G.R. No. 85296 May 14, 1990
Zenith Insurance Corporation, petitioner, vs. Court of Appeals and Lawrence Fernandez, respondents.

FACTS

Private respondent Lawrence Fernandez insured his car with petitioner Zenith Insurance Corporation. The car was damaged in an accident, incurring P3,640.00 in repairs. After two months of alleged delay and unsuccessful settlement negotiations by Zenith, Fernandez filed a complaint for sum of money and damages. During trial, Zenith failed to present its evidence due to its unjustified absence on the scheduled hearing date. The trial court thus submitted the case for decision based solely on Fernandez’s evidence.
The trial court ruled in favor of Fernandez, ordering Zenith to pay the actual damages plus interest, and awarding moral damages, exemplary damages, attorney’s fees, and litigation expenses. Notably, the awarded amounts for moral damages (P20,000) and exemplary damages (P20,000) exceeded the amounts prayed for in the complaint (P10,000 and P5,000, respectively). The Court of Appeals affirmed the trial court’s decision in toto. Zenith elevated the case, contesting the excessive awards and the disallowance of contractual deductions from the claim.

ISSUE

The primary issues are: (1) the propriety of awarding damages in amounts exceeding those prayed for in the complaint, and (2) the correctness of the actual damages awarded without applying the alleged deductible franchise and depreciation.

RULING

The Supreme Court modified the decision. On the first issue, the Court held that while the Insurance Code allows damages for unreasonable delay in paying claims, the awards must be justified and proportional. The two-month delay, arising from a bona fide disagreement on the claim amount, did not constitute the wanton or malevolent conduct required for exemplary damages; thus, the P20,000 exemplary award was deleted. The moral damages award was reduced to P10,000, the amount originally prayed for, as the delay was not so egregious to warrant a higher sum. The increased attorney’s fees (P5,000) were upheld due to the additional litigation incurred.
On the second issue, the Court affirmed the award of P3,640.00 as actual damages. It agreed with the appellate court’s finding that the insurance policy presented as evidence contained no stipulation for a deductible franchise or depreciation; therefore, Zenith’s claimed deductions had no contractual basis. The awards were thus modified to: P3,640.00 actual damages with statutory interest, P10,000.00 moral damages, P5,000.00 attorney’s fees, P3,000.00 litigation expenses, and costs.