Fortune Insurance and Surety Co., Inc. v. CA and Producers Bank of the Philippines

FACTS:

1. Producers Bank was insured by Fortune Insurance.

2. Producers Bank filed against Fortune Insurance a complaint for recovery of the sum of P725K under the policy issued by Fortune. The sum was allegedly lost during a robbery of Producer’s armored vehicle while it was in transit to transfer the money from its Pasay City Branch to its head office in Makati.

3. The said armored vehicle was robbed by its driver Benjamin Magalong and security guard Saturnino Atiga tasked to man the same. Both of them are not Producers Bank’s “employees” but were merely assigned by and affiliated with PRC Management Systems and Unicorn Security Services.

4. Fortune Insurance refused to pay the amount as the loss, according to it, is excluded from the coverage of the insurance policy.

“General Exceptions” provides: The company shall not be liable under this policy in report of x x x (b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee or authorized representative of the Insured whether acting alone or in conjunction with others…”

5. Producers Bank opposed the contention of Fortune Insurance and contends that Atiga and Magalong are not its officer, employee, trustee, or authorized representative at the time of the robbery.

6. According to Fortune Insurance, when Producers commissioned a guard and a driver to transfer its funds from one branch to another, they effectively and necessarily became its authorized representatives in the care and custody of the money. Assuming that they could not be considered authorized representatives, they were, nevertheless, employees of Producers.

ISSUE: WON Magalong and Atiga qualify as employees or authorized representatives of Producers under paragraph (b) of the general exceptions clause of the insurance policy.

HELD: YES. According to SC, Employer-employee relationship depends upon four standards:

(1) the manner of selection and engagement of the putative employee;(2) the mode of payment of wages; (3) the presence or absence of a power to dismiss; and (4) the presence and absence of a power to control the putative employee’s conduct.

The power of control over Magalong and Atiga was vested in and exercised by Producers Bank; hence, an “employer-employee” relationship exists between Magalong and Atiga and Producers Bank.

PRC Management System and Unicorn Security Services are but “labor-only” contractors (not employers) under Article 106 of the Labor Code which provides: “There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, x x x and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.”

In the instant case, Producers Bank entrusted Magalong, Atiga and there other companions to transfer Producers Bank’s money to its head office in Makati. In short, for these particular tasks, they acted as agents of Producers.

New Life Enterprises vs Court of Appeals

FACTS:

1. Julian Sy and Jose Sy formed a partnership under the business name of New Life Enterprise. They were holding their business in a two-storey building in Lucena City.

2. Julian Sy insured the stocks in trade of NewLife Enterprises under three insurance companies.

INSURANCE COMPANY TYPE OFINSURANCE AMOUNT

1. Western Guaranty CorporationFire Insurance Policy - This policy was renewed

350, 000. 00

2. Reliance Surety and Insurance Co. Inc.

Fire Insurance Policy - This policy was also renewed.

300, 000. 00 - There was an additional insurance issued in the amount of 700

3. Equitable Insurance Corporation Fire Insurance Policy 200, 000.

1, 550,000. 00 = Total

3. The building occupied by New Life Enterprises was gutted by fire caused by a faulty electrical wiring. According to the plaintiffs, the stocks in trade were inside said building and were thus burned.

4. Julian Sy, together with an agent of Reliance Insurance, filed his claim. To support his claim, he submitted a fire clearance, the insurance policies and the inventory of stocks. He further testified that the three insurance companies are sister companies, and as a matter of fact when he was following-up his claim with Equitable Insurance, the Claims Manager told him to go first to Reliance Insurance and if said company agrees to pay, they would also pay.

5. Ultimately, the three insurance companies denied plaintiffs' claim for payment due to BREACH OF POLICY CONDITIONS.

6. Reliance Surety and Insurance Company claimed that plaintiff violated Policy Condition No. "3" which requires the insured to give notice of any insurance or insurances already effected covering the stocks in trade.

7. The Trial Court ruled in favor of the plaintiff that was reversed by the Court of Appeals.

ISSUE: Whether or not the plaintiff incurred a breach in the policy conditions?

RULING: YES. According to SC, the terms of the contract are clear and unambiguous. The insured is specifically required to disclose to the insurer any other insurance and its particulars that he may have effected on the same subject matter.

Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent Alvarez regarding the co-insurance on the property, he contradicted himself by inexplicably claiming that he had not read the terms of the policies.

While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer company, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense.