United Coconut Planters Bank General Insurance Co., Inc. v. Asgard Corrugated Box Manufacturing Corporation
REITERATIONFacts
The Antecedents: Asgard Corrugated Manufacturing Corp. (Asgard) and Milestone Paper Products, Inc. (Milestone) entered into a Toll Manufacturing Agreement (TMA). Milestone installed its own equipment parts into Asgard's corrugating machines. On July 15, 2010, Milestone pulled out its equipment and, in the process, allegedly caused damage to Asgard's corrugating machines and other equipment. Asgard filed an insurance claim with UCPB General Insurance Co., Inc. (UCPB Insurance) under an Industrial All Risk Policy, citing the Malicious Damage Endorsement. UCPB Insurance denied the claim, asserting that the damage was caused by Milestone, a co-insured, and thus falls under the exception for willful acts of the insured. Procedural History: Asgard filed a complaint for sum of money. The Regional Trial Court (RTC) initially dismissed the complaint via summary judgment, finding that Milestone had insurable interest. However, upon appeal, the Court of Appeals (CA) reversed, remanding the case for trial, holding that genuine issues of fact existed. Subsequently, the RTC rendered a decision in favor of Asgard, ordering UCPB Insurance to pay actual damages, exemplary damages, and attorney's fees. The CA partially granted UCPB Insurance's appeal by deleting the awards for exemplary damages and attorney's fees but upheld UCPB Insurance's liability to Asgard. UCPB Insurance filed a petition for partial review on certiorari. The Petition: UCPB Insurance assails the CA's ruling, arguing that Milestone had insurable interest at the time of the loss, making Section 89 of the Insurance Code applicable, and that the Malicious Damage Endorsement does not apply independently of the Riot and Strike Endorsement.
Issue(s)
Whether Milestone had insurable interest over Asgard's corrugating machines at the time of the loss. Whether Section 89 of the Insurance Code, which exempts the insurer from liability for loss caused by the willful act of the insured, is applicable. Whether the Malicious Damage Endorsement is applicable to the loss incurred by Asgard. Whether Asgard discharged its burden of proof to substantiate its insurance claim.
Ruling
The Supreme Court granted the petition, partially set aside the Court of Appeals' decision, and dismissed Asgard's complaint. The Court ruled that UCPB Insurance is not liable for the loss because the damage was caused by Milestone, a co-insured, through a willful act, which is an excluded risk under the policy and Section 89 of the Insurance Code. Furthermore, the Malicious Damage Endorsement was found to be an extension of the Riot and Strike Endorsement and thus not applicable as the damage did not occur during a strike or riot. Lastly, Asgard failed to discharge its burden of proof to substantiate its claim for actual damages.
Ratio Decidendi
On whether Milestone had insurable interest over Asgard's corrugating machines at the time of the loss: The Court found that the Toll Manufacturing Agreement (TMA) between Asgard and Milestone was not effectively terminated. The TMA stipulated automatic month-to-month extension if no new agreement was executed after its expiry, and termination required written notice. Milestone's act of removing its equipment and parts did not constitute a valid termination under the TMA. Therefore, Milestone retained an insurable interest because its continued relationship under the TMA meant it would suffer direct pecuniary loss if the machines were destroyed, as it would be liable for breach of contract. The Court reiterated that insurable interest exists if the insured derives a benefit from the property's existence or would suffer loss from its destruction, not necessarily requiring ownership. On the applicability of Section 89 of the Insurance Code: The Court held that Section 89 of the Insurance Code, which states that an insurer is not liable for a loss caused by the willful act or connivance of the insured, is applicable. Since Milestone, a co-insured, willfully and maliciously damaged Asgard's machines, UCPB Insurance is exonerated from liability. This aligns with public policy which prohibits indemnification for intentional misconduct and prevents the encouragement of willful tortious acts. The policy itself also contained an exclusion for loss or damage arising out of the willful act or gross negligence of the insured. On the applicability of the Malicious Damage Endorsement: The Court ruled that the Malicious Damage Endorsement is a mere extension of the Riot and Strike Endorsement and cannot exist independently. The endorsement explicitly states that the insurance under the Riot and Strike endorsement shall extend to include malicious damage. Therefore, for the Malicious Damage Endorsement to apply, the malicious damage must have occurred in connection with an occurrence mentioned in the Riot and Strike Endorsement, such as a strike or riot. Since the damage was not caused during a strike or riot, this endorsement does not cover the loss. Furthermore, Milestone, being a co-insured, does not fall within the definition of "any person" under the endorsement. On Asgard's failure to discharge its burden of proof: The Court found that Asgard failed to substantiate its claim for P147,000,000.00 in actual damages. While Asgard presented a quotation from Taiphil Machinery and Equipment Sales Services and checks as proof of payment, the Court deemed these insufficient. A mere quotation is not competent proof of actual loss. Asgard did not provide detailed explanations of the extent of the damage, whether the damaged machines were integral to Milestone's equipment, or if their detachment caused damage. The Court emphasized that actual damages must be proven with reasonable certainty based on competent evidence, not mere surmises or conjectures.
Main Doctrine
The insurer is not liable for a loss caused by the willful act or through the connivance of the insured, as such damage is not an insurable risk. Furthermore, the Malicious Damage Endorsement, being an extension of the Riot and Strike Endorsement, does not apply if the damage did not occur during a strike or riot.