Coquia v. Fieldmen's Insurance
REITERATIONFacts
The Antecedents: On December 1, 1961, Fieldmen's Insurance Company, Inc. (Company) issued a common carrier accident insurance policy to Manila Yellow Taxicab Co., Inc. (Insured) for the period December 1, 1961, to December 1, 1962. The policy covered death or bodily injury to any fare-paying passenger, including the driver, conductor, and/or inspector, arising from an accident caused by or out of the use of the insured motor vehicle. On February 10, 1962, while the policy was in force, a taxicab of the Insured, driven by Carlito Coquia, met an accident in Mangaldan, Pangasinan, resulting in Carlito's death. The Insured filed a claim for P5,000.00, but the Company offered P2,000.00. The Insured rejected this and counter-offered P4,000.00, which was also rejected. Procedural History: On September 18, 1962, the Insured and Carlito's parents, Melecio Coquia and Maria Espanueva (Coquias), filed a complaint against the Company to collect the policy proceeds. The Company admitted the policy's existence but pleaded lack of cause of action. The trial court ruled in favor of the plaintiffs, sentencing the Company to pay P4,000.00 and costs. The Petition: The Company appealed, contending that the Coquias had no cause of action because they lacked a contractual relation with the Company and because the Insured had not complied with the policy's arbitration provisions.
Issue(s)
Whether the Coquias, as heirs of the deceased driver, have a direct cause of action against the insurance company despite not being direct parties to the insurance policy. Whether the parties waived their right to demand arbitration as a condition precedent to filing a suit.
Ruling
The Supreme Court affirmed the decision of the trial court in toto, ordering the Fieldmen's Insurance Co., Inc. to pay the plaintiffs the sum of P4,000.00 and costs.
Ratio Decidendi
On the issue of cause of action: The Court held that the insurance policy in question is a contract pour autrui. Article 1311 of the Civil Code of the Philippines provides that if a contract contains a stipulation in favor of a third person, that person may demand its fulfillment if they communicated their acceptance before its revocation. The policy explicitly stated that the Company would indemnify the Insured for sums it becomes legally liable to pay for death or bodily injury to any fare-paying passenger, including the driver. Furthermore, the policy stipulated that the Company could, at its option, make indemnity payable directly to the claimants or heirs of claimants, and that the true intention was to protect the liabilities of the Insured towards passengers and the public. The fact that the deceased driver paid fifty percent (50%) of the premiums, deducted from his commissions, further solidified the character of the policy as a contract pour autrui. Therefore, the Coquias, as the sole heirs of the deceased driver, had a direct cause of action against the Company. On the issue of waiver of arbitration: The Court found that the Company's second defense, based on the arbitration clause in the policy, was without merit. Section 17 of the policy stipulated that disputes regarding the amount of liability should be referred to arbitration and that obtaining an award was a condition precedent to any right of action. However, the records showed that neither party invoked this section nor made any reference to arbitration during the negotiations preceding the case. Both parties stipulated in the trial court that arbitration was never suggested. This conduct by both parties constituted a waiver of their respective rights to demand arbitration. The Court cited jurisprudence holding that when parties proceed in disregard of arbitration provisions and neither party demands arbitration, they waive such provision as a matter of law.
Main Doctrine
A common carrier accident insurance policy, which explicitly states that the company may, at its option, make indemnity payable directly to the claimants or heirs of claimants, and that it is the true intention of the policy to protect the liabilities of the Insured towards passengers and the public, constitutes a contract pour autrui, granting the heirs of a deceased driver, who paid a portion of the premiums, a direct cause of action against the insurer. Furthermore, the failure of both parties to invoke or even suggest arbitration during negotiations constitutes a waiver of their right to demand arbitration as a condition precedent to filing a suit.