20. Gulf Resorts, Inc. v.

Phil Charter Insurance, Corporation

458 SCRA 550

Facts: Plaintiff is the owner of the Plaza Resort situated at Agoo, La Union and had its properties
in said resort insured originally with the American Home Assurance Company (AHAC-
AIU). Attached in the said insurance is an indorsement that the same covers loss or damage
(including loss or damage by fire) to any of the property insured by this Policy occasioned by or
through or in consequence of Earthquake. In the first four insurance policies issued by AHAC,
the risk of loss from earthquake shock was extended only to plaintiffs two swimming pools. In
1990, an earthquake struck Central Luzon and Northern Luzon so the properties and
two swimming pools in its Agoo Playa Resort were damaged. Petitioner filed its formal
demand for settlement of the damage to all its properties claiming that, pursuant to its
earthquake shock endorsement rider, Insurance Policy No. 31944 covers all damages to the
properties within its resort caused by earthquake. Respondent denied petitioners claim on the
ground that its insurance policy only afforded earthquake shock coverage to the two swimming
pools of the resort. It contended that the rider limits its liability for loss to the two swimming
pools of petitioner.
Issue: Whether or not the liability of the insurance company extends to the other properties of
the petitioner?
Held: No. Petitioner cannot focus on the earthquake shock endorsement to the exclusion of the
other provisions. All the provisions and riders, taken and interpreted together, indubitably
show the intention of the parties to extend earthquake shock coverage to the two swimming
pools only.
A careful examination of the premium recapitulation will show that it is the clear intent of
the parties to extend earthquake shock coverage only to the two swimming pools. Section 2(1)
of the Insurance Code defines a contract of insurance as an agreement whereby one
undertakes for a consideration to indemnify another against loss, damage or liability arising
from an unknown or contingent event. Thus, an insurance contract exists where the following
elements concur: 1.) The insured has an insurable interest; 2.) The insured is subject to a risk
of loss by the happening of the designated peril; 3. ) The insurer assumes the risk; 4.) Such
assumption of risk is part of a general scheme to distribute actual losses among a large group of
persons bearing a similar risk; and 5.) In consideration of the insurer's promise, the insured
pays a premium.
An insurance premium is the consideration paid an insurer for undertaking to indemnify
the insured against a specified peril. In fire, casualty, and marine insurance, the premium
payable becomes a debt as soon as the risk attaches. In the subject policy, no premium
payments were made with regard to earthquake shock coverage, except on the two swimming
pools. There is no mention of any premium payable for the other resort properties with regard
to earthquake shock. This is consistent with the history of petitioners previous insurance
policies from AHAC-AIU.
SHERMAN SHAFER v. HON. JUDGE, REGIONAL TRIAL COURT OF OLONGAPO CITY,
BRANCH 75, and MAKATI INSURANCE COMPANY, INC.
G.R. No. 78848 November 14, 1988
Facts: Petitioner obtained a private car policy, GA No. 0889, from Makati Insurance Company, Inc., for
third party liability (TPL).> During the effectivity of the policy, an information for reckless imprudence
resulting in damage to property and serious physical injuries was filed against petitioner. Upon motion,
petitioner was granted leave by the former presiding judge of the trail court to file a third party
complaint against the herein private respondent, Makati Insurance Company, Inc. The court then
issued an order dismissing the third party complaint on the ground that it was premature, based on
the premise that unless the accused (herein petitioner) is found guilty and sentenced to pay the
offended party indemnity or damages, the third party complaint is without cause of action. Petitioner
moved for reconsideration of said order, but the motion was denied;
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hence, this petition.
Compulsory Motor Vehicle Liability Insurance (third party liability, or TPL) is primarily intended to
provide compensation for the death or bodily injuries suffered by innocent third parties or
passengers as a result of a negligent operation and use of motor vehicles.

The victims and/or their
dependents are assured of immediate financial assistance, regardless of the financial capacity of motor
vehicle owners.
The liability of the insurance company under the Compulsory Motor Vehicle Liability Insurance is for
loss or damage. Where an insurance policy insures directly against liability, the insurer's liability
accrues immediately upon the occurrence of the injury or event upon which the liability depends, and
does not depend on the recovery of judgment by the injured party against the insured.
The injured for whom the contract of insurance is intended can sue directly the insurer. The general
purpose of statutes enabling an injured person to proceed directly against the insurer is to protect
injured persons against the insolvency of the insured who causes such injury, and to give such
injured person a certain beneficial interest in the proceeds of the policy, and statutes are to be
liberally construed so that their intended purpose may be accomplished. It has even been held that
such a provision creates a contractual relation which inures to the benefit of any and every person
who may be negligently injured by the named insured as if such injured person were specifically
named in the policy.
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In the event that the injured fails or refuses to include the insurer as party defendant in his claim for
indemnity against the insured, the latter is not prevented by law to avail of the procedural rules
intended to avoid multiplicity of suits. Not even a "no action" clause under the policy-which requires
that a final judgment be first obtained against the insured and that only thereafter can the person
insured recover on the policy can prevail over the Rules of Court provisions aimed at avoiding
multiplicity of suits.
In the instant case, the court a quo erred in dismissing petitioner's third party complaint on the
ground that petitioner had no cause of action yet against the insurance company (third party
defendant). There is no need on the part of the insured to wait for the decision of the trial court
finding him guilty of reckless imprudence. The occurrence of the injury to the third party immediately
gave rise to the liability of the insurer under its policy.