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WESTERN GUARANTY CORP. vs.

COURT OF APPEALS
G.R. No. 91666 | July 20, 1990
Topic: Construction/Interpretation of Insurance Contracts
Feliciano, J.

FACTS:
 Private respondent Rodriguez was struck by a De Dios Transportation Co. (DDTC)
passenger bus while crossing a pedestrian lane along Airport Road. The bus driver
disregarded the stop signal of the traffic policeman.
o Priscilla was thrown to the ground and was treated at the San Juan De Dios hospital.
Her face was permanently disfigured, causing her anxiety and stress.
 DDTC was insured with petitioner Western Guaranty Corp., wherein the Master Policy
provided for protection against third party liability.
o “Company will, subject to the Limits of Liability, pay all sums necessary to discharge liability of the insured
in respect of death or bodily injury or damage to property of any third party caused by or arising out of the
use of the vehicle…With respect to death of or bodily injury to any third party or passenger, the
company's payment per victim in any one accident shall not exceed the limits indicated in the Schedule of
Indemnities provided for in this policy.”
 Rodriguez filed a complaint for damages in the RTC against DDTC, which in turn, filed a
third-party complaint against its insurance carrier Western.
 Trial court ordered DDTC to pay actual and moral damages as well as compensation for
loss of earnings, and attorneys fees. Whatever may be left unpaid by DDTC is to be paid by
Western Guaranty by way of contribution, indemnity or subrogation, to the extent of not
more than P50,000.
 Petitioner Western, in this Petition for Review, contends that it cannot be held liable for loss
of earnings, moral damages and attorney’s fees because these items are not included in the
Schedule of Indemnities set forth in the insurance policy.
o Petitioner Western in effect contends that because the Schedule of Indemnities limits
the amount payable for certain kinds of expenses — "hospital room", "surgical
expenses", "operating room" and "medical expenses" — that Schedule should be read
as excluding liability for any other type of expense or damage or loss even though
actually sustained or incurred by the third party victim.

ISSUE: W/N Western Guaranty is liable beyond the Schedule of Indemnities set forth in
the policy

HELD: Yes. The Schedule of Indemnities does not purport to limit, or to enumerate
exhaustively, the species of bodily injury occurrence of which generate liability for
Western.

PETITION DENIED.

RATIO:
 The Schedule doesn’t purport to restrict the kinds of damages that may be awarded against
Western once liability has arisen. All kinds of damages allowable by law—actual or
compensatory, moral, nominal, liquidated, etc.—may be awarded against the insurer.
Schedule of Indemnities was not intended to be an enumeration, much less a closed
enumeration, of the specific kinds of damages which may be awarded under the Master
Policy Western has issued.
 The reading urged by Western of the Schedule of Indemnities comes too close to working
fraud upon both the insured and the third party beneficiary. This would limit the otherwise
unlimited and comprehensive scope of liability assumed by Western under Sec. 1: “all sums
necessary to discharge liability of the insured in respect of [bodily injury to a third party].”
This reading will be repugnant to public policy. Western should have then used more precise
language if this is what they had intended, so that the insured may be properly informed.
 Doctrine: It is well-settled that contractual limitations of liability found in insurance contracts
should be regarded by courts with a jaundiced eye and extreme care and should be so
construed as to preclude the insurer from evading compliance with its just obligations. As a
contract of adhesion, insurance contracts should be construed strictly against the party
which prepared the contract.