G.R. No. 91666, July 20, 1990
WESTERN GUARANTY CORPORATION, petitioner, vs. HONORABLE COURT OF APPEALS, PRISCILLA E. RODRIGUEZ, and DE DIOS TRANSPORTATION CO., INC., respondents.

FACTS

On March 27, 1982, respondent Priscilla E. Rodriguez was struck by a passenger bus owned by De Dios Transportation Co., Inc. while she was crossing a pedestrian lane. The bus driver disregarded a traffic policeman’s stop signal. Rodriguez sustained bodily injuries, including permanent facial disfigurement, leading to hospitalization and moral distress. She filed a complaint for damages against the bus company and its driver. The bus company, in turn, filed a third-party complaint against its insurer, petitioner Western Guaranty Corporation, under a Master Policy providing third-party liability coverage.
The Regional Trial Court ruled in favor of Rodriguez, ordering the bus company and driver to pay actual damages, loss of earnings, moral damages, and attorney’s fees. It held Western Guaranty solidarily liable to pay Rodriguez up to P50,000.00 for any unpaid amount. The Court of Appeals affirmed the decision in toto. Western Guaranty filed this Petition for Review, arguing it should not be liable for loss of earnings, moral damages, and attorney’s fees, contending these items were not included in the policy’s “Schedule of Indemnities,” which listed specific monetary values for death, permanent disablement, and hospital charges.

ISSUE

Whether the “Schedule of Indemnities” in the insurance policy limits the insurer’s liability exclusively to the items and amounts listed therein, thereby excluding liability for other damages like loss of earnings, moral damages, and attorney’s fees awarded to the victim.

RULING

The Supreme Court denied the petition, upholding the liability of Western Guaranty. The legal logic rests on the interpretation of the insurance contract. The Court examined Section 1 of the Master Policy, which defines the insurer’s scope of liability in comprehensive terms: “all sums necessary to discharge liability of the insured” for bodily injury to a third party. This broad grant of coverage is the primary source of the insurer’s obligation. The attached “Schedule of Indemnities” was not intended to be an exclusive enumeration of compensable damages but merely set monetary limits for specific claims like death, bodily injury, and hospital charges. To read the schedule as an exhaustive list would drastically and fraudulently limit the comprehensive liability assumed under Section 1, effectively negating the very coverage promised.
Furthermore, the contract is one of adhesion, prepared by the insurer. Ambiguities or limitations in such contracts are construed strictly against the drafter. Contractual limitations of liability are regarded with extreme caution to prevent the insurer from evading its just obligations. Since Western Guaranty failed to use clear and precise language to exclude liability for other legally recoverable damages like loss of earnings and moral damages, its comprehensive promise in Section 1 controls. Therefore, the insurer is liable for the full range of damages necessary to discharge the insured’s liability, up to the policy’s per-accident limit, as correctly determined by the lower courts.