WESTERN GUARANTY CORPORATION, PETITIONER, VS. HONORABLE COURT OF APPEALS, PRISCILLA E. RODRIGUEZ, AND DE DIOS TRANSPORTATION CO., INC., RESPONDENTS.

At around 4:30 in the afternoon of 27 March 1982, while crossing
Airport Road on a pedestrian lane on her way
to work, respondent Priscilla E. Rodriguez was struck by a De Dios passenger bus owned by respondent De Dios Transport­ation Co., Inc. then driven by one Walter
Saga y Aspero. 
The bus driver disregarded the stop signal given by a traffic policeman
to allow pedestrians to cross the road. 
Priscilla was thrown to the ground, hitting her forehead.  She was treated at the Protacio Emergency
Hospital and later on hospitalized
at the San Juan De Dios Hospital.  Her face was permanently
disfigured, causing her serious anxiety and moral distress.

Respondent bus company was insured with
petitioner Western Guaranty Corporation (“Western”) under its Master
Policy which provided, among other things, for protection against third party
liability, the relevant section reading as follows:

“Section 1.  Liability to the Public -­- Company
will, subject to the Limits of Liability, pay all sums necessary to
discharge liability of the insured in respect of –

(a)  
death of or bodily
injury to or damage to property of any passenger as defined herein.

(b)   
death of or bodily injury or damage to
property of any THIRD PARTY as defined herein in any accident caused by
or arising out of the use of the Schedule Vehicle, provided that the
liability shall have first been determined. 
In no case, however, shall the Company’s total payment under both Section I and Section II combined exceed the Limits of
Liability set forth herein.  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 excluding the cost of additional medicines, and such other burial
and funeral expenses that might have been incurred.” (Under­scoring
supplied)

Respondent Priscilla Rodriguez filed a complaint for damages before the Regional Trial Court of Makati against De Dios
Transportation Co. and Walter A. Saga. 
Respondent De Dios Transportation Co., in
turn, filed a third-party complaint against its insurance carrier, petitioner
Western.

On 6 August 1985,
the trial court rendered a decision
in favor of respondent Priscilla E. Rodriguez, the dispositive
portion of which read:

“WHEREFORE, judgment is hereby rendered in favor of plaintiff
and against the defendants, ordering the latter to pay the former, jointly and
severally, and for the third-party defendant to pay to the plaintiff, by way of
contribution, indemnity or subrogation whatever amount may be left unpaid by
the defendant De Dios Transporation
Company, Inc. to the extent of not more than P50,000.00,
as follows:

a)     
the sum of P2,776.00 as actual damages
representing doctor’s fees, hospitalization and medicines;

b)     
the sum of P1,500.00 by way of compensation for
loss of earning during plaintiff’s incapacity to work;

c)     
the sum of P10,000.00 as and by way of moral
damages;

d)     
the sum of P10,000.00 as and by way of
attorney’s fees; and

e)     
the cost of suit.”

On appeal, the Court of Appeals affirmed in toto the decision of the trial court.  Petitioner moved for the reconsideration of
the appellate court’s decision.  In a
Resolution dated 10 January 1990,
the Court of Appeals denied the motion for reconsideration for lack of merit.

Petitioner Western is now before us on a Petition for Review alleging that the Court of Appeals erred
in holding petitioner liable to pay beyond the limits set forth in the Schedule
of Indemnities and in finding Western liable for loss of earnings, moral
damages and attorney’s fees.  Succinctly
stated, it is petitioner Western’s position that it cannot be held liable for
loss of earnings, moral damages and attorney’s fees because these items are not
among those included in the Schedule of Indemnities set forth in the insurance
policy.

Deliberating on the instant Petition for Review, we consider that
petitioner Western has failed to show any reversible error on the part of the
Court of Appeals in rendering its Decision dated 26 April 1989 and its Resolution dated 10 January 1990.

An examination of Section 1 entitled “Liability to the
Public”, quoted above, of the Master Policy issued by petitioner Western
shows that that Section defines the scope of the liability of insurer
Western as well as the events which generate such liability.  The scope of liability of Western is marked
out in comprehensive terms:  “all
sums necessary to discharge liability of the insured in respect of [the
precipitating events] —“.  The
precipitating events which generate liability on the part of the insurer,
either in favor of a passenger
or a third party, are
specified in the following terms:  (1)
death of, or (2) bodily injury to, or (3) damage to property of, the passenger
or the third party.  Where no death, no
bodily injury and no damage to property resulted from the casualty (“any
accident caused by or arising out of the use of the Schedule Vehicle”), no
liability is created so far as concerns the insurer, petitioner Western.

The “Schedule of Indemnities for Death and/or Bodily
Injury” attached to the Master Policy, which petitioner Western invokes,
needs to be quoted in full:

“Schedule of Indemnities for Death
and/or Bodily Injury:

The following schedule of indemnities
should be observed in the settlement of claims for death, bodily injuries of,
professional fees and hospital charges, for services rendered to traffic
accident victims under CMVLI coverage:

Total of Accommodation of Professional
Attendance

Total amount of
medical

expenses
must not exceed

(for
single period of

confinement)
………………………….    400.00″^[1]

It will
be seen that the above quoted Schedule of Indemni­ties establishes
monetary limits which Western may invoke in case of occurrence of the
particular kinds of physical injury there listed, e.g.:

loss of both
feet ……………. P6,000.00;

loss of one
foot …………….. P2,400.00;

loss of
sight of one eye ……. P1,800.00.

It must be stressed, however, that the Schedule of Indemnities
does not purport to limit, or to enumerate exhaustively, the species of
bodily injury occurrence of which generate liability for petitioner Western.  A car accident may, for instance, result in injury to internal organs of a passenger or third party, without any accompanying amputation or loss of an external member
(e.g., a foot or an arm or an eye).  But
such internal injuries are surely covered by Section 1 of
the Master Policy, since they certainly constitute bodily injuries.

Petitioner Western in effect contends before this Court, as it
did before the Court of Appeals, that because the Schedule of Indemnities
limits the amount payable for certain kinds of expenses — “hospital
room”, “surgical expenses”, “anaesthesiologists‘
fee”, “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.  We are not persuaded by
Western’s contention.

Firstly, the Schedule of Indemnities does not purport to
restrict the kinds of damages that may be awarded against Western once
liability has arisen.  Section 1, quoted
above, does refer to certain “Limits of Liability” which in the case
of the third party liability section of the Master Policy, is apparently P50,000.00 per person per accident.  Within this over-all quantitative limit, all
kinds of damages allowable by law — “actual or compensatory
damages”; “moral damages”; “nominal damages”;
“temperate or moderate damages”; “liquidated damages”; and
“exemplary damages”^[2]
— may be awarded by a competent court against the insurer once liability is
shown to have arisen, and the essential requisites or conditions for grant of
each species of damages are present.  It
appears to us self-evident that the 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.  Accordingly, we agree with the Court of
Appeals that:

“x x x we
cannot agree with the movant that the schedule was
meant to be an exclusive enumeration of the nature of the damages for which it
would be liable under its policy.  As we see it, the schedule was merely
meant to set limits to the amounts the movant would
be liable for in cases of ‘claims for death, bodily injuries of, professional
services and hospital charges, for services rendered to traffic accident
victims,’ and not necessarily exclude claims against the insurance policy for
other kinds of damages, such as those in question.”

Secondly, 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 of Section 1, quoted above.  For Western’s reading would drastically and
without warning limit the otherwise unlimited (save for the over-all
quantitative limit of liability of P50,000.00 per person per accident) and
comprehensive scope of liability assumed by the insurer Western under Section
1:  “all sums necessary to discharge
liability of the insured in respect
of [bodily injury to a third
party]”.  This result — which is
not essentially different from taking away
with the left hand what had been given with the right hand — we must avoid as obviously repugnant
to public policy.  If what Western now
urges is what Western intended to achieve by its Schedule
of Indemnities, it was incumbent upon Western to use language far more specific
and precise than that used in fact by Western, so that the insured, and
potential purchasers of its Master Policy, and the Office of the Insurance
Commissioner, may be properly informed and act accordingly.

Petitioner Western would have us construe the Schedule of
Indemnities as comprising contractual limitations of liability which, as
already noted, is comprehensively defined in Section 1 — “Liability to
the Public” — of the Master Policy. 
It is well-settled, however, 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.^[3]

Finally, an insurance contract is a contract of adhesion.  The rule is well entrenched in our
jurisprudence that the terms of such contract are to be construed strictly against
the party which prepared the contract, which in this case happens to be
petitioner Western.^[4]

ACCORDINGLY, the Court Resolved to DENY the Petition for
Review for lack of merit.  Costs against petitioner.

Fernan, C.J., Gutierrez Jr., Bidin, and Cortes, JJ., concur.

^[1]
Rollo, pp. 5-6.

^[2]
Article 2197, Civil Code.

^[3]
Taurus Taxi v. Capital Insurance, 24 SCRA 454 (1968);
Eagle Star v. Chia Yu, 96 Phils.
696 (1955).

^[4]
Landicho v.
Government Service Insurance System, 44 SCRA 7 (1972); Qua Chee Gan v. Law Union and Rock Insurance Co.,
Ltd., 98 Phil. 85 (1955).