Malayan Insurance Co., Inc. vs. Philippines First Insurance Co., Inc.

Double insurance does not exist where two insurance policies covering the same subject matter and the same risk are issued to different insureds having distinct insurable interests, even if the subject matter and peril are identical; consequently, neither an "other insurance" clause nor an "over insurance" clause in one policy may be invoked to limit or extinguish the insurer's liability.

Wyeth Philippines, Inc. and Reputable Forwarder Services, Inc. had been annually executing a contract of carriage since 1989, under which Reputable undertook to transport and deliver Wyeth's products to its customers, dealers, or salesmen. On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 from Philippines First Insurance Co., Inc. to secure its interest over its own products during transit, covering all risks of direct physical loss or damage from any external cause by land, with a limit of P6,000,000.00 per any one land vehicle. The contract of carriage required Reputable to secure an insurance policy on Wyeth's goods, prompting Reputable to obtain a Special Risk Insurance Policy from Malayan Insurance Co., Inc. on February 11, 1994, for P1,000,000.00.

Since 1989, Wyeth Philippines, Inc. and Reputable Forwarder Services, Inc. had been annually executing a contract of carriage, under which Reputable undertook to transport and deliver Wyeth's products to its customers, dealers, or salesmen. On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 from Philippines First Insurance Co., Inc. to secure its interest over its own nutritional, pharmaceutical, and other products while being transported or shipped in the Philippines. The policy covered all risks of direct physical loss or damage from any external cause by land, with a limit of P6,000,000.00 per any one land vehicle.

On December 1, 1993, Wyeth executed its annual contract of carriage with Reputable. Although the contract was not signed by Wyeth's representatives, it was signed by Reputable's representatives, the terms were faithfully observed by the parties, and the same contract had been annually executed since 1989. Under the contract, Reputable undertook to answer for "all risks with respect to the goods" and to be liable to Wyeth for "the loss, destruction, or damage of the goods/products due to any and all causes whatsoever, including theft, robbery, flood, storm, earthquakes, lightning, and other force majeure while the goods/products are in transit and until actual delivery to the customers, salesmen, and dealers" of Wyeth. The contract also required Reputable to secure an insurance policy on Wyeth's goods. Accordingly, on February 11, 1994, Reputable signed a Special Risk Insurance Policy (SR Policy) with Malayan Insurance Co., Inc. for P1,000,000.00.

On October 6, 1994, during the effectivity of both the Marine Policy and the SR Policy, Reputable received from Wyeth 1,000 boxes of Promil infant formula worth P2,357,582.70 to be delivered to Mercury Drug Corporation in Libis, Quezon City. On the same date, the truck carrying Wyeth's products was hijacked by about 10 armed men who threatened to kill the truck driver and two of his helpers should they refuse to turn over the truck and its contents. The hijacked truck was recovered two weeks later without its cargo.

On March 8, 1995, Philippines First, after due investigation and adjustment and pursuant to the Marine Policy, paid Wyeth P2,133,257.00 as indemnity, thereby becoming subrogated to Wyeth's rights. Philippines First demanded reimbursement from Reputable, but the latter ignored the demand. Philippines First then instituted an action for sum of money against Reputable on August 12, 1996. In its complaint, Philippines First described Reputable as "a private corporation engaged in the business of a common carrier." In its answer, Reputable claimed it was a private carrier, that the contract of carriage could not bind it because Wyeth's representative did not sign it, and that the loss was due to force majeure. Reputable subsequently impleaded Malayan as third-party defendant to collect under the SR Policy, asserting that the policy covered the risk of robbery or hijacking. Malayan disclaimed liability, invoking Section 5 of the SR Policy, which excluded coverage when the property was insured by any marine policy, and arguing that the SR Policy expressly excluded third-party liability.

The RTC found Reputable liable to Philippines First for P2,133,257.00 representing the indemnity paid, P15,650.00 in adjustment fees, P50,000.00 in attorney's fees, and costs of suit. On the third-party complaint, the RTC found Malayan liable to indemnify Reputable for P1,000,000.00 in policy proceeds, P50,000.00 in attorney's fees, and costs of suit. Both Reputable and Malayan appealed. The CA affirmed the RTC with modification, deleting the award of attorney's fees in favor of Reputable. The CA ruled that Section 12 of the SR Policy prevailed over Section 5 as the later provision, but since the ratable proportion provision of Section 12 applied only in case of double insurance—which was absent—Malayan was liable for the full P1,000,000.00.

• Nature of Carrier: Malayan contended that Philippines First judicially admitted in its complaint that Reputable is a common carrier, and that pursuant to Article 1745(6) of the Civil Code, Reputable's liability for the loss should be dispensed with or diminished, which would consequently absolve Malayan.
• Other Insurance vs. Over Insurance: Malayan argued that Section 5 (which it called an "over insurance clause") and Section 12 (which it called a "modified other insurance clause") of the SR Policy are separate provisions applicable under distinct circumstances and should be read together, there being no actual conflict between them. It maintained that under Section 5, Malayan would not be completely absolved if the assured itself obtained additional insurance and the loss exceeded the marine policy coverage, while Section 12 would apply when additional insurance was obtained by someone other than Reputable.
• Impairment of Contract: Malayan posited that an impairment of contract resulted when the CA failed to apply the express provisions of Sections 5 and 12 of the SR Policy.
• Alternative Prayer: In the alternative, Malayan prayed that it be held liable for no more than P468,766.70, its alleged pro-rata share of the loss based on the policy coverage, subject to Section 12 of the SR Policy.

• Reputable — Exemption from Liability: Reputable contended that it is exempt from liability for acts committed by thieves or robbers who act with grave or irresistible threat, whether as a common carrier or a private/special carrier. It, however, maintained the correctness of the CA ruling that Malayan is liable for the full amount of its policy coverage and not merely a ratable portion under Section 12.
• Philippines First — Conclusiveness of Factual Findings: Philippines First argued that the factual finding that Reputable is a private carrier should be accorded the highest degree of respect and considered conclusive between the parties. It clarified that its alleged judicial admission that Reputable is a common carrier was disputed by Reputable's own declaration that it is a private carrier, reiterated in its third-party complaint, and admitted by Malayan in its answer to the third-party complaint. Reputable even presented evidence to prove it is a private carrier.
• Philippines First — Solidary Liability: Philippines First prayed for a slight modification of the assailed decision, seeking that Reputable and Malayan be rendered solidarily liable to it for P998,000.00, representing the balance from the P1,000,000.00 coverage after deducting P2,000.00 under Section 10 of the SR Policy.

• Nature of Carrier: Whether Reputable is a private carrier.
• Liability Under Contract of Carriage: Whether Reputable is strictly bound by the stipulations in its contract of carriage with Wyeth, such that it should be liable for any risk of loss or damage, for any cause whatsoever, including that due to theft or robbery and other force majeure.
• Applicability of Sections 5 and 12 of the SR Policy: Whether the RTC and CA erred in rendering nugatory Sections 5 and 12 of the SR Policy.
• Solidary Liability: Whether Reputable should be held solidarily liable with Malayan for the amount of P998,000.00 due to Philippines First.

• Nature of Carrier: Yes. Reputable is a private carrier, the factual findings of the RTC and CA being conclusive, supported by unrebutted testimony that Reputable serves only one customer, Wyeth. A common carrier becomes a private carrier when it undertakes to carry for a special person only.
• Liability Under Contract of Carriage: Yes. As a private carrier, Reputable is bound by the stipulations of its contract of carriage, which expressly made it liable for loss due to any and all causes whatsoever, including theft, robbery, and force majeure. The Civil Code provisions on common carriers do not apply where the carrier is acting as a private carrier.
• Applicability of Sections 5 and 12 of the SR Policy: No. Neither Section 5 (other insurance clause) nor Section 12 (over insurance clause) applies because no double insurance exists, the Marine Policy and SR Policy having been issued to different insureds with distinct insurable interests. Both provisions presuppose the existence of double insurance.
• Solidary Liability: No. Reputable is not solidarily liable with Malayan, their liabilities arising from different obligations—Reputable's from the contract of carriage and Malayan's from the SR Policy.

• Nature of Carrier: The factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are conclusive between the parties, save for recognized exceptions, none of which are present. Malayan's reliance on Philippines First's alleged judicial admission in its complaint that Reputable is a common carrier is misplaced. A judicial admission is conclusive only against the pleader who made it—here, Philippines First—not against Reputable, whose nature of business is in question. Philippines First, as a mere subrogee of Wyeth, is not privy to the SR Policy and is not in a position to make definitive admissions about Reputable's business. Moreover, Reputable disputed this characterization in its answer and third-party complaint, stating it is a private carrier—an allegation admitted by Malayan in its own answer to the third-party complaint. The unrebutted testimony of Reputable's Vice President and General Manager, William Ang Lian Suan, that Reputable serves only one customer, Wyeth, further supports the finding. Under Article 1732 of the Civil Code, common carriers offer their services to the public; a private carrier undertakes carriage by special agreement and does not hold itself out to the general public. A common carrier becomes a private carrier when it undertakes to carry a special cargo or is chartered to a special person only.

• Liability Under Contract of Carriage: The extent of a private carrier's obligation is dictated by the stipulations of its contract, provided they are not contrary to law, morals, good customs, public order, or public policy. The Civil Code provisions on common carriers should not apply where the carrier is not acting as such but as a private carrier. Public policy governing common carriers has no force where the public at large is not involved. Being a private carrier, Reputable's liability is fully governed by the contract of carriage, which expressly made it liable for loss due to any and all causes whatsoever, including theft, robbery, and force majeure while goods are in transit until actual delivery.

• Applicability of Sections 5 and 12 of the SR Policy: Section 5 is actually the "other insurance clause" (also called "additional insurance" and "double insurance"), akin to Condition No. 3 in Geagonia vs. CA, which the Court upheld as a warranty that no other insurance exists and whose validity is allowed by Section 75 of the Insurance Code. Section 12 is the "over insurance clause," covering situations of over insurance due to double insurance, in accord with the principle of contribution under Section 94(e) of the Insurance Code. Both provisions presuppose the existence of double insurance. Under Section 93 of the Insurance Code, double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest, requiring: (1) the person insured is the same; (2) two or more insurers insuring separately; (3) identity of subject matter; (4) identity of interest insured; and (5) identity of risk. Here, while both policies covered the same goods and the same risk, they were issued to different persons—Wyeth under the Marine Policy and Reputable under the SR Policy. Their insurable interests are distinct: Wyeth's interest is over its own goods, while Reputable's interest is over the safety of the goods, which may become the basis of its liability, falling within Section 15 of the Insurance Code. Reputable's procurement of the SR Policy pursuant to a contractual requirement does not make it a mere agent of Wyeth. Therefore, no double insurance exists, and neither Section 5 nor Section 12 applies. Furthermore, any ambiguity in the SR Policy must be construed strictly against the insurer and liberally in favor of the insured, as a contract of adhesion.

• Solidary Liability: Solidary liability arises only when the obligation expressly so states, when the law so provides, or when the nature of the obligation requires it. Citing Heirs of George Y. Poe vs. Malayan Insurance Company, Inc., the direct liability of an insurer under indemnity contracts against third-party liability does not mean the insurer can be held solidarily liable with the insured, since they are held liable under different obligations. Malayan's liability arises from the SR Policy (contract of insurance), while Reputable's arises from the contract of carriage. Being based on different obligations, no solidary liability attaches.

• Distinction Between Common and Private Carriers — Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods for compensation, offering their services to the public. A private carrier is one where the carriage is generally undertaken by special agreement and does not hold itself out to carry goods for the general public. A common carrier becomes a private carrier when it undertakes to carry a special cargo or is chartered to a special person only. The Court applied this to hold that Reputable, serving only one customer (Wyeth), operated as a private carrier, and thus the Civil Code provisions on common carriers—including Article 1745(6)—did not apply.

• Liability of Private Carriers Governed by Contract — The extent of a private carrier's obligation is dictated by the stipulations of its contract, provided they are not contrary to law, morals, good customs, public order, or public policy. The Civil Code provisions on common carriers should not apply where the carrier is not acting as such but as a private carrier. Public policy governing common carriers has no force where the public at large is not involved.

• Double Insurance — Under Section 93 of the Insurance Code, double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest. The requisites are: (1) the person insured is the same; (2) two or more insurers insuring separately; (3) identity of subject matter; (4) identity of interest insured; and (5) identity of the risk insured against. The Court held that no double insurance existed because the Marine Policy and SR Policy were issued to different insureds (Wyeth and Reputable) with distinct insurable interests, notwithstanding identity of subject matter and risk.

• Insurable Interest of a Carrier or Depository — Under Section 15 of the Insurance Code, a carrier or depository has an insurable interest in a thing held by it as such, to the extent of its liability but not to exceed the value thereof. The Court applied this to distinguish Reputable's insurable interest (liability for the goods) from Wyeth's insurable interest (ownership of the goods), which precluded a finding of double insurance.

• Contra Proferentem in Insurance Contracts — Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity in favor of the insured, where the contract is prepared by the insurer. A contract of insurance, being a contract of adhesion par excellence, any ambiguity should be resolved against the insurer and liberally in favor of the insured. Limitations of liability should be construed to preclude the insurer from noncompliance with its obligations.

• Judicial Admissions Binding Only Against the Pleader — An admission, verbal or written, made by a party in the course of the proceeding does not require proof, but is conclusive only against the pleader who made it. The Court held that Philippines First's characterization of Reputable as a common carrier in its complaint could not be binding on Reputable, which disputed it and presented contrary evidence.

• No Solidary Liability Between Insurer and Insured — The direct liability of an insurer under indemnity contracts against third-party liability does not mean the insurer can be held solidarily liable with the insured, since they are held liable under different obligations—the insured's based on tort or contract, the insurer's based on the insurance policy.

• "Therefore, even though the two concerned insurance policies were issued over the same goods and cover the same risk, there arises no double insurance since they were issued to two different persons/entities having distinct insurable interests. Necessarily, over insurance by double insurance cannot likewise exist. Hence, as correctly ruled by the RTC and CA, neither Section 5 nor Section 12 of the SR Policy can be applied." — This passage states the ratio decidendi on the double insurance issue, establishing that identity of insured and insurable interest is essential for double insurance to arise.

• "The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. Public policy governing common carriers has no force where the public at large is not involved." — This passage articulates the controlling doctrine on the inapplicability of common carrier provisions to private carriers, frequently cited in transportation law jurisprudence.

• "Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations." — This is the canonical formulation of the contra proferentem doctrine in Philippine insurance law, commonly cited in subsequent jurisprudence.

• "In this case, the pleader or the plaintiff who alleged that Reputable is a common carrier was Philippines First. It cannot, by any stretch of imagination, be made conclusive as against Reputable whose nature of business is in question." — This passage defines the scope of judicial admissions, clarifying that they bind only the pleader and not parties whose status is the subject of the admission.

• Geagonia vs. CA, 311 Phil. 152 (1995) — Followed. The Court relied on this case in upholding the validity of an "other insurance clause" as a warranty that no other insurance exists, and in ruling that the prohibition in such clauses applies only in case of double insurance. The Court drew an analogy between Condition No. 3 in Geagonia and Section 5 of the SR Policy.

• Loadmasters Customs Services, Inc. vs. Glodel Brokerage Corporation and R&B Insurance Corporation, G.R. No. 179446, January 10, 2011 — Cited for the definition of a private carrier as one where the carriage is generally undertaken by special agreement and does not hold itself out to carry goods for the general public.

• Valenzuela Hardwood and Industrial Supply, Inc. vs. CA, 340 Phil. 745 (1997) — Cited for the principle that a common carrier becomes a private carrier when it undertakes to carry a special cargo or is chartered to a special person only.

• Home Insurance Co. vs. American Steamship Agencies, Inc., 131 Phil. 552 (1968) — Cited for the principle that the Civil Code provisions on common carriers should not apply where the carrier is acting as a private carrier.

• Heirs of George Y. Poe vs. Malayan Insurance Company, Inc., G.R. No. 156302, April 7, 2009 — Controlling precedent for the ruling that an insurer and insured cannot be held solidarily liable since their liabilities arise from different obligations.

• Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company, G.R. No. 166245, April 9, 2008 — Cited for the doctrine that insurance contracts are contracts of adhesion and ambiguities should be resolved against the insurer and in favor of the insured.

• Article 1732, Civil Code — Defines common carriers as persons, corporations, firms, or associations engaged in the business of carrying or transporting passengers or goods for compensation, offering their services to the public. Applied to distinguish Reputable, which served only one customer, from a common carrier.

• Article 1745(6), Civil Code — Provides that stipulations dispensing with or diminishing a common carrier's liability for acts committed by thieves or robbers who do not act with grave or irresistible threat, violence, or force are unreasonable, unjust, and contrary to public policy. Malayan invoked this provision, but the Court held it inapplicable because Reputable is a private carrier, not a common carrier.

• Section 93, Insurance Code — Defines double insurance as existing where the same person is insured by several insurers separately in respect to the same subject and interest. Applied to determine that no double insurance existed because the Marine Policy and SR Policy insured different persons.

• Section 94(e), Insurance Code — Provides the principle of contribution where the insured is over insured by double insurance, requiring each insurer to contribute ratably to the loss. The Court noted this provision underpins Section 12 of the SR Policy but held it inapplicable absent double insurance.

• Section 15, Insurance Code — Provides that a carrier or depository has an insurable interest in a thing held by it as such, to the extent of its liability but not to exceed the value thereof. Applied to establish that Reputable had a distinct insurable interest from Wyeth, precluding a finding of double insurance.

• Section 75, Insurance Code — Allows the incorporation of "other insurance" clauses in insurance policies. Cited in connection with the validity of Section 5 of the SR Policy.

• Section 4, Rule 129, Rules of Court — Provides that admissions made by a party in the course of the proceeding do not require proof. Malayan invoked this provision, but the Court held the admission was binding only on the pleader (Philippines First), not on Reputable.

Antonio T. Carpio (Senior Associate Justice, Chairperson, Second Division), Arturo D. Brion (Associate Justice), Jose Portugal Perez (Associate Justice), and Maria Lourdes P.A. Sereno (Associate Justice) concurred. No separate concurring opinions were written.