TIO v. CA - What is applicable here is Art. 2209.

- What is applicable here is Art. 2209. Since the parties did not allege the rate of interest stipu-
Unfair Claims Settlement | 30 September 1991 | C.J. Fernan lated in the insurance contract, the legal interest was properly pegged at 6%.

Nature of Case: Petition for certiorari RULING: Petition DENIED.

Digest maker: Africa

SUMMARY: When the fishmeal was damaged when it was transported from US to Manila, NOTE:
Two filed a complaint to claim damages from its insurer EASCO and the owner of the vessel • Sec. 243: The amount of any loss or damage for which an insurer may be liable, under any
Far Eastern Shipping Company. Granted by court. However, the writ of execution which policy other than life insurance policy, shall be paid within thirty days after proof of loss is
pegged the legal interest at 12% was questioned by EASCO, who argued that it should be received by the insurer and ascertainment of the loss or damage is made either by agree-
6%. Court affirmed EASCO’s contention. ment between the insured and the insurer or by arbitration; but if such ascertainment is not
had or made within sixty days after such receipt by the insurer of the proof of loss, then the
DOCTRINE: Secs. 243 and 244 Insurance Code are not pertinent in the case as they only ap- loss or damage shall be paid within ninety days after such receipt. Refusal or failure to pay
ply when the court finds an unreasonable delay or refusal in the payment of the claims. the loss or damage within the time prescribed herein will entitle the assured to collect inter-
est on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling
prescribed by the Monetary Board, unless such failure or refusal to pay is based on the
ground that the claim is fraudulent.
FACTS:
• Sec. 244: In case of any litigation for the enforcement of any policy or contract of insurance, it
1. Tio imported the 1,000 bags of fishmeal from US. The goods were issued with EASCO
shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as
and shipped on board a vessel owned by Far Eastern Shipping Company. When the
to whether the payment of the claim of the insured has been unreasonably denied or with-
goods reached Manila, they were found to have been damaged by sea water which
held; and in the affirmative case, the insurance company shall be adjudged to pay damages
rendered the fishmeal useless.
which shall consist of attorney's fees and other expenses incurred by the insured person by
2. Tio then filed a claim with EASCO and Far Eastern Shipping. Both refused to pay,
reason of such undeniable denial or withholding of payment plus interest of twice the ceiling
prompting Tio to sue them for damages. Granted by court. The judgment became final as
prescribed by the Monetary Board of the amount of the claim due the insured, from the date
to EASCO but the shipping company appealed to CA.
following the time prescribed in section two hundred forty-two or in section two hundred
3. TC then issued a writ of execution and the legal rate of interest was fixed at 12%. EASCO
forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to
moved to quash the writ alleging that legal interest should be 6% under Art. 2209 of the
pay any such claim within the time prescribed in said sections shall be considered prima fa-
Civil Code. Denied by TC but reversed by CA, hence this appeal.
cie evidence of unreasonable delay in payment.
4. Tio argues that it should be 12% pursuant to Arts. 243 and 244 of the Insurance Code.
• Art. 2209: If the obligation consists in the payment of a sum of money and the debtor incurs
in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the
ISSUE/S & RATIO:
payment of interest agreed upon, and in the absence of stipulation, the legal interest which is
1. Should the legal interest be 6% or 12%? — 6%
six per cent per annum.
- The provisions in the Insurance Code are not pertinent in the case as they only apply when
the court finds an unreasonable delay or refusal in the payment of the claims.
- In this case, there was no unjustified refusal as there was an issue of the interpretation of the
terms of the policy. While this is not sufficient to free it from liability, this only shows that
refusal to settle claim was justified.
- Circular No. 416, which raised the legal rate from 6% to 12%, only refers to loans or forbear-
ances but not to court judgments for damages arising from injury.