Hollero Construction v. Government Service Insurance System
REITERATIONFacts
The Antecedents: H.H. Hollero Construction, Inc. (petitioner) entered into a Project Agreement with the Government Service Insurance System (GSIS) for the development of a housing project. Petitioner was obligated to secure Contractors’ All Risks (CAR) Insurance. Petitioner secured CAR Policy No. 88/085 and CAR Policy No. 88/086, with the latter reinsured by the respondent Pool of Machinery Insurers (Pool). The policies stipulated a 14-day notice of claim and a 12-month period to institute action after rejection of a claim. Three typhoons (Biring, Huaning, Saling) caused damage to the Project. Petitioner filed claims on June 30, 1988, August 25, 1988, and October 18, 1989. The GSIS rejected claims for Typhoons Biring and Huaning on April 26, 1990, citing the average clause provision. The GSIS rejected the claim for Typhoon Saling on June 21, 1990, on a "no loss" basis due to non-renewal. Petitioner sent a letter on April 18, 1991, reiterating its demand for settlement regarding Typhoon Saling damages. Procedural History: Petitioner filed a Complaint for Sum of Money and Damages on September 27, 1991. The GSIS filed a Motion to Dismiss, arguing prescription due to the complaint being filed more than one year after the rejection of claims. The Regional Trial Court (RTC) denied the motion. The RTC, in its Judgment dated February 3, 1999, granted petitioner's claims, holding that the average clause was inefficacious, damages were established, and CAR Policy No. 88/086 was deemed renewed. The RTC declared GSIS liable for indemnity claims. The GSIS appealed to the Court of Appeals (CA). The Petition: The CA, in its Decision dated March 13, 2001, set aside the RTC judgment and dismissed the complaint, ruling that the complaint was barred by prescription as it was filed beyond the 12-month limitation from the final rejection of claims on April 26, 1990, and June 21, 1990. The CA denied reconsideration on February 21, 2002. Petitioner filed a petition for review on certiorari before the Supreme Court.
Issue(s)
Whether the Court of Appeals committed reversible error in dismissing the complaint on the ground of prescription. Whether the GSIS's letters dated April 26, 1990, and June 21, 1990, constituted a "final rejection" of the petitioner's claims, thereby commencing the prescriptive period.
Ruling
The petition is denied. The Decision of the Court of Appeals is affirmed.
Ratio Decidendi
On the Issue of Prescription: The Supreme Court affirmed the Court of Appeals' ruling that the petitioner's complaint was barred by prescription. The Court reiterated the principle that contracts of insurance are to be construed according to the plain, ordinary, and popular sense of their terms. Section 10 of the General Conditions of the CAR Policies stipulated that all benefits under the policy shall be forfeited if no action is instituted within twelve (12) months after the rejection of the claim for loss, damage, or liability. Case law clarifies that this prescriptive period should be reckoned from the "final rejection" of the claim. On the Issue of Final Rejection: The Court found that the GSIS's letters dated April 26, 1990, and June 21, 1990, constituted a "final rejection" of the petitioner's claims. The letter dated April 26, 1990, denied claims for Typhoons Biring and Huaning, stating no amount was recoverable, and while it offered an opportunity for queries, no further action was pursued by either party, indicating it was deemed a rejection. The letter dated June 21, 1990, denied the claim for Typhoon Saling on a "no loss" basis due to non-renewal. The Court clarified that "final rejection" refers to the insurer's initial denial of the claim, not the denial of a subsequent motion for reconsideration. The Court cited Sun Insurance Office, Ltd. v. CA, which debunked the contention that the prescriptive period starts only after a petition for reconsideration is resolved, as this could be used as a scheme to waste time and destroy evidence. Therefore, the causes of action accrued upon receipt of these rejection letters, and the filing of the complaint on September 27, 1991, was beyond the twelve-month prescriptive period.
Main Doctrine
The prescriptive period for an insured's action for indemnity under an insurance policy, as stipulated in the policy, commences from the date of the insurer's initial or first rejection of the claim, not from the rejection of a subsequent motion for reconsideration.