Travellers Insurance & Surety Corporation vs. Court of Appeals

An insurer under a third-party liability policy cannot be held solidarily liable with the insured tortfeasor, its liability being based on contract while the insured's is based on tort; and absent the written notice of claim required by Section 384 of the Insurance Code, no cause of action accrues against the insurer and the claim is deemed waived.

Private respondent Vicente Mendoza, Jr. sued as heir of his mother, Feliza Vineza de Mendoza. Armando Abellon was the registered owner of the Lady Love taxicab and Rodrigo Dumlao its driver, while petitioner Travellers Insurance & Surety Corporation was impleaded as the alleged compulsory insurer of the vehicle under a third-party liability policy. The action implicated Section 384 of P.D. No. 612, otherwise known as the Insurance Code, which then governed the written notice of claim and the prescriptive period for actions against insurers and which was later amended by Batas Pambansa Blg. 874.

At about 5:30 o'clock in the morning of July 20, 1980, a 78-year-old woman by the name of Feliza Vineza de Mendoza was on her way to hear mass at the Tayuman Cathedral. While walking along Tayuman corner Gregorio Perfecto Streets, she was bumped by a taxi that was running fast. Several persons witnessed the accident, among whom were Rolando Marvilla, Ernesto Lopez and Eulogio Tabalno. After the bumping, the old woman was seen sprawled on the pavement. Marvilla ran towards her and held her on his lap to inquire what had happened, but she was already in shock and could not talk. At that moment a private jeep stopped, and with its driver, the two helped board the old woman on the jeep and brought her to the Mary Johnston Hospital in Tondo.

Ernesto Lopez, a driver of a passenger jeepney plying along Tayuman Street from Pritil, Tondo, to Rizal Avenue and vice-versa, also witnessed the incident. It was on his return trip from Rizal Avenue when Lopez saw the plaintiff and his brother crying near the scene of the accident; upon learning that the two were the sons of the old woman, Lopez told them what had happened. The Mendoza brothers were then able to trace their mother at the Mary Johnston Hospital, where they were advised by the attending physician that they should bring the patient to the National Orthopedic Hospital because of her fractured bones. Instead, the victim was brought to the U.S.T. Hospital, where she expired at 9:00 o'clock that same morning. Death was caused by "traumatic shock" as a result of the severe injuries she sustained.

The evidence showed that at the moment the victim was bumped by the vehicle, the latter was running fast, so much so that because of the strong impact the old woman was thrown away and she fell on the pavement. In the related criminal case against Dumlao, the trial court found as a fact that the accused "was driving the subject taxicab in a careless, reckless and imprudent manner and at a speed greater than what was reasonable and proper without taking the necessary precaution to avoid accident to persons," considering the condition of the traffic at the place at the time. The driver fled from the scene of the accident without rendering assistance to the victim.

Three witnesses who were at the scene at the time identified the taxi involved, though not necessarily the driver thereof. Marvilla saw a lone taxi speeding away just after the bumping which, when it passed by him, he noticed to be a Lady Love Taxi with Plate No. 438, painted maroon, with a baggage bar attached on the baggage compartment and with an antenna attached at the right rear side. The same descriptions were revealed by Ernesto Lopez, who further described the taxi as having reflectorized decorations on the edges of the glass at the back. A third witness, Eulogio Tabalno, made similar descriptions although, because of the fast speed of the taxi, he was able to detect only the last digit of the plate number, which is "8." The police proceeded to the garage of Lady Love Taxi, took possession of the taxi, and later impounded it in the impounding area of the agency concerned. The eyewitnesses were unanimous in pointing to that Lady Love Taxi with Plate No. 438 as the vehicle involved.

During the investigation, Armando Abellon, the registered owner of Lady Love Taxi bearing No. 438-HA Pilipinas Taxi 1980, certified that the vehicle was driven last July 20, 1980 by one Rodrigo Dumlao. It was on the basis of this affidavit of the registered owner that the police apprehended Rodrigo Dumlao and consequently had him prosecuted and eventually convicted of the offense. Dumlao absconded in that criminal case, particularly at the time of the promulgation of the judgment therein, so much so that he became a fugitive from justice.

Private respondent filed a complaint for damages against Armando Abellon as owner of the Lady Love Taxi and Rodrigo Dumlao as the driver of the taxicab that bumped his mother. He subsequently amended his complaint to include petitioner as the compulsory insurer of the said taxicab under Certificate of Cover No. 1447785-3. The trial court found as fact that the driver of the Lady Love taxicab was driving in a careless, reckless and imprudent manner, and that the eyewitnesses were unanimous in identifying the Lady Love Taxi with Plate No. 438 as the vehicle involved.

• Lack of Insurance Coverage: Petitioner contended that it did not issue an insurance policy as compulsory insurer of the Lady Love Taxi, and it presented this defense of lack of insurance coverage before the trial court.
• Failure to File Written Notice of Claim: Petitioner argued that, assuming arguendo that it had indeed covered the taxicab for third-party liability insurance, private respondent failed to file a written notice of claim with petitioner as required by Section 384 of P.D. No. 612, otherwise known as the Insurance Code.
• Limited Liability Under the Policy: Petitioner counter-alleged that, assuming arguendo that it is the insurer of the Lady Love taxicab in question, its liability is limited to only P50,000.00, this being its standard amount of coverage in vehicle insurance policies.

• Proof of the Insurance Contract and Solidary Liability: Whether petitioner may be held jointly and severally liable with the driver and owner of the Lady Love taxicab as compulsory insurer, absent any copy of the insurance contract having been attached to the complaint or otherwise presented before the trial court.
• Written Notice of Claim Under Section 384: Whether private respondent's failure to file a written notice of claim with petitioner within six months from the date of the accident, as required by Section 384 of the Insurance Code, barred his cause of action against petitioner.

• Proof of the Insurance Contract and Solidary Liability: No. The trial court could not validly hold petitioner liable absent proof of the insurance contract, and the insurer's liability under an indemnity contract against third-party liability is based on contract and cannot be made solidary with the insured's tort-based liability.
• Written Notice of Claim Under Section 384: No. Private respondent's cause of action against petitioner cannot prevail because he failed to file the written claim mandated by Section 384 of the Insurance Code, and he is deemed under that provision to have waived his rights as against petitioner-insurer.

• Proof of the Insurance Contract and Solidary Liability: When private respondent filed his amended complaint to implead petitioner as party defendant and alleged that petitioner was the third-party liability insurer of the Lady Love taxicab, he did not attach a copy of the insurance contract, an omission he did not deny. The right of a third person to sue the insurer depends on whether the contract of insurance is intended to benefit third persons also or only the insured. The test applied is that where the contract provides for indemnity against liability to third persons, those third persons to whom the insured is liable can sue the insurer; where the contract is for indemnity against actual loss or payment, third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability actually discharged by him through payment to third persons, their recourse being limited to the insured alone. Because no copy of the contract was attached, the trial court could not apprise itself of the real nature and pecuniary limits of petitioner's liability, and could not possibly have ascertained private respondent's right as a third person to sue petitioner as insurer, never having seen or read the contract and learned of its terms and conditions. Petitioner did not volunteer to present any insurance contract, having precisely raised the defense of lack of insurance coverage, and the trial court did not issue a subpoena duces tecum to have the contract produced. There was thus hardly a basis in the records for the trial court to have validly found petitioner liable jointly and severally with the owner and driver. The trial court failed to distinguish between private respondent's cause of action against the owner and driver, which is based on torts and quasi-delicts, and his cause of action against petitioner, which is based on contract. While a third person may directly sue the insurer where the contract provides for indemnity against liability to third persons, the direct liability of the insurer under such indemnity contracts does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault, because the liability of the insurer is based on contract while that of the insured is based on tort. In solidary obligation the creditor may enforce the entire obligation against one of the solidary debtors, but the insurer cannot be obliged to pay the entire obligation when the amount stated in its policy for indemnity against third-party liability is limited; the qualification made in the trial court's decision limiting petitioner's liability to a stated amount while making the obligation solidary was an evident breach of the concept of a solidary obligation. This took on more significance in light of petitioner's counter-allegation that, assuming it was the insurer, its liability was limited to only P50,000.00, its standard amount of coverage, since no copy of the insurance contract was ever proffered by private respondent notwithstanding that his complaint against petitioner was one under a written contract. The trial court thus proceeded to hold petitioner liable for damages exceeding its limited liability, showing that it erroneously presumed petitioner could be found liable absent proof of the contract and based merely on proof of the driver's reckless imprudence.
• Written Notice of Claim Under Section 384: At the time of the vehicular incident, before the Insurance Code was amended by Batas Pambansa Blg. 874, Section 384 required any person having a claim upon the policy to present, without unnecessary delay, a written notice of claim setting forth the amount of his loss and/or the nature, extent and duration of the injuries sustained as certified by a duly licensed physician; it further provided that notice of claim must be filed within six months from the date of the accident, otherwise the claim shall be deemed waived, and that action or suit for recovery of damage due to loss or injury must be brought in proper cases with the Commission or the Courts within one year from the date of the accident, otherwise the claimant's right of action shall prescribe. In Summit Guaranty and Insurance Co., Inc. vs. De Guzman, the one-year prescription period to bring suit against the insurer was held to be counted from the time the insurer rejects the written claim filed by the insured, the beneficiary, or the third person interested under the policy, since the cause of action does not accrue until the party obligated refuses, expressly or impliedly, to comply with its duty. Section 384 was thereafter amended by B.P. Blg. 874 to categorically provide that the action or suit must be brought within one year from denial of the claim, confirming that the prescriptive period begins to run from the date of the insurer's rejection of the claim. This ruling is premised upon compliance by the persons suing under an insurance contract with the indispensable requirement of having filed the written claim mandated by Section 384 before and after its amendment. Absent such written claim, no cause of action accrues under the insurance contract, since it is the rejection of that claim that triggers the running of the one-year prescriptive period and there can be no opportunity for the insurer to reject a claim if none has been filed in the first place. Petitioner asserted that no written claim was filed by private respondent and rejected by petitioner, and private respondent did not dispute such asseveration through a denial in his pleadings; accordingly, the appellate court committed reversible error in finding petitioner liable under an insurance contract whose existence had not at all been proven in court. Even if such a contract existed, private respondent's cause of action cannot prevail because he failed to file the written claim mandated by Section 384, and he is deemed to have waived his rights as against petitioner-insurer.

• Indemnity Against Liability Distinguished from Indemnity Against Actual Loss — The right of a person injured to sue the insurer of the party at fault depends on whether the contract of insurance is intended to benefit third persons also or only the insured. Where the contract provides for indemnity against liability to third persons, third persons to whom the insured is liable may sue the insurer directly; where the contract is for indemnity against actual loss or payment, third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability actually discharged by him through payment to third persons, and the third persons' recourse is limited to the insured alone. The Court invoked this test but held that because no copy of the insurance contract was attached to the complaint, the trial court could not have ascertained the real nature and pecuniary limits of the insurer's liability nor the right of the injured party as a third person to sue.
• Non-Solidary Liability of the Insurer Under a Third-Party Liability Policy — The direct liability of the insurer under an indemnity contract against third-party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault, because the liability of the insurer is based on contract while that of the insured is based on tort. In the context of a solidary obligation, the creditor may compel one solidary debtor to pay the entire obligation, but an insurer cannot be obliged to pay the entire obligation when the amount stated in its policy is limited; a qualification limiting the insurer's liability while making the obligation solidary is an evident breach of the concept of a solidary obligation. Applied, the trial court erred in holding the driver, the owner, and the alleged insurer jointly and severally liable.
• Accrual of the Cause of Action Under an Insurance Contract — The prescriptive period to bring suit in court under an insurance policy begins to run from the date of the insurer's rejection of the claim filed by the insured, the beneficiary, or any person claiming under an insurance contract. This is because a cause of action requires not only a legal right of the plaintiff and a correlative obligation of the defendant but also an act or omission of the defendant in violation of that legal right, so the cause of action does not accrue until the party obligated refuses, expressly or impliedly, to comply with its duty. Absent the written claim, no cause of action accrues, since it is the rejection that triggers the one-year prescriptive period and there can be no opportunity for the insurer to reject a claim if none has been filed in the first place.
• Waiver of Claim for Failure to File Written Notice Under Section 384 — Under Section 384 of the Insurance Code as it stood before its amendment by B.P. Blg. 874, notice of claim must be filed within six months from the date of the accident, otherwise the claim shall be deemed waived. The filing of the written claim is an indispensable requirement for any person suing under an insurance contract, both before and after the amendment. Applied, private respondent's failure to file the written claim within the six-month period rendered his claim waived and left him without a cause of action against the insurer.

• "The right of the person injured to sue the insurer of the party at fault (insured), depends on whether the contract of insurance is intended to benefit third persons also or on the insured And the test applied has been this: Where the contract provides for indemnity against liability to third persons, then third persons to whom the insured is liable can sue the insurer. Where the contract is for indemnity against actual loss or payment, then third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability actually discharged by him thru payment to third persons, said third persons' recourse being thus limited to the insured alone." — This passage states the controlling test for determining whether an injured third person may sue the insurer directly, drawn from Guingon vs. Del Monte and quoted in the decision as the framework the trial court failed to apply because it never saw the insurance contract.
• "While it is true that where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity contracts against third-party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured is based on tort." — This is the ratio decidendi on the solidary liability issue, drawn from Malayan Insurance Co., Inc. vs. Court of Appeals, and it supplies the canonical formulation distinguishing the contractual liability of the insurer from the tort-based liability of the insured.
• "We have certainly ruled with consistency that the prescriptive period to bring suit in court under an insurance policy, begins to run from the date of the insurer's rejection of the claim filed by the insured, the beneficiary or any person claiming under an insurance contract." — This passage restates the Court's consistent ruling on when the prescriptive period under an insurance policy commences, a point reinforced by the amendment introduced by B.P. Blg. 874.
• "Absent such written claim filed by the person suing under an insurance contract, no cause of action accrues under such insurance contract, considering that it is the rejection of that claim that triggers the running of the one-year prescriptive period to bring suit in court, and there can be no opportunity for the insurer to even reject a claim if none has been filed in the first place, as in the instant case." — This passage supplies the decisive ground for dismissing the complaint against petitioner, holding that the indispensable written claim is a condition sine qua non to the accrual of any cause of action against the insurer.

• Summit Guaranty and Insurance Co., Inc. vs. De Guzman, 151 SCRA 389 [1987] — Controlling precedent; relied upon for the rule that the one-year prescriptive period to bring suit against the insurer is counted from the time the insurer rejects the written claim filed by the insured, the beneficiary, or the third person interested under the policy, and that the cause of action does not accrue until the obligor refuses, expressly or impliedly, to comply with its duty.
• Malayan Insurance Co., Inc. vs. Court of Appeals, 165 SCRA 536 [1988] — Followed; cited for the rule that the insurer's liability is based on contract while the insured's is based on tort, so that the insurer cannot be held solidarily liable with the insured and other parties at fault, and for the principle that a qualification limiting the insurer's liability while making the obligation solidary breaches the concept of a solidary obligation.
• Guingon vs. Del Monte, 20 SCRA 1043 [1967] — Cited for the test distinguishing a contract for indemnity against liability to third persons, under which third persons may sue the insurer, from a contract for indemnity against actual loss or payment, under which the third person's recourse is limited to the insured.
• Vda. de Maglana vs. Consolacion, 212 SCRA 268 [1992] — Cited in support of the same principle governing the contractual nature of the insurer's liability under a third-party liability policy.
• Eagle Star Insurance Co., Ltd. vs. Chia Yu — Cited for the rule that the plaintiff's cause of action does not accrue until his claim is finally rejected by the insurance company, since before such final rejection there was no real necessity for bringing suit.
• ACCFA vs. Alpha Insurance and Surety Co. — Cited for the elements of a cause of action and the principle that a cause of action does not accrue until the party obligated refuses, expressly or impliedly, to comply with its duty.
• Country Bankers Insurance Corp. vs. Travellers Insurance and Surety Corporation, 176 SCRA 523 [1989] — Cited in connection with the amendment of Section 384 by B.P. Blg. 874, which made the one-year period run from the denial of the claim.

• Section 384, P.D. No. 612 (Insurance Code), as it stood before its amendment by B.P. Blg. 874 — Required any person having a claim upon the policy to present to the insurance company, without unnecessary delay, a written notice of claim setting forth the amount of his loss and/or the nature, extent and duration of the injuries sustained as certified by a duly licensed physician; provided that notice of claim must be filed within six months from the date of the accident, otherwise the claim shall be deemed waived; and required that action or suit for recovery of damage due to loss or injury be brought in proper cases with the Commission or the Courts within one year from the date of the accident, otherwise the claimant's right of action shall prescribe. Applied, private respondent's failure to file the written notice of claim within six months from the accident deemed his claim waived and left him without a cause of action against petitioner.
• Batas Pambansa Blg. 874 — Amended Section 384 to categorically provide that the action or suit for recovery of damage due to loss or injury must be brought in proper cases with the Commissioner or the Courts within one year from denial of the claim, otherwise the claimant's right of action shall prescribe. The Court cited the amendment to confirm that the prescriptive period begins to run from the insurer's rejection or denial of the claim, and that the written claim is an indispensable requirement both before and after the amendment.

Bellosillo, J.; Vitug, J.; and Kapunan, J., concurred. Padilla, J., was on leave.