Perla Compania de Seguros, Inc. v. Honorable Court of Appeals
REITERATIONFacts
The Antecedents: Milagros Cayas owned a passenger bus insured with Perla Compania de Seguros, Inc. (PCSI). On December 17, 1978, the bus was involved in an accident in Naic, Cavite, injuring several passengers. One injured passenger, Edgardo Perea, sued Cayas for damages, and three other passengers agreed to a settlement of P4,000.00 each with Cayas. Cayas failed to appear at the pre-trial of Perea's case, was declared in default, and subsequently ordered to pay P10,000.00 for damages, P10,000.00 for exemplary damages, P5,000.00 for moral damages, and P7,000.00 for attorney's fees. Procedural History: When the decision in Perea's case was about to be executed against her, Cayas filed a complaint against PCSI for reimbursement. She alleged that her house and lot were levied upon and sold to satisfy the judgment, and she paid P4,000.00 each to the other three injured passengers. She claimed PCSI refused reimbursement despite her policy coverage. The trial court initially dismissed the case for failure to prosecute but later reconsidered. After PCSI failed to file an answer, a default judgment was rendered in favor of Cayas. This default judgment was set aside, and trial ensued. The trial court found that PCSI's liability was limited to P50,000.00 per accident and P12,000.00 per person. It awarded Cayas P50,000.00 for compensation of injured passengers and P5,000.00 for attorney's fees, but denied her claim for moral damages due to lack of proof. PCSI appealed to the Court of Appeals, which affirmed the trial court's decision. Cayas' motion for reconsideration was denied, leading to the present petition. The Petition: PCSI filed a petition for review on certiorari, challenging the Court of Appeals' decision affirming the lower court's ruling. PCSI argued that its liability should be limited and that Cayas' failure to obtain written consent for settlements with the other passengers precluded reimbursement.
Issue(s)
Whether petitioner Perla Compania de Seguros, Inc. (PCSI) is liable for the full amount claimed by Milagros Cayas, considering the policy limits and settlements made without written consent. Whether the Court of Appeals erred in affirming in toto the decision of the lower court, specifically regarding the policy limits, the requirement of written consent for settlements, and the principle against unjust enrichment.
Ruling
The Supreme Court modified the decision of the Court of Appeals. Petitioner PCSI is ordered to pay Milagros Cayas the amount of Twelve Thousand Pesos (P12,000.00) plus legal interest from the promulgation of the lower court's decision until fully paid, and attorney's fees in the amount of P5,000.00. No pronouncement as to costs.
Ratio Decidendi
On the extent of PCSI's liability and the settlements made without written consent: The Supreme Court held that PCSI's liability is governed by the terms of the insurance policy, which explicitly limited the liability to P12,000.00 per person and P50,000.00 per accident. Milagros Cayas' failure to secure written authority from PCSI before settling with other injured passengers, as required by the policy, precludes her from seeking reimbursement for those payments, citing Stokes v. Malayan Insurance Co., Inc. Contracts are the law between the parties, and the lower courts erred in disregarding the policy stipulations. On the Court of Appeals' affirmation of the lower court's decision: The Court found that the lower courts erred in making PCSI liable for P50,000.00 when Cayas only proved a total loss of P44,000.00, violating the principle that insurance indemnity cannot be an instrument of enrichment. The P12,000.00 per person limit in PCSI's policy was valid and binding, representing the minimum required by law. The Court found no reason to disturb the award of attorney's fees. Therefore, the Court of Appeals erred in affirming the lower court's decision in toto.
Main Doctrine
An insurer's liability is measured by the terms of the insurance policy, and compliance with its conditions, such as obtaining written consent for settlements, is a prerequisite for recovery. The insured cannot seek reimbursement for payments made without the insurer's written consent as stipulated in the policy.