FACTS: Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Forwarder Services, Inc. (Reputable) had been annually executing a contract of carriage, whereby the latter undertook to transport and deliver the former’s products to its customers, dealers or salesmen.

On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from respondent Philippines First Insurance Co., Inc. (Philippines First) to secure its interest over its own products. Philippines First thereby insured Wyeth’s nutritional, pharmaceutical and other products usual or incidental to the insured’s business while the same were being transported or shipped in the Philippines. The policy covers all risks of direct physical loss or damage from any external cause, if by land, and provides 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. It turned out, however, that the contract was not signed by Wyeth’s representative/s. Nevertheless, it was admittedly signed by Reputable’s representatives, the terms thereof faithfully observed by the parties and, as previously stated, the same contract of carriage had been annually executed by the parties every year since 1989. DST

Under the contract, Reputable undertook to answer for “all risks with respect to the goods and shall be liable to the COMPANY (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 the COMPANY”. The contract also required Reputable to secure an insurance policy on Wyeth’s goods. Thus, on February 11, 1994, Reputable signed a Special Risk Insurance Policy (SR Policy) with petitioner Malayan for the amount of P1,000,000.00.

On October 6, 1994, during the effectivity of the Marine Policy and SR Policy, Reputable received from Wyeth 1,000 boxes of Promil infant formula worth P2,357,582.70 to be delivered by Reputable to Mercury Drug Corporation in Libis, Quezon City. Unfortunately, on the same date, the truck carrying Wyeth’s products was hijacked by about 10 armed men. They threatened to kill the truck driver and two of his helpers should they refuse to turn over the truck and its contents to the said highway robbers. 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. Philippines First then demanded reimbursement from Reputable, having been subrogated to the rights of Wyeth by virtue of the payment. The latter, however, ignored the demand.

Consequently, Philippines First instituted an action for sum of money against Reputable on August 12, 1996. In its complaint, Philippines First stated that Reputable is a “private corporation engaged in the business of a common carrier.” In its answer, Reputable claimed that it is a private carrier. It also claimed that it cannot be made liable under the contract of carriage with Wyeth since the contract was not signed by Wyeth’s representative and that the cause of the loss wasforce majeure, i.e., the hijacking incident.

Subsequently, Reputable impleaded Malayan as third-party defendant in an effort to collect the amount covered in the SR Policy. According to Reputable, “it was validly insured with [Malayan] for P1,000,000.00 with respect to the lost products under the latter’s Insurance Policy No. SR-0001-02577 effective February 1, 1994 to February 1, 1995” and that the SR Policy covered the risk of robbery or hijacking.

Disclaiming any liability, Malayan argued, among others, that under Section 5 of the SR Policy, the insurance does not cover any loss or damage to property which at the time of the happening of such loss or damage is insured by any marine policy and that the SR Policy expressly excluded third-party liability.

ISSUE: WON THERE IS DOUBLE INSURANCE.

HELD: NONE. Section 5 is actually the other insurance clause (also called “additional insurance” and “double insurance”), one akin to Condition No. 3 in issue in Geagonia v. CA, which validity was upheld by the Court as a warranty that no other insurance exists. The Court ruled that Condition No. 3 is a condition which is not proscribed by law as its incorporation in the policy is allowed by Section 75 of the Insurance Code. It was also the Court’s finding that unlike the other insurance clauses, Condition No. 3 does not absolutely declare void any violation thereof but expressly provides that the condition “shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00.”

In this case, similar to Condition No. 3 in Geagonia, Section 5 does not provide for the nullity of the SR Policy but simply limits the liability of Malayan only up to the excess of the amount that was not covered by the other insurance policy. In interpreting the “other insurance clause” in Geagonia, the Court ruled that the prohibition applies only in case of double insurance. The Court ruled that in order to constitute a violation of the clause, the other insurance must be upon same subject matter, the same interest therein, and the same risk. Thus, even though the multiple insurance policies involved were all issued in the name of the same assured, over the same subject matter and covering the same risk, it was ruled that there was no violation of the “other insurance clause” since there was no double insurance.

Section 12 of the SR Policy, on the other hand, is the over insurance clause. More particularly, it covers the situation where there is over insurance due to double insurance. In such case, Section 15 provides that Malayan shall “not be liable to pay or contribute more than its ratable proportion of such loss or damage.” This is in accord with the principle of contribution provided under Section 94 (e) of the Insurance Code, which states that “where the insured is over insured by double insurance, each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract.” HEDaTA

Clearly, both Sections 5 and 12 presuppose the existence of a double insurance. The pivotal question that now arises is whether there is double insurance in this case such that either Section 5 or Section 12 of the SR Policy may be applied.

By the express provision of 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 in order for double insurance to arise are as follows:

1.   The person insured is the same;

2.   Two or more insurers insuring separately;

3.   There is identity of subject matter;

4.   There is identity of interest insured; and

5.   There is identity of the risk or peril insured against.

In the present case, while it is true that the Marine Policy and the SR Policy were both issued over the same subject matter, i.e., goods belonging to Wyeth, and both covered the same peril insured against, it is, however, beyond cavil that the said policies were issued to two different persons or entities. It is undisputed that Wyeth is the recognized insured of Philippines First under its Marine Policy, while Reputable is the recognized insured of Malayan under the SR Policy. The fact that Reputable procured Malayan’s SR Policy over the goods of Wyeth pursuant merely to the stipulated requirement under its contract of carriage with the latter does not make Reputable a mere agent of Wyeth in obtaining the said SR Policy. aCHcIE

The interest of Wyeth over the property subject matter of both insurance contracts is also different and distinct from that of Reputable’s. The policy issued by Philippines First was in consideration of the legal and/or equitable interest of Wyeth over its own goods. On the other hand, what was issued by Malayan to Reputable was over the latter’s insurable interest over the safety of the goods, which may become the basis of the latter’s liability in case of loss or damage to the property and falls within the contemplation of Section 15 of the Insurance Code.

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.

Apart from the foregoing, the Court is also wont to strictly construe the controversial provisions of the SR Policy against Malayan. This is in keeping with the rule that: ACTEHI

“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.”

Moreover, the CA correctly ruled that:

To rule that Sec. 12 operates even in the absence of double insurance would work injustice to Reputable which, despite paying premiums for a [P]1,000,000.00 insurance coverage, would not be entitled to recover said amount for the simple reason that the same property is covered by another insurance policy, a policy to which it was not a party to and much less, from which it did not stand to benefit. . . .

On the fourth issue — Reputable is

not solidarily liable with Malayan.

There is solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires. In Heirs of George Y. Poe v. Malayan Insurance Company, Inc., the Court ruled that:

[W]here the insurance contract provides for indemnity against liability to third persons, the liability of the insurer is direct and such third persons can directly sue the insurer. The direct liability of the insurer under indemnity contracts against third party[-]liability does not mean, however, that the insurer can be held solidarily liable with the insured and/or the other parties found at fault, since they are being held liable under different obligations. The liability of the insured carrier or vehicle owner is based on tort, in accordance with the provisions of the Civil Code; while that of the insurer arises from contract, particularly, the insurance policy. (Citation omitted and emphasis supplied)

Suffice it to say that Malayan’s and Reputable’s respective liabilities arose from different obligations — Malayan’s is based on the SR Policy while Reputable’s is based on the contract of carriage. Under Article 1732 of the Civil Code, common carriers are persons, corporations, firms, or associations engaged in the business of carrying or transporting passenger or goods, or both by land, water or air for compensation, offering their services to the public. On the other hand, a private carrier is one wherein the carriage is generally undertaken by special agreement and it 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 chartered to a special person only. For all intents and purposes, therefore, Reputable operated as a private/special carrier with regard to its contract of carriage with Wyeth.

On the second issue — Reputable is

bound by the terms of the contract

of carriage.

The extent of a private carrier’s obligation is dictated by the stipulations of a contract it entered into, provided its stipulations, clauses, terms and conditions are not contrary to law, morals, good customs, public order, or public policy. “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.”

Thus, being a private carrier, the extent of Reputable’s liability is fully governed by the stipulations of the contract of carriage, one of which is that it shall be liable to Wyeth for the loss of the goods/products due to any and all causes whatsoever, including theft, robbery and other force majeure while the goods/products are in transit and until actual delivery to Wyeth’s customers, salesmen and dealers.

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