12/3/2020 [ G.R. No.

50997, June 30, 1987 ]

235 Phil. 389

EN BANC
[ G.R. No. 50997, June 30, 1987 ]
SUMMIT GUARANTY AND INSURANCE COMPANY, INC.,
PETITIONER, VS. HON. JOSE C. DE GUZMAN, IN HIS CAPACITY AS
PRESIDING JUDGE OF BRANCH III, CFI OF TARLAC, GERONIMA
PULMANO AND ARIEL PULMANO, RESPONDENTS.
[G.R. NO. L-48679. JUNE 30, 1987]
SUMMIT GUARANTY AND INSURANCE COMPANY, INC.,
PETITIONER, VS. THE HONORABLE GREGORIA C. ARNALDO, IN
HER CAPACITY AS INSURANCE COMMISSIONER, AND JOSE G.
LEDESMA, JR., RESPONDENTS.
[G.R. NO. L-48758. JUNE 30, 1987]
SUMMIT GUARANTY AND INSURANCE COMPANY, INC.,
PETITIONER, VS. HONORABLE RAMON V. JABSON, IN HIS
CAPACITY AS PRESIDING JUDGE OF BRANCH XXVI, COURT OF
FIRST INSTANCE OF RIZAL, PASIG, METRO MANILA AND AMELIA
GENERAO, RESPONDENTS.
DECISION

GANCAYCO, J.:

These three consolidated cases arose from three separate complaints filed against Summit
Guaranty and Insurance Company, Inc., herein petitioner, for the payment of insurance on
insurance policies issued by the latter.

The facts are as follows:

G.R. No. L-48679

Private respondent Jose Ledesma was the owner of a tractor which was bumped by a minibus
insured with petitioner company for purposes of Third Party Liability. The incident took place
on March 10, 1977.

Immediately thereafter, private respondent made a notice of claim with petitioner company for
the damage and loss suffered by the tractor. Petitioner company then advised private respondent
to have the tractor repaired at G.A. Machineries which estimated the job at Twenty-One
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Thousand Pesos (P21,000.00).[1] Later, petitioner company through its officials, made an
assurance of payment of the said amount.[2]

When G.A. Machineries was finally through with the repair, private respondent made several
demands on petitioner company because of the repair shop's warning that failure to pay would
result in the auctioning of the tractor to cover the mechanic's lien. However, private respondent
only received additional assurances of payment.

On June 8, 1977, due to the failure of petitioner company to settle his claim, private respondent
submitted a letter-complaint to the Insurance Commission.[3] The latter, in turn, wrote petitioner
company to inquire about the status of the claim.[4]

Again, in March, 1978, petitioner company promised to pay[5]

On April 26, 1978, for not having received any payment of its credit, private respondent filed a
formal complaint with the Insurance Commission[6] which petitioner company moved to dismiss
on the ground of prescription. The Commission, through an order of respondent Commissioner
Gregoria Arnaldo, deferred the resolution of the motion to dismiss causing petitioner company
to file a motion for reconsideration which was later denied. Hence, this petition for certiorari
and prohibition.

G.R. No. 50997

Private respondent Geronima Pulmano was the owner of a jeep insured with petitioner company
in the amount of Twenty Thousand Pesos (P20,000.00). On Sept. 5, 1977, while being driven
by private respondent Ariel Pulmano this jeep got involved in a vehicular accident which
resulted in the death of one of the victims.

Private respondent immediately filed a notice of accident and claim with the petitioner company
and diligently submitted all the required documents with it.[7] However, petitioner company did
not take any steps to process the claim.

Because of this, private respondents brought their claim to the Insurance Commission and the
latter wrote petitioner company three letters dated October 11, 13 and 21, 1977.[8] On December
22, 1977, the heirs of the victim themselves filed a letter-complaint with the Insurance
Commission[9] a copy of which was sent to petitioner company by registered mail.[10] Still,
petitioner company failed to settle the claim.

Since all the waiting for petitioner company to act proved to be futile, private respondents were
constrained to file a complaint with the Court of First Instance of Tarlac dated October 5, 1978.
Petitioner company moved to dismiss on the ground of prescription but respondent Judge Jose
C. de Guzman denied the motion. Hence, this petition for certiorari and prohibition.

G.R. No. L-48758

Private respondent Amelia Generao owned a passenger jeepney that was insured with petitioner
company under a Vehicle Comprehensive Policy. On June 23, 1976, while being driven by
private respondent Carlos Pagkalinawan, this jeepney struck the van of a certain Mr. Hahn.

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Two days after the accident or on June 25, 1976, Generao notified petitioner company of the
vehicular accident and demanded from it payment of damages on both vehicles[11] Thereafter,
Generao submitted to petitioner company all the necessary papers in support of the claim and
required of her by the latter.[12] Following this, Generao and petitioner company had a dialogue at
the office of the insurance company to settle the claim.[13] Then, in the initial hearing of the
criminal case that arose out of the incident, accused Pagkalinawan was represented by a lawyer
of petitioner company[14]

Nonetheless, time passed without petitioner company taking any final action on Generao's
claim.

On August 3, 1977, Mr. Hahn filed a complaint for damages against herein respondents Generao
and Pagkalinawan with the Court of First Instance of Rizal, Branch XXVI. Private respondents,
on the other hand, filed a third party complaint against petitioner company which in turn filed a
motion to dismiss on the ground of prescription. Respondent Judge Ramon V. Jabson, however,
denied the said motion. Subsequently, petitioner company filed a motion for reconsideration
which again was denied. Hence, this petition for certiorari and prohibition.

The only issue at bar is whether or not the causes of action of private respondents have already
prescribed.

According to the petitioner company, the complaints of private respondents, having been filed
beyond the one-year period provided in Section 384 of the Insurance Code, can no longer
prosper. Said law reads as follows:

SECTION 384. Any person having any claim upon the policy issued pursuant to this
chapter shall, without any unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the amount of his loss, and/or the
nature, extent and duration of the injuries sustained as certified by a duly licensed
physician. Notice of claim must be filed within six months from date of the accident,
otherwise, the claim shall be deemed waived. Action or suit for recovery of damage
due to loss or injury must be brought, in proper cases, with the Commission or the
Courts within one year from date of accident, otherwise the claimant's right of action
shall prescribe. (Emphasis supplied.)[15]

Petitioner company contends that the two periods prescribed in the aforementioned law - that is,
the six-month period for filing the notice of claim and the one-year period for bringing an action
or suit - are mandatory and must always concur. Petitioner company argues that under this law,
even if the notice of claim was timely filed with the insurance company within the six-month
period, as what happened in the three cases before Us, the action or suit that follows, if filed
beyond the one-year period should necessarily be dismissed on the ground of prescription.

We find no merit in the contention of petitioner company. There is absolutely nothing in the law
which mandates that the two periods must always concur. On the contrary, it is very clear that
the one-year period is only required "in proper cases". It appears that petitioner company
disregarded this very significant phrase when it made its own interpretation of the law. Had the
lawmakers intended it to be the way petitioner company assumes it to be, then the phrase "in
proper cases" would not have been inserted. At this point, it is but appropriate for Us to reiterate
our ruling in Aisporna vs. Court of Appeals,[16] to wit:
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"Legislative intent must be ascertained from a consideration of the statute as a

whole. The particular words, clauses and phrases should not be studied as detached
and isolated expressions, but the whole and every part of the statute must be
considered in fixing the meaning of any of its parts and in order to produce a
harmonious whole. A statute must be so construed as to harmonize and give effect to
all its provisions whenever possible."

It is very obvious that petitioner company is trying to use Section 384 of the Insurance Code as a
cloak to hide itself from its liabilities. The facts of these cases evidently reflect the deliberate
efforts of petitioner company to prevent the filing of a formal action against it. Bearing in mind
that if it succeeds in doing so until one year lapses from the date of the accident it could set up
the defense of prescription, petitioner company made private respondents believe that their
claims would be settled in order that the latter will not find it necessary to immediately bring
suit. In violation of its duties to adopt and implement reasonable standards for the prompt
investigation of claims and to effectuate prompt, fair and equitable settlement of claims,[17] and
with manifest bad faith, petitioner company devised means and ways of stalling the settlement
proceedings. In G.R. No. L-50997, no steps were taken to process the claim and no rejection of
said claim was ever made even if private respondent had already complied with all the
requirements. In G.R. No. L-48758 - petitioner company even provided legal assistance to one
of the private respondents in the criminal case filed against him leading private respondents to
believe that it was ready to pay. In the same case, petitioner company admits that it took no
final action or adjudication of the claim.[18] Worse still, in G.R. No.L-48679, assurances of
payment were constantly given and petitioner company even said that a check was ready for
release.

This Court has made the observation that some insurance companies have been inventing
excuses to avoid their just obligations[19] and it is only the State that can give the protection
which the insuring public needs from possible abuses of the insurers.[20]

In view of the foregoing, We hold that these three cases do not fall within the meaning of
"proper cases" as contemplated in Section 384 of the Insurance Code. To hold otherwise would
enable petitioner company to evade its responsibility through a clever scheme it had contrived.

To strengthen its position, petitioner company cites the following principle laid down in the case
of Ang vs. Fulton Fire Insurance,[21] to wit:

"'The condition contained in an insurance policy that claims must be presented

within one year after rejection is not merely a procedural requirement but an
important matter essential to a prompt settlement of claims against insurance
companies as it demands that insurance suits be brought by the insured while the
evidence as to the origin and cause of destruction have not yet disappeared. It is in
the nature of a condition precedent to the liability of the insurer, or in other terms, a
resolutory clause, the purpose of which is to terminate all liabilities in case the action
is not filed by the insured within the period stipulated.'"

Suffice it to say that the aforementioned case has no application to the present cases as in that
case the claim of the plaintiffs was denied as early as April 18, 1956 and the action was brought
only on May 5, 1958 or almost 2 years after. As we have already noted earlier, in the cases at
bar, no denial of the claims was ever made and on the contrary, private respondents were made
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to believe that they will be paid by petitioner company. The alleged delay, which is quite
insignificant compared to the length of time that the plaintiffs took in the Ang case in bringing
suit, was not caused by herein private respondents but by the petitioner company itself.

The one-year period should instead be counted from the date of rejection by the insurer as this is
the time when the cause of action accrues. Since in these cases there has yet been no accrual of
cause of action, We hold that prescription has not yet set in.

In Eagle Star Insurance Co., Ltd., et al. vs. Chia Yu,[22] this Court ruled:

"The plaintiff's cause of action did not accrue until his claim was finally rejected by
the insurance company. This is because, before such final rejection, there was no
real necessity for bringing suit."

The philosophy of the above pronouncement was pointed out in the case of ACCFA vs. Alpha
Insurance and Surety Co.,[23] viz:

"Since a 'cause of action' requires, as essential elements, not only a legal right of the
plaintiff and a correlative obligation of the defendant but also 'an act or omission of
the defendant in violation of said legal right', the cause of action does not accrue
until the party obligated refuses, expressly or impliedly, to comply with its duty."

Finally, We are pleased to note that the now defunct Batasang Pambansa, after having
recognized that Section 384 of the Insurance Code, has created so many problems for the
insured[24] amended the law to read as follows:

SEC. 384. Any person having any claim upon the policy issued pursuant to this
chapter shall, without any unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the nature, extent and duration of
the injuries sustained as certified by a duly licensed physician. Notice of claim must
be filed within six months from date of the accident otherwise, the claim shall be
deemed waived. Action or suit for recovery of damage due to loss or injury must be
brought in proper cases, with the Commisioner or the Courts within one year from
denial of the claim, otherwise the claimant's right of action shall prescribe.
(Emphasis supplied.)[25]

WHEREFORE, the instant petitions are hereby dismissed for lack of merit. The temporary
restraining order dated July 18, 1979 issued in G.R. No. 50997 is hereby lifted. With costs
against petitioner company. Let the records of these cases be immediately remanded for prompt
determination of the claims. This decision is immediately executory.

SO ORDERED.

Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras,
Feliciano, Padilla, Bidin, Sarmiento, and Cortes, JJ., concur.

[1] Page 7, Rollo.

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[2] Page 6, Rollo.
[3] Pages 34 and 38, Rollo.
[4] Page 34, Rollo.
[5] Page 7, Rollo.
[6] Annex "A", pages 6-8, Rollo.
[7] Page 9, Rollo.
[8] Pages 30-31, Rollo.
[9] Page 31, Rollo.
[10] Page 31, Rollo.
[11] Pages 14, 18 and 33, Rollo.
[12] Page 33, Rollo.
[13] Page 33, Rollo.
[14] Pages 18 and 33, Rollo.

Section 384 of the Insurance Code (Presidential Decree No. 612) has been amended by P.D.
[15]

No. 1814 and B.P. Blg. 874. The above-quoted provision is in the original text.
[16] 113 SCRA 459.

Section 241 of the Insurance Code provides: (1) No insurance company doing business in the
[17]

Philippines shall refuse, without just cause, to pay or settle claims arising under coverages
provided by its policies, nor shall any such company engage in unfair claim settlement prac-
tices. Any of the following acts by an insurance company, if committed without just cause and
performed with such frequency as to indicate a general business practice, shall constitute unfair
claim settlement practices;

(a) knowingly misrepresenting to claimants pertinent facts or policy provisions relating to

coverages at issue;

(b) failing to acknowledge with reasonable promptness pertinent communications with

respect to claims arising under its policies;

(c) failing to adopt and implement reasonable standards for the prompt investigation of
claims arising under its policies;

(d) not attempting in good faith to effectuate prompt, fair and equitable settlement of
claims submitted in which liability has become reasonably clear; or

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(e) compelling policyholders to institute suits to recover amounts due under its policies
by offering without justifiable reason substantially less than the amounts ultimately recovered in
suits brought by them.

(2) Evidence as to numbers and types of valid and justifiable complaints to the
Commissioner against an insurance company, and the Commissioner's complaint experience
with other insurance companies writing similar lines of insurance shall be admissible in
evidence in an administrative or judicial proceeding brought under this section.

(3) If it is found, after notice and an opportunity to be heard, that an insurance company
has violated this section, each instance of non-compliance with paragraph (1) may be treated as
a separate violation of this section and shall be considered sufficient cause for the suspension or
revocation of the company's certificate authority. (Emphasis supplied)
[18] Page 39, Rollo of G.R. No. L-48758.
[19] American Home Insurance Co. vs. Court of Appeals,109 SCRA 180.
[20] Campos, Insurance, 1983 Ed., p. 7.
[21] 2 SCRA 945; page 73, Rollo of G.R. No. 50997.
[22] G.R. No. 5915, March 31, 1955.
[23] G.R. No. 24566, July 29, 1968.

Pages 770-771, Record of the Batasan, Proceedings and Debates, First Division (1984-1985),
[24]

Volume 4.

Assemblyman H. Perez, who was the sponsor of the Bill (Parliamentary Bill No. 1340) that
[25]

embodied the proposed amendment of changing the period of prescription to run not from the
date of the accident but from the date of the denial of the claim, explained that the latter is the
date of accrual of the cause of action.

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