Summary: Country Bankers Insurance Corp. vs. Lianga Bay and Community Multi-Purpose Cooperative (GR 136914, 25 January 2002)

Country Bankers Insurance Corporation vs. Lianga Bay and Community Multi-Purpose Cooperative Inc.
[GR 136914, 25 January 2002]
Second Division, De Leon Jr. (J): 4 concur

Facts: Country Bankers Insurance Corporation (CBIC) is a domestic corporation principally engaged in the insurance business wherein it undertakes, for a consideration, to indemnify another against loss, damage or liability from an unknown or contingent event including fire while Lianga Baya and Community Multi-purpose Cooperative Inc. (LBCMCI) is a duly registered cooperative judicially declared insolvent and represented by the elected assignee, Cornelio Jamero. It appears that sometime in 1989, the CBIC and LBCMCI entered into a contract of fire insurance. Under Fire Insurance Policy F-1397, CBIC insured LBCMCI's stocks-in-trade against fire loss, damage or liability during the period starting from 20 June 1989 at 4:00 p.m. to 20 June 1990 at 4:00 p.m., for the sum of P200,000.00. On 1 July 1989, at or about 12:40 a.m., LBCMCI's building located at Barangay Diatagon, Lianga, Surigao del Sur was gutted by fire and reduced to ashes, resulting in the total loss of LBCMCI's stocks-in-trade, pieces of furniture and fixtures, equipments and records. Due to the loss, LBCMCI filed an insurance claim with CBIC under its Fire Insurance Policy F-1397, submitting: (a) the Spot Report of Pfc. Arturo V. Juarbal, INP Investigator, dated 1 July 1989; (b) the Sworn Statement of Jose Lomocso; and (c) the Sworn Statement of Ernesto Urbiztondo. CBIC, however, denied the insurance claim on the ground that, based on the submitted documents, the building was set on fire by 2 NPA rebels who wanted to obtain canned goods, rice and medicines as provisions for their comrades in the forest, and that such loss was an excepted risk under paragraph 6 of the policy conditions of Fire Insurance Policy F-1397, which provides that "This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly, of any of the following occurrences, namely: xxx (d) Mutiny, riot, military or popular uprising, insurrection, rebellion, revolution, military or usurped power. Any loss or damage happening during the existence of abnormal conditions (whether physical or otherwise) which are occasioned by or through or in consequence, directly or indirectly, of any of said occurrences shall be deemed to be loss or damage which is not covered by this insurance, except to the extent that the Insured shall prove that such loss or damage happened independently of the existence of such abnormal conditions." Finding the denial of its claim unacceptable, LBCMCI then instituted in the trial court the complaint for recovery of "loss, damage or liability" against CBIC. In due time, the trial court rendered its Decision dated 26 December 1991 in favor of LBCMCI, ordering CBIC to pay LBCMCI to fully pay the insurance claim for the loss LBCMCI sustained as a result of the fire under its Fire Insurance Policy F-1397 in its full face value of P200,000.00 with interest of 12% per annum from date of filing of the complaint until the same is fully paid; to pay as and in the concept of actual or compensatory damages in the total sum of P50,000.00; to pay as and in the concept of exemplary damages in the total sum of P50,000.00; to pay in the concept of litigation expenses the sum of P5,000.00; to pay by way of reimbursement the attorney's fees in the sum of P10,000.00; and to pay the costs of the suit. CBIC interposed an appeal to the Court of Appeals. On 29 December 1998, the appellate court affirmed the challenged decision of the trial court in its entirety. CBIC filed the petition for review on certiorari.

Issue: Whether the burden of proof of loss in this case is upon the insurer, and not the insured.

Held: YES. CBIC does not dispute that LBCMCI's stocks-in-trade were insured against fire loss, damage or liability under Fire Insurance Policy F-1397 and that LBCMCI lost its stocks-in-trade in a fire that occurred on 1 July 1989, within the duration of said fire insurance. CBIC, however, posits the view that the cause of the loss was an excepted risk under the terms of the fire insurance policy. Where a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss comes within the purview of the exception or limitation set up. If a proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability. Stated elsewise, since CBIC in this case is defending on the ground of non-coverage and relying upon an exemption or exception clause in the fire insurance policy, it has the burden of proving the facts upon which such excepted risk is based, by a preponderance of evidence. But CBIC failed to do so. CBIC relies on the Sworn Statements of Jose Lomocso and Ernesto Urbiztondo as well as on the Spot Report of Pfc. Arturo V. Juarbal dated 1 July 1989. The Sworn Statements of Jose Lomocso and Ernesto Urbiztondo are inadmissible in evidence, for being hearsay, inasmuch as they did not take the witness stand and could not therefore be cross-examined. CBIC's evidence to prove its defense is sadly wanting and thus, gives rise to its liability to LBCMCI under Fire Insurance Policy F-1397.

	This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.