G.R. No. 244407 , January 26, 2021
UCPB General Insurance Co., Inc., Petitioner, vs. Asgard Corrugated Box Manufacturing Corporation, Respondent.

FACTS

Respondent Asgard Corrugated Box Manufacturing Corporation (Asgard) and Milestone Paper Products, Inc. (Milestone) entered into a Toll Manufacturing Agreement. Asgard later filed for corporate rehabilitation. On August 7, 2009, Asgard and Milestone obtained an Industrial All Risk Policy from petitioner UCPB General Insurance Co., Inc. (UCPB Insurance), which insured machinery and equipment at Asgard’s plant for P500,000,000. The policy named “Milestone and/or Market Link and/or Nova Baile and/or Asgard” as the insured. On July 15, 2010, Milestone pulled out its stocks and equipment from Asgard’s plant, damaging Asgard’s corrugating machines in the process. Asgard filed an insurance claim under the policy’s Malicious Damage Endorsement. UCPB Insurance denied the claim, arguing the policy had no cross liability cover and the damage was caused by Milestone, a co-insured, citing Section 87 (now Section 89) of the Insurance Code, which exempts an insurer from liability for a loss caused by the willful act of the insured. Asgard filed a complaint for sum of money. The Regional Trial Court granted UCPB Insurance’s Motion for Summary Judgment and dismissed the complaint, ruling Milestone had an insurable interest in the damaged property as a co-insured. The Court of Appeals reversed and remanded the case for trial, finding genuine issues of fact, including the ownership of the damaged machinery and the nature of the insurable interests. UCPB Insurance filed the present Petition for Partial Review.

ISSUE

Whether the Court of Appeals erred in reversing the grant of summary judgment and in ordering a full trial, specifically on the applicability of Section 89 of the Insurance Code which exempts the insurer from liability for a loss caused by the willful act of the insured.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision to remand the case for trial. The Court held that summary judgment was improperly granted as genuine issues of material fact existed that necessitated a full trial. These issues included: (1) whether Milestone had an insurable interest in the specific machinery damaged, which was crucial to determine if it was a co-insured whose willful act would bar recovery under Section 89 of the Insurance Code; (2) the true ownership of the damaged corrugating machines and the parts therein; (3) the nature of the relationship and insurable interests of the various named insureds under the single policy; and (4) whether the policy was a joint or composite insurance. The Court ruled that these factual issues must be resolved first before the legal issue of the applicability of Section 89 of the Insurance Code could be determined. The case was remanded to the trial court for further proceedings.