G.R. No. L-16138, L-16139, L-16140, L-16141, L-16142, L-16143, L-16144, L-16145. April 29, 1961.
Diosdado C. Ty, plaintiff-appellant, vs. First National Surety & Assurance Co., Inc., et al., defendants-appellees.

FACTS

The plaintiff, Diosdado C. Ty, an employee of Broadway Cotton Factory, secured eighteen identical personal accident insurance policies from various companies, including the eight defendant-appellees. The policies named his employer as the beneficiary, and the employer paid the premiums. On December 24, 1953, a fire destroyed the factory. While escaping, Ty sustained severe injuries to his left hand, including multiple fractures to several fingers, resulting in a temporary total disability that prevented him from working.
Ty filed claims under Part II of the policies, which provided indemnity for partial disability. The specific provision stated the company would pay P650.00 for the “Loss of: Either hand,” with a clarifying definition that “The loss of a hand shall mean the loss by amputation through the bones of the wrist.” All defendant insurance companies uniformly rejected his claim, arguing the policy required actual physical severance, which did not occur, as Ty’s hand, though disabled, was not amputated.

ISSUE

The core issue is whether the plaintiff can recover indemnity for the “loss of a hand” under the insurance policies when the injury resulted in a temporary total disability of the hand but without its physical amputation.

RULING

The Supreme Court affirmed the trial court’s dismissal of the complaints, ruling that Ty could not recover. The legal logic rests on the principle that an insurance policy is a contract, and its clear and unambiguous terms constitute the law between the parties. The Court emphasized that the policy language was explicit and specific: indemnity for the loss of a hand was contingent upon “loss by amputation through the bones of the wrist.”
The Court rejected the appellant’s argument for a functional interpretation of “loss,” which would equate it with the inability to use the hand for work. While sympathetic to Ty’s condition, the Court held it could not extend coverage beyond the contract’s plain terms. The definition provided was a technical, surgical definition of physical loss, not a definition of functional disability. Since the agreed-upon condition—amputation—was not met, no liability attached. The ruling underscores that courts cannot create a new contract for the parties or rewrite clear stipulations under the guise of interpretation, even when a hardship results. The terms were not obscure; they were precise and binding.