken as a capricious desire to expose his life to danger, considering that the place he was duty-bound to guard was only a block away. In volunteering to extend help, he might have thought, rightly or wrongly, that to know the truth was in the interest of his employer and affected the security of the neighborhood. Some risk existed, but it was inherent in his position. He could not be blamed solely for doing what he believed was in keeping with his duty as a watchman and as a citizen. He could not be considered as making an arrest as an officer of the law simply because he went with the traffic policeman, for he did not go there for that purpose nor was he asked to do so by the policeman.
• Assault or Murder: The Court held that it could not be pretended that Basilio died in the course of an assault or murder. There was no proof that his death resulted from either crime; the record was barren of any circumstance showing how the fatal shot was fired. The criminal case pending in court might clarify the incident, but before that, anything said on the point would be mere conjecture. Nor could the killing be said to be intentional, because there was the possibility that the malefactor fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. While the act may not exempt the triggerman from liability for the damage done, the happening was a pure accident on the part of the victim. The victim could have been either the policeman or Atty. Ojeda; it could not be pretended that the malefactor aimed at the deceased precisely because he wanted to take his life.
• Accidental Death: The Court concluded that the circumstances did not warrant the finding that Basilio’s death came within the purview of the exception clause of the supplementary policy and, hence, did not exempt the company from liability. The Court rejected the Court of Appeals’ conclusion that the death, although unexpected, was not accidental because it was a voluntary and intentional act of the robber. The Court viewed the death as a pure accident on the part of the victim and not within the stipulated exceptions.
• Construction of Ambiguous Exceptions: The Court recognized the general rule that parties may limit the coverage of the policy to particular accidents and risks or causes of loss and may expressly except other risks or causes of loss. However, the terms and phraseology of the exception clause should be clearly expressed so as to be within the easy grasp and understanding of the insured; if the terms are doubtful or obscure, they must be interpreted or resolved against the one who caused the obscurity under Article 1377 of the New Civil Code. Terms in an insurance policy that are ambiguous, equivocal, or uncertain are to be construed strictly and most strongly against the insurer and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved. The reason is that the insured usually has no voice in the selection or arrangement of the words employed, and the language is selected with great care and deliberation by experts and legal advisers acting exclusively in the interest of the insurance company. Insurance is complex and difficult for a layman to understand; policies are prepared by experts who know and can anticipate the bearings and possible complications of every contingency. So long as insurance companies insist on ambiguous, intricate, and technical provisions that conceal rather than frankly disclose their intentions, courts must, in fairness to those who purchase insurance, construe every ambiguity in favor of the insured. An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the very purpose for which the policy was procured. Thus, the exceptions invoked did not exempt the company from liability.

• Ambiguity in Insurance Contracts Construed Against Insurer (Contra Proferentem) — Where terms in an insurance policy are ambiguous, equivocal, or uncertain, they are construed strictly and most strongly against the insurer and liberally in favor of the insured to effect the dominant purpose of indemnity or payment, especially where a forfeiture is involved. The Court applied this rule to the supplementary policy’s exception clause, resolving doubts against Philippine American Life Insurance Company and in favor of the insured’s widow.
• Exception Clauses Must Be Clearly Expressed — Although parties may limit coverage and expressly except certain risks or causes of loss, the terms and phraseology of an exception clause must be clearly expressed so as to be within the easy grasp and understanding of the insured. If doubtful or obscure, the clause is interpreted or resolved against the one who caused the obscurity under Article 1377 of the New Civil Code. The Court found the invoked exceptions insufficient to exempt the insurer.
• Accidental Death During Robbery — A death during a robbery is not necessarily excluded from accidental-death coverage as death from assault or murder or while making an arrest as an officer of the law. Where the record does not show how the fatal shot was fired, and the malefactor may have fired merely to scare away people rather than to kill the victim, the happening may be a pure accident on the part of the victim and outside the policy’s exceptions. The Court applied this to hold the insurer liable for the supplemental benefit.
• Risk Inherent in Employment — A watchman who leaves his post only to assist a neighbor and a policeman a block away, prompted by the policeman, does not thereby capriciously expose himself to danger; the risk may be inherent in his position and his conduct may be in keeping with his duty as a watchman and citizen. The Court used this to reject the exclusion for death while making an arrest as an officer of the law.

• "While as a general rule "the parties may limit the coverage of the policy to certain particular accidents and risks or causes of loss, and may expressly except other risks or causes of loss therefrom" (45 C. J. S. 781-782), however, it is to be desired that the terms and phraseology of the exception clause be clearly expressed so as to be within the easy grasp and understanding of the insured, for if the terms are doubtful or obscure the same must of necessity be interpreted or resolved aganst the one who has caused the obscurity. (Article 1377, new Civil Code)" — States the controlling rule on exception clauses: they must be clear, and doubtful terms are resolved against the party who caused the obscurity.
• "terms in an insurance policy, which are ambiguous, equivacal, or uncertain . . . are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved" (29 Am. Jur., 181) — Articulates the canonical contra proferentem formulation applied by the Court to the supplementary policy.
• "We are therefore persuaded to conclude that the circumstances unfolded in the present case do not warrant the finding that the death of the unfortunate victim comes within the purview of the exception clause of the supplementary policy and, hence, do not exempt the company from liability." — States the ratio decidendi: the exceptions invoked did not exempt the insurer from paying the accidental-death benefit.
• "He cannot therefore be blamed solely for doing what he believed was in keeping with his duty as a watchman and as a citizen. And he cannot be considered as making an arrest as an officer of the law, as contended, simply because he went with the traffic policeman, for certainly he did not go there for that purpose nor was he asked to do so by the policeman." — Explains why the exclusion for death while making an arrest as an officer of the law did not apply.

• Algoe vs. Pacific Mut. L. Ins. Co., 91 Wash. 324, LRA 1917A, 1237 — Cited for the rule that so long as insurance companies insist upon the use of ambiguous, intricate, and technical provisions which conceal rather than frankly disclose their own intentions, courts must, in fairness to those who purchase insurance, construe every ambiguity in favor of the insured.
• Moore vs. Aetna Life Insurance Co., LRA 1915D, 264 — Cited for the principle that an insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the very purpose for which the policy was procured.

• Article 1377, New Civil Code — Cited for the rule that if the terms of a contract are doubtful or obscure, they must be interpreted or resolved against the one who caused the obscurity. The Court applied this provision to the insurance policy’s exception clause, resolving ambiguity against the insurer.

Paras, C.J.; Bengzon; Padilla; Montemayor; Reyes, A.; Jugo; Labrador; Concepcion; and Reyes, J.B.L., JJ., concur.