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Mejia, Melanie

WILLIAM TIU V. PEDRO ARRIESGADO et al., 437 SCRA 426 (2004)


FACTS: On March 15, 1987, a truck owned by Condor was travelling along
Poblacion, Compostela, Cebu blew one of its rear tires.

1. The truck driver parked the truck on the right side of the highway to
get assistance
2. Thereafter, DRough Riders passenger bus was cruising along the
highway in the same direction.
3. Its driver saw the stalled truck 25 meters away but it was too late. The
bus rammed on the rear part of the truck resulting in the injury of its
passengers, including Arriesgado and his wife (died from her injuries)
4. Arriesgado filed a complaint for breach of contract of carriage against
DRough Riders and its driver.
5. For its part, Tiu (owner of DRough Riders) filed a third party
complaint against its insurer, PPSII, the owner of the truck and its
driver. He claimed that PPSII, as insurer, should be held solidarily
liable with Tiu
6. The trial court held in favor of Arriesgado but it made no mention
ofCA affirmed the trial courts ruling and cited that as a common
carrier, Tiu must exercise extraordinary diligence in transporting its
passengers, which it failed to do
7. As to the liability of PPSII: CA held that no evidence was presented
against PPSII so it cannot be held liable for Arriesgados claim
8. PPSIIs argument: There is a contract of insurance (TPL) but it had
already settled the claims of those injured in the incident
ISSUE: In third-party liability insurance, would it be possible for a third party to
sue the insurer directly?

HELD: Yes. This is an exception to the rule on mutuality of contract. Whenever a

contract contains stipulation for the benefit of a third person and the moment the
third person communicates his assent thereto, the contract becomes binding upon
him. The fact that a third person demands fulfillment of the insurance policy may
be reasonably construed as an assent on his part to the benefit provided in the
policy. This provision arms him with the requisite legal personality to bring an
action on the insurance policy. (stipulation pour atrui).
ISSUE: In a TPL insurance, is the insurer solidarily liable with the insured?
HELD: No. Although the victim may proceed directly against the insurer for
indemnity, the third party liability is only up to the extent of the insurance policy
and those required by law. While it is true that where the insurance contract

provides for indemnity against liability to third persons, and such persons can
directly sue the insurer, the direct liability of the insurer under indemnity contracts
against third party liability does not mean that the insurer can be held liable in
solidum with the insured and/or the other parties found at fault. For the liability of
the insurer is based on contract; that of the insured carrier or vehicle owner is
based on tort.
The respondent PPSII could not then just deny petitioner Tiu's claim; it should have
paid P12,000 for the death of Felisa Arriesgado, and respondent Arriesgado's
hospitalization expenses of P1,113.80, which the trial court found to have been
duly supported by receipts. The total amount of the claims, even when added to
that of the other injured passengers which the respondent PPSII claimed to have
settled, would not exceed the P50,000 limit under the insurance agreement.