Wijangco vs. UCPB General Insurance Co., Inc.

An insurer that fails to specify defects or deficiencies in the insured's notice or preliminary proof of loss within 90 days from receipt thereof is deemed to have waived such defects and may not deny payment based on insufficiency of proof of loss, pursuant to Section 92 of the Insurance Code in relation to Section 249, the 90-day period being statutorily deemed a reasonable period within which the insurer must ascertain its liability.

Wilfrido C. Wijangco was the registered owner of a 2003 Jaguar X-type with plate number XHP-988, which was mortgaged with AMA Rural Bank of Mandaluyong, Inc. and insured with respondent UCPB General Insurance Co., Inc. under Policy PC-551278 for the period March 12, 2006 to March 12, 2007, in the amount of PHP 1,800,000.00. The Insurance Policy covered loss or damage by burglary, housebreaking, or theft under Section III thereof. The premium had been paid and the policy was in effect at the time of the vehicle's loss.

Wilfrido C. Wijangco was the registered owner of a 2003 Jaguar X-type with plate number XHP-988, as evidenced by Certificate of Registration No. 4024310-3 dated December 21, 2005. The vehicle was mortgaged with AMA Rural Bank of Mandaluyong, Inc. and insured with UCPB General Insurance Co., Inc. under Policy PC-551278 for the period covering March 12, 2006 to March 12, 2007, in the amount of PHP 1,800,000.00. The Insurance Policy covered loss or damage by burglary, housebreaking, or theft, and the premium had been fully paid.

On August 24, 2006, at around 5:00 p.m., Wilfrido's son, Andrew C. Wijangco, was at the parking lot of Tropical Hut along President's Avenue, Sucat, Parañaque City, when two unidentified men held him at gunpoint. One of the men stated, "kailangan namin ang kotse mo," while pointing a gun at him. Out of shock, Andrew surrendered the keys. One of the men warned him, "huwag kang hahabal, alam namin ang galaw mo," before they sped away with the vehicle. Andrew, fearing the carnappers had left an accomplice behind to watch him, remained at the parking lot until he regained his composure. He then called his friend, Dante "Ted" Pradas, a resident of Moonwalk, Parañaque City, who instructed him to come to his house. Together, they proceeded to the Parañaque City Police Station at around 9:50 p.m. to report the incident. Andrew signed the police blotter and provided his contact information. The following day, August 25, 2006, Andrew returned to the Parañaque City Police and reported the crime to the Anti-Carnapping Unit, which prepared an Alarm Sheet indicating the vehicle was "forcibly taken." Three days later, on August 27, 2006, Andrew again returned to the police and presented the Alarm Sheet to the Traffic Management Group-Task Force Limbas.

On September 1, 2006, Wilfrido filed an insurance claim with UCPB Insurance. As part of the claims procedure, UCPB Insurance provided a List of Claim Requirements, which included the certificate of registration, official receipt of registration, comprehensive policy copy, official receipt of premium, and police report or affidavit of incident. Andrew prepared the documents and turned them over to UCPB Insurance's adjuster on October 10, 2006. Despite repeated follow-ups, the insurer did not approve the claim. On March 11, 2007, Wilfrido, through counsel, wrote to UCPB Insurance to protest the delay and made a formal demand. On March 21, 2007, or 162 days after Andrew submitted the proof of loss, UCPB Insurance informed Wilfrido that the subject vehicle had been recovered and was under the custody of the TMG-Task Force Limbas, and that it would hold processing of the claim pending a TMG Clearance, threatening to close its file after 60 days if no such clearance was issued. On April 11, 2007, Wilfrido wrote to the TMG to verify the status of the investigation but received no response.

On June 15, 2007, Wilfrido filed a Complaint against UCPB Insurance for violation of the Civil Code and the Insurance Code, praying for payment of the insurance proceeds, attorney's fees, double interest, moral and exemplary damages, and costs of suit. UCPB Insurance defended by arguing that the vehicle was recovered, that no carnapping took place based on an Investigation Report by TMG Police Superintendent Atty. Eleuterio N. Gutierrez, Jr. and handwritten statements by Tropical Hut security guards, and that Wilfrido failed to cooperate with the TMG investigation. The RTC credited the testimony of Wilfrido's witnesses and found that the vehicle was indeed stolen, that Wilfrido had an insurable interest, and that the insurer's liability had attached upon the theft, rendering the subsequent recovery immaterial. The CA reversed, finding that Wilfrido failed to prove total loss because the vehicle was recovered, and that he violated the policy's Conditions by not immediately reporting to the police and by not cooperating with the TMG.

• Sufficiency of Proof of Loss: Petitioner maintained, citing Section 91 of the Insurance Code, that he had sufficiently proved his compliance with the documentary requirements for his insurance claim and that nothing in the Insurance Policy or the List of Claim Requirements required the submission of a TMG Clearance as a condition for payment.
• Fact of Loss: Petitioner asserted that he was able to prove the fact of loss of the subject vehicle and is thus entitled to payment of the insurance claim, praying for the reinstatement of the RTC Decision.

• No Total Loss: Respondent argued that the CA was correct in finding that there was no total loss of the subject vehicle considering that it was recovered by the TMG.
• No Carnapping: Respondent insisted that no carnapping took place based on the Investigation Report issued by the TMG.
• Breach of Policy Conditions: Respondent maintained that Wilfrido failed to comply with his mandatory obligations under the Conditions of the Insurance Policy by not immediately reporting the theft to the police and by failing to cooperate with the TMG.

• Waiver of Defects in Proof of Loss: Whether UCPB Insurance waived any defect or deficiency in the proof of loss submitted by Wilfrido by failing to specify objections within the period prescribed by law.
• Fact of Theft: Whether Wilfrido established by preponderance of evidence that the subject vehicle was lost through theft, a covered peril under the Insurance Policy.
• Effect of Subsequent Recovery: Whether the subsequent recovery of the stolen vehicle negates the loss through theft and extinguishes the insurer's liability.
• Immediate Notice to Police: Whether Wilfrido violated the Insurance Policy's condition requiring immediate notice to the police in case of theft.
• Cooperation Clause: Whether Wilfrido violated the Insurance Policy's cooperation clause by failing to cooperate with UCPB Insurance and the TMG in securing the conviction of the offenders.
• Damages and Interest: Whether UCPB Insurance is liable for double interest, attorney's fees, moral damages, and exemplary damages, and the proper rates and periods therefor.

• Waiver of Defects in Proof of Loss: Yes. UCPB Insurance waived any defect in the proof of loss by failing to specify objections within 90 days from receipt, as required by Section 92 of the Insurance Code in relation to Section 249.
• Fact of Theft: Yes. Wilfrido established the theft of the subject vehicle by preponderance of evidence through Andrew's testimony, corroborated by Pradas' testimony as part of the res gestae, while UCPB Insurance's contrary evidence was hearsay and inadmissible.
• Effect of Subsequent Recovery: No. The subsequent recovery of the stolen vehicle does not negate theft, which is perfected from the moment of unlawful taking; moreover, the insurer's liability was fixed before recovery was communicated, and the vehicle was recovered in an unserviceable condition.
• Immediate Notice to Police: No violation. The five-hour delay in reporting was reasonable under the circumstances, the insurer having failed to prove actual and substantial prejudice, and Andrew having exercised due diligence given the shocking experience and his unfamiliarity with the area.
• Cooperation Clause: No violation. Wilfrido attempted to contact the TMG within the period prescribed by UCPB Insurance, and the insurer failed to prove it exercised good faith and due diligence in securing the insured's cooperation or that it suffered substantial prejudice.
• Damages and Interest: Yes. UCPB Insurance is liable for the insurance proceeds of PHP 1,800,000.00, attorney's fees equivalent to 10% thereof, double interest at 24% per annum from January 8, 2007 until June 30, 2013 and at 12% per annum from July 1, 2013 until finality (compounded from June 15, 2007), moral damages of PHP 100,000.00, exemplary damages of PHP 100,000.00, and costs of suit, with the total monetary awards earning 6% per annum legal interest from finality until full payment.

• Waiver of Defects in Proof of Loss: Under Section 92 of the Insurance Code, all defects in a notice of loss or preliminary proof thereof which the insured might remedy, and which the insurer omits to specify without unnecessary delay, are waived. Section 249 of the Insurance Code provides a maximum period of 90 days after receipt of proof of loss within which a non-life insurance claim must be paid; this period was statutorily deemed a reasonable period for the insurer to ascertain its liability. Any delay beyond 90 days in objecting to the proof of loss is presumed unreasonable and unnecessary, as it postpones payment. Here, Andrew submitted the proof of loss on October 10, 2006, yet UCPB Insurance only wrote to Wilfrido on March 21, 2007—162 days later—to require a TMG Clearance and certificate of non-recovery. UCPB Insurance's own Claims Manager testified that no advice to submit missing documents was given prior to that letter. The presumption of unnecessary delay stood unrebutted, as UCPB Insurance provided no justification apart from an unsubstantiated assertion of fraud. Furthermore, the List of Claim Requirements originated from UCPB Insurance itself, and the documents submitted by Andrew pursuant to that list must be taken as sufficient proof of loss. The insurer's own Claims Manager testified that UCPB Insurance pays carnapping claims based on alarm sheets, official receipts, and registration certificates—all of which Andrew presented.

• Fact of Theft: In property insurance cases involving specified risks, the claimant-insured bears the burden to prove by preponderance of evidence that the loss was caused by a covered peril; once a prima facie case is established, the burden shifts to the insurer to prove the loss arose from an excepted cause or one for which it is not liable. Andrew testified clearly and consistently that two men held him at gunpoint and forcibly took the vehicle. Pradas corroborated Andrew's narration as part of the res gestae: the carnapping was a startling occurrence, Andrew's statements concerned that occurrence and its immediate attending circumstances, and the statements were made before Andrew had time to contrive a falsehood, as he called Pradas immediately after the incident while still at the parking lot, with no intervening circumstance diverting his attention. UCPB Insurance's contrary evidence—the Investigation Report by Atty. Gutierrez, the handwritten statements of Tropical Hut security guards, and the JCI Report—were all hearsay and inadmissible because none of the persons who prepared or executed those documents were presented in open court. The Investigation Report could not be admitted as a public document without the testimony of the police officer who prepared it. Fraud cannot be presumed but must be established with clear and convincing evidence, which UCPB Insurance failed to do. As between Wilfrido's sworn testimony and UCPB Insurance's hearsay evidence, the former prevailed.

• Effect of Subsequent Recovery: The subsequent recovery of a stolen vehicle does not negate theft, which is perfected from the moment of unlawful taking. Under Section 249, the period to indemnify the insured for a lost vehicle is set by law because motor vehicle insurance contracts would be of insignificant value if the insured should be forced to indefinitely wait on the chance of recovery or be compelled to take the old vehicle if recovered. When the statutory period for payment has elapsed before the vehicle is recovered, payment for the loss is fixed and the insured cannot be compelled to receive the vehicle. Here, Wilfrido was informed of the recovery on March 21, 2007—162 days after the proof of loss was submitted and well beyond the 90-day period. Applying Villacorta vs. Insurance Commission, the loss was not merely temporary because the vehicle was recovered in an unserviceable state, with missing parts (car seats, emblem, stereo, speaker, door handle, and battery), flat tires, and damaged roofing and bumper.

• Immediate Notice to Police: The Insurance Policy did not define "immediate notice." Under established rules of construction, ambiguous terms in an insurance policy are construed strictly against the insurer and liberally in favor of the insured, especially where a forfeiture is involved. "Immediate notice" should be interpreted according to its object or purpose: what matters is that notice is given with due diligence under the circumstances and without unnecessary and unreasonable delay. Denial of a claim for breach of the notice requirement is valid only upon showing that the insurer suffered actual and substantial prejudice. The five-hour delay was reasonable: Andrew was a resident of Pasig City merely visiting a friend in Parañaque, was unfamiliar with the area, had just suffered a shocking experience at gunpoint, feared an accomplice was watching him, and needed to contact a local friend to accompany him to the police station. He reported to the police the same evening, returned the next day to the Anti-Carnapping Unit, and went to the TMG three days later. UCPB Insurance alleged no loss or prejudice from the delay, and the investigation continued with the vehicle even being recovered.

• Cooperation Clause: To validly deny payment for breach of the cooperation clause, the insurer must prove by preponderance of evidence that it acted in good faith and with due diligence to secure the insured's cooperation, and that it suffered substantial prejudice. Andrew reported the incident to the police on the same day, provided his contact information, returned to the Anti-Carnapping Unit the next day, and presented the Alarm Sheet to the TMG three days later. Within the 60-day period prescribed by UCPB Insurance's March 21, 2007 letter, Wilfrido wrote to the TMG on April 11, 2007, but received no response. UCPB Insurance itself received the Investigation Report on October 10, 2006, yet waited 162 days before requesting Wilfrido's appearance before the TMG—only after the payment period had elapsed and after learning the vehicle was at the TMG impounding area. The belatedly required certificate of non-recovery was by then impossible to obtain, as the vehicle had already been recovered. UCPB Insurance failed to prove substantial prejudice from any alleged non-cooperation.

• Damages and Interest: The Insurance Policy valued the vehicle at PHP 1,800,000.00 in the event of loss; in the absence of fraud, this valuation is conclusive. Under Sections 249 and 250, the insurer's failure to pay within the prescribed period is prima facie evidence of unreasonable delay, entitling the insured to double interest at twice the ceiling prescribed by the Monetary Board. Since proof of loss was received on October 10, 2006, with no ascertainment of loss, payment was due within 90 days, or until January 8, 2007; double interest runs from that date. Pursuant to Secretary of the Department of Public Works and Highways vs. Sps. Tecson, the rate is 24% per annum from January 8, 2007 until June 30, 2013 (under CB Circular No. 416), and 12% per annum from July 1, 2013 until finality (under BSP-Monetary Board Circular No. 799). Attorney's fees of 10% of the insurance proceeds are reasonable under jurisprudence and are subject to the same double interest. Under Article 2212 of the Civil Code, interest due earns legal interest from judicial demand; the double interest is therefore compounded from June 15, 2007 (date of filing of the Complaint) until finality. Moral damages of PHP 100,000.00 are proper under Article 2220 because UCPB Insurance acted in bad faith by accepting premiums, refusing to indemnify, belatedly requiring documents not in the List of Claim Requirements, and threatening to close the file. Exemplary damages of PHP 100,000.00 are proper under Article 2229 as a correction for the public good. The total monetary awards earn 6% per annum legal interest from finality until full payment, pursuant to Article 2209 of the Civil Code and Lara's Gifts & Decors, Inc. vs. Midtown Industrial Sales, Inc.

• Waiver of Defects in Proof of Loss (Section 92, Insurance Code) — All defects in a notice of loss or preliminary proof thereof which the insured might remedy, and which the insurer omits to specify without unnecessary delay, are waived. The insurer has a duty to indicate deficiencies without unnecessary delay so the insured may correct them. Any delay beyond the 90-day period under Section 249 is presumed unreasonable and unnecessary, as it postpones payment of the claim. Applied: UCPB Insurance's 162-day delay in objecting to the proof of loss was presumed unreasonable, and the defect was deemed waived.

• Best Evidence in Proof of Loss (Section 91, Insurance Code) — When a policy requires preliminary proof of loss, the insured is not bound to give proof as would be necessary in court, but only the best evidence in his power at the time. If the policy specifies the proof required, that specification controls; if not, the fact and amount of loss may be determined on the basis of the best evidence available. Applied: The List of Claim Requirements provided by UCPB Insurance itself defined the proof required, and Andrew submitted documents pursuant to that list.

• Subsequent Recovery Does Not Negate Theft — The subsequent recovery of a stolen motor vehicle does not negate theft, which is perfected from the moment of unlawful taking. When the statutory period for payment has elapsed before recovery, payment is fixed and the insured cannot be compelled to receive the recovered vehicle. Applied: Wilfrido was informed of the recovery beyond the 90-day period, and the vehicle was in an unserviceable condition.

• Res Gestae (Rule 130, Section 42, 2019 Revised Rules on Evidence) — Statements made by a person while a startling occurrence is taking place or immediately prior or subsequent thereto, under the stress of excitement caused by the occurrence, are admissible as part of the res gestae. Requisites: (1) the principal act is a startling occurrence; (2) the statements concern the occurrence and its immediate attending circumstances; and (3) the statements were made before the declarant had time to contrive a falsehood. Applied: Pradas' testimony on Andrew's statements immediately after the carnapping was admissible as res gestae.

• Actual and Substantial Prejudice Required for Denial Based on Breach of Notice or Cooperation Clause — Payment of an insurance claim may be denied for breach of the notice requirement only upon showing that the insurer suffered actual and substantial prejudice. For breach of the cooperation clause, the insurer must prove it acted in good faith and with due diligence to secure cooperation and that it suffered substantial prejudice. Applied: UCPB Insurance proved neither prejudice nor good faith.

• Construal of Insurance Contracts Against the Insurer — Terms and conditions in an insurance policy that limit the liability of the insurer to the insured should be strictly construed against the insurer. Ambiguous, uncertain, or vague terms are construed strictly against the insurer and liberally in favor of the insured, especially where a forfeiture is involved. Applied: The undefined term "immediate notice" was construed in favor of the insured.

• Double Interest Under Sections 249 and 250 of the Insurance Code — Refusal or failure to pay within the prescribed period entitles the assured to collect interest at twice the ceiling prescribed by the Monetary Board for the duration of the delay. Failure to pay within the prescribed periods is prima facie evidence of unreasonable delay. The "duration of delay" is reckoned from the date following the time prescribed for payment. Applied: Double interest was imposed from January 8, 2007, the last day for payment under Section 249.

• Compounding of Interest (Article 2212, Civil Code) — Interest due shall earn legal interest from the time it is judicially demanded. This applies to compensatory interest, including the double interest imposed by the Insurance Code. Applied: Double interest on the insurance proceeds and attorney's fees was compounded from June 15, 2007, the date of judicial demand.

• "All defects in a notice of loss, or in preliminary proof thereof, which the insured might remedy, and which the insurer omits to specify to him, without unnecessary delay, as grounds of objection, are waived." — This is the text of Section 92 of the Insurance Code as quoted in the decision, forming the statutory basis for the ruling that UCPB Insurance waived its objections to the proof of loss.

• "when the insured has submitted proof of loss, even though it may be defective or insufficient, the burden rests upon the insurer to make objections thereto without unnecessary delay; otherwise, it must be deemed to have waived the defect or insufficiency." — This passage articulates the ratio decidendi on the insurer's duty to promptly object to deficient proof of loss and the consequence of failure to do so.

• "Common sense dictates that the mere recovery of a stolen vehicle does not and will not erase the fact of theft." — This statement establishes the principle that subsequent recovery of a stolen vehicle is immaterial to the fact of theft, which is perfected upon unlawful taking.

• "payment of an insurance claim due to the insured's breach of the notice requirement may be validly denied by the insurer only upon showing that it suffered an actual and substantial prejudice because of the breach." — This formulation sets the controlling standard for denying claims based on breach of notice requirements, requiring proof of actual prejudice rather than mere technical violation.

• Industrial Personnel and Management Services, Inc. vs. Country Bankers Insurance Corp., 842 Phil. 216 (2018) — Followed for the proposition that the insurer has a duty to indicate deficiencies in the proof of loss without unnecessary delay, and that in the absence of timely objection, the proof of loss is deemed sufficient and the insurer is deemed to have waived further proof.

• Prudential Guarantee and Assurance, Inc. vs. Trans-asia Shipping Lines, Inc., 524 Phil. 716 (2006) — Followed for the interpretation of the "duration of delay" under Section 249 of the Insurance Code, clarifying the three scenarios for when payment is due and when double interest begins to accrue.

• Villacorta vs. Insurance Commission, 188 Phil. 497 (1980) — Followed for the rule that the insured has a right to indemnification when the unlawful taking of the vehicle proves permanent rather than temporary, particularly where the vehicle is never returned in a serviceable and useful condition.

• Standard Insurance Co., Inc. vs. Cuaresma, 742 Phil. 733 (2014) — Followed for the rule that a traffic investigation report is inadmissible as hearsay unless the police officer who prepared it is presented as a witness to testify on its contents.

• DST Movers Corp. vs. People's General Insurance Corp., 778 Phil. 235 (2016) — Followed alongside Cuaresma for the same rule on the inadmissibility of investigation reports without the testimony of the preparer.

• Great Pacific Life Insurance Corp. vs. Court of Appeals, 263 Phil. 443 (1990) — Followed for the award of moral damages where the insurer accepted premiums without giving the insured the corresponding protection, constituting bad faith.

• Secretary of the Department of Public Works and Highways vs. Sps. Tecson, 758 Phil. 604 (2015) — Followed for the applicable interest rates: 12% per annum under CB Circular No. 416 prior to July 1, 2013, and 6% per annum under BSP-Monetary Board Circular No. 799 from July 1, 2013 onward.

• Lara's Gifts & Decors, Inc. vs. Midtown Industrial Sales, Inc., 929 Phil. 754 (2022) — Followed for the rule that the judgment award shall earn legal interest at 6% per annum from the date of finality until full payment, and for the compounding of interest under Article 2212 of the Civil Code.

• Malayan Insurance Co., Inc. vs. Arnaldo, 238 Phil. 658 (1987) — Followed for the rule that the insured need only give the best evidence in his power at the time as preliminary proof of loss, and that the valuation in the policy is conclusive in the absence of fraud.

• Capila vs. People, 527 Phil. 599 (2006) — Followed for the definition and requisites of the res gestae exception to the hearsay rule, particularly that a statement made by a declarant to a witness about a robbery immediately after its occurrence forms part of the res gestae.

• Section 2(a), Insurance Code (Presidential Decree No. 612, as amended by Republic Act No. 10607) — Defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event. Applied to establish that UCPB Insurance was bound to indemnify Wilfrido against the loss of the vehicle, provided the loss arose from a covered peril.

• Section 19, Insurance Code — Provides that an insurable interest in property must exist when the insurance takes effect and when the loss occurs. Applied to confirm Wilfrido's insurable interest as registered owner at the relevant times.

• Section 90, Insurance Code — Governs notice of loss in fire insurance and authorizes the Insurance Commissioner to specify the period for submission of notice of loss in other non-life insurance. Cited in connection with the notice and proof of loss framework.

• Section 91, Insurance Code — Provides that when preliminary proof of loss is required, the insured need only give the best evidence in his power at the time; the policy may specify the proof required. Applied to hold that the List of Claim Requirements provided by UCPB Insurance defined the proof required, and Andrew's submission pursuant to that list was sufficient.

• Section 92, Insurance Code — Provides that all defects in a notice of loss or preliminary proof thereof which the insured might remedy, and which the insurer omits to specify without unnecessary delay, are waived. Applied to hold that UCPB Insurance waived any defect by failing to object within 90 days of receipt of the proof of loss.

• Section 249, Insurance Code — Prescribes the periods within which non-life insurance claims must be paid (30 days after proof of loss and ascertainment, or 90 days after receipt of proof of loss if no ascertainment is made within 60 days) and provides for double interest in case of delay. Applied to determine that payment was due by January 8, 2007, and that double interest accrued from that date.

• Section 250, Insurance Code — Requires the court to make a finding on whether payment was unreasonably denied or withheld, and provides for attorney's fees, expenses, and double interest in the affirmative case; failure to pay within prescribed periods is prima facie evidence of unreasonable delay. Applied to hold UCPB Insurance liable for double interest and attorney's fees.

• Rule 130, Section 42, 2019 Revised Rules on Evidence — Defines the res gestae exception to the hearsay rule. Applied to admit Pradas' testimony on Andrew's statements immediately after the carnapping.

• Article 2212, Civil Code — Provides that interest due shall earn legal interest from the time it is judicially demanded. Applied to compound the double interest from June 15, 2007, the date of judicial demand.

• Article 2220, Civil Code — Allows moral damages in breaches of contract where the defendant acted fraudulently or in bad faith. Applied to award PHP 100,000.00 in moral damages based on UCPB Insurance's bad faith.

• Article 2229, Civil Code — Authorizes exemplary damages in addition to moral, temperate, liquidated, or compensatory damages by way of example or correction for the public good. Applied to award PHP 100,000.00 in exemplary damages.

• Article 2209, Civil Code — Provides that if the obligation consists in the payment of a sum of money and the debtor incurs in delay, the indemnity shall be the legal interest of 6% per annum in the absence of stipulation. Applied to impose 6% per annum interest on the total monetary awards from finality until full payment.

Caguioa (Chairperson), Gaerlan, and Dimaampao, JJ., concurred. Singh, J., was on leave.