Capital Insurance and Surety Co., Inc. v.

Del Monte Motor

Works, Inc., G.R. No. 159979, December 9, 2015
By: Jillian Mae A. Cruz

Topic: Exemption of the Security Deposit of the Insurer from Levy by a Judgment Creditor or Any
Other Claimant

Question: A sued B, C, D before the RTC to recover the unpaid billings related to the fabrication and
construction of 35 passenger bus bodies with an application for the. Issuance of writ of preliminary
attachment, which the sheriff served on the defendants, resulting in the levy and garnishment of various
properties belonging to the defendants. B filed an Extremely Urgent Motion to Discharge Upon Filing of a
Counterbond, attaching thereto bond by CISCO Insurance Company (CISCO) and its supporting
documents purportedly issued by the petitioner. Later, the RTC approved the counterbond and discharged
the writ of preliminary attachment.

RTC rendered its decision in favor of the respondents. To enforce the decision against the counterbond,
the A moved for execution. The RTC granted the motion, over the CISCO's opposition. Serving the writ of
execution, the sheriff levied against the petitioner's personal properties, and later issued the notice of
auction sale. The sheriff also served a notice of garnishment against the security deposit of the
CISCO in the Insurance Commission.

Then A moved to direct the release by the depositary banks of funds subject to the notice of garnishment
from the accounts of the petitioner, and to transfer or release the amount of P14,864,219.37 from the
CISCO’s security deposit in the Insurance Commission. Later, CISCO opposed the A's motion.

RTC granted A’s motion. Accordingly, the Insurance Commission is ordered to withdraw from security
deposit of CISCO to be paid to the sheriff in satisfaction of the notice of garnishment served. However, the
Insurance Commissioner refused to release the same invoking Sec. 203 of the Insurance Code which
exempts the security deposit from execution.

a. Was the security deposit of the insurance company immune from levy or execution by a judgment
creditor?
b. What right, if any, did the A have in the CISCO’s security deposit?
c. Was the Insurance Commissioner's refusal to release the security deposit despite the
garnishment on execution legally justified?

Answer:

a. YES. The security deposit of the insurer is immune from levy or execution by a judgment creditor.

Sec. 203 of the Insurance Code provides that, except as otherwise provided in this Code, no judgment
creditor or other claimant shall have the right to levy upon any securities of the insurer held on deposit
under this section or held on deposit pursuant to the requirement of the Commissioner.

The securities are held as a contingency fund to answer for the claims against the insurance company by
all its policy holders and their beneficiaries. This step is taken in the event that the company becomes
insolvent or otherwise unable to satisfy the claims against it. Thus, a single claimant may not lay stake on
the securities to the exclusion of all others. The other parties may have their own claims against the
insurance company under other insurance contracts it has entered into.
Denying the exemption would potentially pave the way for a single claimant, like the A, to short-circuit the
procedure normally undertaken in adjudicating the claims against an insolvent company under the rules on
concurrence and preference of credits in order to ensure that none could obtain an advantage or preference
over another by virtue of an attachment or execution. To allow the A to proceed independently against the
security deposit of the CISCO would not only prejudice the policy holders and their beneficiaries, but would
also annul the very reason for which the law required the security deposit.

b. YES. A has an inchoate right over the security deposit.

The Supreme Court has held that the right to claim against the security deposit is dependent on the solvency
of the insurance company, and is subject to all other obligations of the insurance company arising from its
insurance contracts.

Accordingly, the A's interest in the security deposit could only be inchoate or a mere expectancy, and thus
had no attribute as property.

c. YES. The Insurance Commissioner's refusal to release was legally justified.

Under Section 191 and Section 203 of the Insurance Code, the Insurance Commissioner had the specific
legal duty to hold the security deposits for the benefit of all policy holders. The law specifically confers
custody over the securities upon the commissioner, with whom these investments are required to be
deposited. An implied trust is created by the law for the benefit of all claimants under subsisting insurance
contracts issued by the insurance company.

As the officer vested with custody of the security deposit, the insurance commissioner is in the best position
to determine if and when it may be released without prejudicing the rights of other policy holders. Before
allowing the withdrawal or the release of the deposit, the commissioner must be satisfied that the conditions
contemplated by the law are met and all policy holders protected.

Under the circumstances, the Insurance Commissioner properly refused the request to release issued by
the sheriff under the notice of garnishment.
 International Container Terminal Services, Inc. v. FGU
Insurance Corp., 556 SCRA 194 (2008)
By: Jillian Mae A. Cruz

Topic: When Presentation of Policy is Not a Condition for Recovery by Insurance Company

Question: ICTS’ liability arose from a lost shipment under its custody and responsibility. As the lost
shipment was insured by FGU, it paid the shipment’s consignee the amount of 1.8Million. In turn, FGU
sought reimbursement from ICTS but the latter refused. The NBI conducted an investigation. The AAREMA
Marine and Cargo Surveyors, Inc. also conducted an inquiry. Both confirmed that the shipment was lost
while in the custody and responsibility of ICTS.

ICTS was ordered by the RTC to pay FGU Insurance Corp. (FGU) the amount of 1.8 Million. ICTS appealed
to the CA. The CA affirmed RTC decision. Hence, ICTS contended that CA erred in failing to dismiss the
complaint on the ground of respondent's failure to offer the insurance policy in evidence. Is ICTS’ contention
correct?

Answer: NO. ICTS contention is not correct.

The Supreme Court has held that as a general rule, the marine insurance policy needs to be presented in
evidence before the trial court or even belatedly before the appellate court in order to determine the extent
of the coverage. This general rule applies only when cargo passed through several stages with different
parties and it could not be determined when the damage to the cargo occurred, such that the insurer should
be liable for it.

In this case, however, the presentation of the insurance policy was not fatal because the loss of the cargo
undoubtedly occurred while on board the ICTS’ vessel (under its custody).

Hence, CA did not err in not dismissing the complaint on the ground of respondent's failure to offer the
insurance policy in evidence.