G.R. No. 81026; April 3, 1990
PAN MALAYAN INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, ERLINDA FABIE AND HER UNKNOWN DRIVER, respondents.

FACTS

Petitioner Pan Malayan Insurance Corporation (PANMALAY) filed a complaint for damages against private respondents Erlinda Fabie and her driver. PANMALAY alleged it insured a vehicle owned by Canlubang Automotive Resources Corporation (CANLUBANG). This vehicle was damaged in a collision allegedly due to the negligence of the driver of a pick-up owned by Fabie. PANMALAY indemnified CANLUBANG for the repair costs under the insurance policy and, by virtue of a Release of Claim and Subrogation Receipt, sought to be subrogated to CANLUBANG’s rights to recover from the alleged wrongdoers.
Private respondents moved to dismiss the complaint for lack of cause of action. They argued that PANMALAY settled the claim under the “own damage” coverage of the policy, which purportedly operates on the assumption that no third-party wrongdoer exists, thus precluding any right of subrogation under Article 2207 of the Civil Code. The Regional Trial Court granted the motion to dismiss, and the Court of Appeals affirmed the dismissal.

ISSUE

Whether the insurer, PANMALAY, has a cause of action against the alleged tortfeasors (private respondents) after indemnifying its assured under the “own damage” clause of the insurance policy.

RULING

Yes. The Supreme Court granted the petition and reinstated the complaint. The legal logic is anchored on the principle of subrogation under Article 2207 of the Civil Code. This article provides that upon indemnifying the insured for a loss arising from a wrong, the insurer is subrogated to the rights of the insured against the wrongdoer. This right is not contingent on a specific policy clause or a written assignment; it accrues equitably upon payment of the insurance claim.
The Court rejected the lower courts’ interpretation that payment under an “own damage” clause inherently negates the existence of a third-party wrongdoer or bars subrogation. The insurance policy’s “own damage” coverage (Section III-1) was correctly interpreted to include loss or damage from collision or overturning, irrespective of whether a negligent third party caused it. The insurer’s payment under this coverage, following a collision allegedly caused by another driver, does not transform the settlement into an admission that no liable third party exists. Therefore, PANMALAY’s payment properly triggered its subrogatory right to sue the allegedly negligent driver and vehicle owner.
Furthermore, the Court clarified that even assuming arguendo that the payment was considered “voluntary” (i.e., for a loss not strictly covered, which it was not), the insurer would still have a cause of action against the third-party tortfeasor under Article 1236 of the Civil Code concerning payment by a third person with the right to reimbursement. The dismissal for lack of cause of action was thus a reversible error. The case was remanded for trial on the merits to determine the actual facts and liabilities.