G.R. No. 78860, 28 May 1990, 203 SCRA 487

FACTS:

Cayas was the registered owner of a Mazda bus which was insured with petitioner PERLA COMPANIA DE SEGUROS, INC (PCSI). The bus figured in an accident in Cavite, injuring several of its passengers. One of them, Perea, sued Cayas for damages in the CFI, while three others agreed to a settlement of P4,000.00 each with Cayas.
After trial, the court rendered a decision in favor of Perea, Cayas ordered to compensate the latter with damages. Cayas filed a complaint with the CFI, seeking reimbursement from PCSI for the amounts she paid to ALL victims, alleging that the latter refused to make such reimbursement notwithstanding the fact that her claim was within its contractual liability under the insurance policy.
The decision of the CA affirmed in toto the decision of the RTC of Cavite, the dispositive portion of which states:
IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering defendant PCSI to pay plaintiff Cayas the sum of P50,000.00 under its maximum liability as provided for in the insurance policy; …
In this petition for review on certiorari, petitioner seeks to limit its liability only to the payment made by private respondent to Perea and only up to the amount of P12,000.00. It altogether denies liability for the payments made by private respondents to the other 3 injured passengers totaling P12,000.00.

ISSUE:

How much should PCSI pay?

HELD:

The decision of the CA is modified, petitioner only to pay Cayas P12,000.00
The insurance policy provides:5. No admission, offer, promise or payment shall be made by or on behalf of the insured without the written consent of the Company …It being specifically required that petitioner’s written consent be first secured before any payment in settlement of any claim could be made, private respondent is precluded from seeking reimbursement of the payments made to the other 3 victims in view of her failure to comply with the condition contained in the insurance policy.Also, the insurance policy involved explicitly limits petitioner’s liability to P12,000.00 per person and to P50,000.00 per accidentClearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application in the present case. Thus, it was error on the part of the trial and appellate courts to have disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance policy.We observe that although Cayas was able to prove a total loss of only P44,000.00, petitioner was made liable for the amount of P50,000.00, the maximum liability per accident stipulated in the policy. This is patent error. An insurance indemnity, being merely an assistance or restitution insofar as can be fairly ascertained, cannot be availed of by any accident victim or claimant as an instrument of enrichment by reason of an accident.

*Case digest by Peregrino Varquez, LLB-4, Andres Bonifacio College Law School, SY 2018-2019