Fortune Insurance and Surety Co., Inc. v.

CA and Producers Bank of the

Philippines
FACTS:
1. Producers Bank was insured by Fortune Insurance.
2. Producers Bank filed against Fortune Insurance a complaint for recovery of the sum of P725K
under the policy issued by Fortune. The sum was allegedly lost during a robbery of
Producers armored vehicle while it was in transit to transfer the money from its Pasay City
Branch to its head office in Makati.
3. The said armored vehicle was robbed by its driver Benjamin Magalong and security guard
Saturnino Atiga tasked to man the same. Both of them are not Producers Banks employees
but were merely assigned by and affiliated with PRC Management Systems and
Unicorn Security Services.
4. Fortune Insurance refused to pay the amount as the loss, according to it, is excluded from
the coverage of the insurance policy.
General Exceptions provides: The company shall not be liable under this
policy in report of x x x (b) any loss caused by any dishonest, fraudulent or
criminal act of the insured or any officer, employee, partner, director, trustee or
authorized representative of the Insured whether acting alone or in conjunction
with others
5. Producers Bank opposed the contention of Fortune Insurance and contends that Atiga and
Magalong are not its officer, employee, trustee, or authorized representative at the
time of the robbery.
6. According to Fortune Insurance, when Producers commissioned a guard and a driver to
transfer its funds from one branch to another, they effectively and necessarily became its
authorized representatives in the care and custody of the money. Assuming that they could
not be considered authorized representatives, they were, nevertheless, employees of
Producers.
ISSUE: WON Magalong and Atiga qualify as employees or authorized representatives of
Producers under paragraph (b) of the general exceptions clause of the insurance policy.
HELD: YES. According to SC, Employer-employee relationship depends upon four standards:
(1)
(2)
(3)
(4)

the
the
the
the

manner of selection and engagement of the putative employee;

mode of payment of wages;
presence or absence of a power to dismiss; and
presence and absence of a power to control the putative employees conduct.

The power of control over Magalong and Atiga was vested in and exercised by Producers Bank;
hence, an employer-employee relationship exists between Magalong and Atiga and Producers
Bank.
PRC Management System and Unicorn Security Services are but labor-only contractors (not
employers) under Article 106 of the Labor Code which provides: There is labor-only
contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, x x x and the workers recruited and
placed by such persons are performing activities which are directly related to the principal

business of such employer. In such cases, the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
In the instant case, Producers Bank entrusted Magalong, Atiga and there other companions to
transfer Producers Banks money to its head office in Makati. In short, for these particular tasks,
they acted as agents of Producers.

New Life Enterprises vs Court of Appeals

FACTS:
1. Julian Sy and Jose Sy formed a partnership under the business name of New Life Enterprise.
They were holding their business in a two-storey building in Lucena City.
2. Julian Sy insured the stocks in trade of NewLife Enterprises under three insurance companies.
INSURANCE COMPANY

TYPE OFINSURANCE
Fire Insurance Policy - This policy
was renewed

AMOUNT
350, 000. 00

2. Reliance Surety and

Insurance Co. Inc.

Fire Insurance Policy - This policy

was also renewed.

300, 000. 00 - There

was an additional
insurance issued in the
amount of 700

3. Equitable Insurance
Corporation

Fire Insurance Policy

200, 000.

1. Western Guaranty
Corporation

1, 550,000. 00 = Total
3. The building occupied by New Life Enterprises was gutted by fire caused by a faulty electrical
wiring. According to the plaintiffs, the stocks in trade were inside said building and were thus
burned.
4. Julian Sy, together with an agent of Reliance Insurance, filed his claim. To support his claim,
he submitted a fire clearance, the insurance policies and the inventory of stocks. He further
testified that the three insurance companies are sister companies, and as a matter of fact
when he was following-up his claim with Equitable Insurance, the Claims Manager told him to
go first to Reliance Insurance and if said company agrees to pay, they would also pay.
5. Ultimately, the three insurance companies denied plaintiffs' claim for payment due to
BREACH OF POLICY CONDITIONS.
6. Reliance Surety and Insurance Company claimed that plaintiff violated Policy Condition No.
"3" which requires the insured to give notice of any insurance or insurances
already effected covering the stocks in trade.
7. The Trial Court ruled in favor of the plaintiff that was reversed by the Court of Appeals.
ISSUE: Whether or not the plaintiff incurred a breach in the policy conditions?

RULING: YES. According to SC, the terms of the contract are clear and unambiguous. The
insured is specifically required to disclose to the insurer any other insurance and its particulars
that he may have effected on the same subject matter.
Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent
Alvarez regarding the co-insurance on the property, he contradicted himself by inexplicably
claiming that he had not read the terms of the policies.
While it is a cardinal principle of insurance law that a policy or contract of insurance is to be
construed liberally in favor of the insured and strictly against the insurer company, yet contracts
of insurance, like other contracts, are to be construed according to the sense and meaning of
the terms which the parties themselves have used. If such terms are clear and unambiguous,
they must be taken and understood in their plain, ordinary and popular sense.