By Atty. Julius Gregory B. Delgado
PLATINUM GROUP METALS CORPORATION VS. THE MERCANTILE INSURANCE CO., INC.,
G.R. NO. 253716 (JULY 10, 2023): RESTATEMENT OF THE DOCTRINE OF INSURABLE INTEREST AND DEFINITION OF RIOT, CIVIL COMMOTION, INSURRECTION AND REBELLION AS EXCEPTED PERILS UNDER AN INSURANCE POLICY
Petitioner Platinum Group Metals Corporation (“PGMC”) is a mining company engaged in mine
exploration and development as well as processing and marketing of nickel ore and value-added products for the international market. Sometime in August 2011, PGMC obtained an Insurance Policy from respondent Mercantile Insurance Co., Inc. (“Mercantile”) for 100 brand new units of Sinotruck Howo Dump Trucks in the amount of Php208,410,998.00 from 12:00 noon of August 8, 2011 until 12:00 noon of August 8, 2012 covering “all risks of physical loss or damage due to external causes x x x not limited to earthquake, explosion, fire and lightning, flood, landslide and subsidence, tidal wave, tornado, tsunami, typhoon, and volcanic eruption.”
On October 3, 2011, around 300 armed persons who identified themselves as members of the
Communist Party of the Philippines/New People’s Army/National Democratic Front simultaneously raided and seized control of three mining companies in the Municipality of Claver, one of which is PGMC’s plant site in Sitio Kinalablaban, Brgy. Cagdianao, Claver, where PGMC employees and security personnel were held hostage for several hours while the armed persons denounced PGMC’s supposed destruction of the environment and refusal to pay revolutionary taxes. The armed persons then fired shots and burned PGMC’s facilities, equipment, and vehicles, among those of which 89 insured trucks.
In a Letter dated October 5, 2011, Reynaldo Basuel, President of Penta Insurance Brokers
Services, Inc. (“Penta”), PGMC’s President, Atty. Dante Bravo, requested Penta, as its insurance broker, to “send an insurance adjuster to their mine site at Claver, Surigao del Norte to assess, verify and validate the damage incurred on the damaged trucks as caused by the October 3 incident” and to assist PGMC on its claim against Mercantile under the Insurance Policy. After nine (9) months without receiving any reply, PGMC wrote another Letter dated August 23, 2012, wherein PGMC made a final demand from Penta and Mercantile to remit proceeds of the insurance claim in the amount of Php208,410,998.00 within five (5) days.
In its Letter-Reply to PGMC dated August 29, 2012, Mercantile, through its Executive Vice
President, Atty. Honorio J. Ramajo, denied PGMC’s claim under the Insurance Policy stating, among others, that “the destruction or damage of the insured trucks was caused by riot and civil commotion, both of which are excluded risks.” In the alternative, Mercantile expressed that insurrection and rebellion, which are excluded risks, may also qualify as the proximate cause of the losses sustained by PGMC because members of the attackers were known advocates of open and armed defiance of, or resistance to, the Philippine Government.
PGMC filed a Complaint against Mercantile before the Regional Trial Court of Makati City which
ruled in its favor in a Decision dated November 6, 2017. The RTC did not give credence to Mercantile’s assertion that the damages to the insured trucks were the result of a riot, a civil commotion, an insurrection, or a rebellion, all of which were excluded from the Insurance Policy. It also pointed out that the Insurance Policy did not define the meaning of insurrection and rebellion. Respondent Mercantile filed a motion for reconsideration with inhibition and another branch of the RTC resolved to deny the motion seeking for reconsideration of the decision in a Resolution dated May 9, 2018.
On appeal before the Court of Appeals, reversed and set aside the trial court’s Decision dated
November 6, 2017 and Resolution dated May 9, 2018. The Court of Appeals held that PGMC failed to prove that it had an insurable interest in the trucks which were the subject of the Insurance Policy. It held that PGMC failed to prove its insurable interest therein because the contracts of sale presented before the trial court were all mere photocopies. It also sustained the ratiocination that “riot”, “civil commotion”, “insurrection” and “rebellion” are excluded risks under the Insurance Policy. On a Petition for Review on Certiorari, the Supreme Court affirmed with modification the ruling of the Court of Appeals. The Court restated the legal doctrine on “insurable interest” as anyone who derives a benefit from its existence or would suffer a loss from its destruction, regardless of whether he or she has or has not any title, lien upon, or possession of the property. Pursuant to Section 14 of the Insurance Code, “insurable interest in a property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.” The Supreme Court did not subscribe to technical vacillation of the Court of Appeals when it reversed the ruling of the trial court stating that PGMC failed to prove its insurable interest because the contracts of sale over these dump trucks were mere photocopies. The Court held that the Insurance Policy clearly naming PGMC as the insured is a common exhibit of both parties in the trial court. The Court also held that assuming arguendo that PGMC’s ownership of the trucks were not proven before the RTC, its insurable interest is not limited to ownership of the property subject of the insurance but
also by possession of a substantial economic interest in the property. The Court held that in the instant case, PGMC had an actual and substantial economic interest in the damaged trucks as it is undisputed
that it was in physical possession of these damaged trucks when the attack took place as these trucks were being used in its day-to-day business.
Nonetheless, the Supreme Court held that respondent Mercantile was able to prove that the
loss of, or damage to, the trucks fall under the excepted perils under the Insurance Policy. The Court, quoting Black’s Law Dictionary defined “riot” as “an assemblage of three or more persons in a public place taking concerted action in a turbulent and disorderly manner for a common purpose (regardless of the lawfulness of that purpose)” or “an unlawful disturbance of the peace by an assemblage of usually three or more persons acting with a common purpose in a violent or tumultuous manner that threatens or terrorizes the public or an institution.” It also defined “civil commotion” as a “public uprising by a large number of people who, acting together, cause harm to people or property.” Meanwhile, the Court defined “insurrection” as “a violent revolt against an oppressive authority, usually a government.” Finally, the Court defined “rebellion” as an “open, organized, and armed resistance to an established
government or ruler; especially an organized attempt to change the government or leader of a country, usually through violence” or “open resistance or opposition to an authority or tradition.” Ruling that respondent Mercantile has discharged its burden by proving that the destruction of the insured trucks was caused by an excepted peril under the Insurance Policy, the Court held: “Based from the above-discussion that if the terms used in a contract of insurance are clear and unambiguous, they must be taken and understood in their plain, ordinary, and popular sense, the foregoing acts and circumstances, taken in their totality, constitute insurrection or rebellion that falls under the excepted
risks in the Insurance Policy.
First, three mining companies in the Municipality of Claver, Surigao del Norte, including the
PGMC, were simultaneously raided and eventually controlled by armed individuals who identified themselves as CNN members. Second, it was established that the attack on the PGMC mining site was for a political purpose or impelled by a political motive in that while its employees were held hostage, the attackers denounced PGMC’s purported destruction of the environment, its refusal to pay revolutionary taxes, and the employees’ participation in the progress in the mining operations. Moreover, they blamed the officials of the Philippine government for purportedly allowing investors to operate large-scale
mining industries in the Province. Lastly, the attack was violent in that the attackers fired shots at and burned PGMC’s facilities, equipment, and vehicles.”