Full Tank Redemption: SC Puts the Brakes on Insurance Delays

The persistent threat of carnapping in the Philippines, particularly in major cities like Manila and Iloilo City, is a constant source of anxiety for motorists. According to the Philippine National Police Highway Patrol Group (PNP-HPG), a 2024 report indicated a significant drop in carnapping incidents, with 140 four-wheel vehicle incidents recorded in the first half of 2025, down from 160 in the same period the previous year. While this is encouraging, the risk remains. For many car owners, a simple trip to a parking lot can turn into a nightmare, leaving them with nothing but a police report and the daunting task of dealing with their insurance provider. When a vehicle is stolen, an insured owner's immediate thought is their insurance policy. But what happens when a stolen vehicle is later recovered? Does the insurance company's liability for the loss disappear?

The Supreme Court recently tackled this very question, providing a clear answer that protects the rights of insured car owners against the delays and disputes of insurance companies. This decision has a significant impact on how insurance claims are handled and what insured parties can expect when faced with such a situation.

Contract that Steers the Journey

At its core, a contract of insurance is a promise. It is an agreement whereby one party, the insurer, undertakes to indemnify another, the insured, against loss, damage, or liability arising from an unknown or contingent event. This definition is enshrined in Section 2(a) of the Insurance Code of the Philippines. The essence of this contract is the assumption of risk by the insurer and the indemnification of loss as its principal purpose.

The validity of an insurance contract rests on its key elements:

1. The insured has an insurable interest in the property.

2. The insured is subject to a risk of loss if the designated peril occurs.

3. The insurer assumes that risk.

4. The insurer's assumption of risk is part of a larger plan to distribute actual losses among a group of people who face similar risks.

5. The insured pays a premium in consideration of the insurer's promise to cover the loss.

The Insurable Interest

A central concept in insurance is "insurable interest." As reiterated in the case of UCPB General Insurance Co., Inc. v. Asgard Corrugated Box Manufacturing Corp. (G.R. No. 244407), Sec. 13 of the Insurance Code defines insurable interest as "every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured." This means you must stand to suffer a direct financial loss if the insured property is damaged or lost.

According to Sec. 14 of the same code, an insurable interest in property can take three forms: an existing interest, such as that of a legal owner; an inchoate interest based on an existing one, like a stockholder in corporate property; or an expectancy coupled with an existing interest from which it arises. It is important to note, as per Sec. 19, that for property insurance, this insurable interest must exist both when the policy takes effect and when the loss occurs.

A Case of Unjust Delay

In a recent decision penned by Associate Justice Henri Jean Paul B. Inting, the Supreme Court’s Third Division examined a case that had major implications for insured vehicle owners. The case began with a terrifying incident: Wilfrido C. Wijangco's son, Andrew, was held at gunpoint in a parking lot, and his car was stolen. The incident was reported to the police, and Wilfrido immediately filed an insurance claim with UCPB General Insurance Co., Inc., submitting all the necessary documents.

Despite Wilfrido's repeated follow-ups, UCPB failed to approve his claim. After a significant delay, UCPB informed him that his car had been recovered by the Traffic Management Group (TMG) and that his claim would be put on hold pending an official clearance. Frustrated by the lack of progress and the prolonged delay, Wilfrido filed a case against UCPB.

The case took a confusing path through the lower courts. The Regional Trial Court (RTC) granted the insurance claim, correctly holding that UCPB’s liability attached the moment the car was stolen. The subsequent recovery of the vehicle did not erase the fact of the theft. However, the Court of Appeals (CA) reversed this ruling, citing Wilfrido's alleged failure to give "immediate notice of loss."

On appeal, the Supreme Court reinstated the RTC's decision. The SC emphasized that the theft was complete the moment the car was unlawfully taken and the recovery of the vehicle does not negate the fact that a theft occurred. The Court pointed out that under Section 249 of the Insurance Code, an insurer must pay a claim within a specified period — in this case, 90 days — after receiving a proof of loss. Wilfrido submitted his proof of loss on October 10, 2006, but UCPB informed him of the recovery 162 days later, well beyond the legal limit.

The Court reasoned that once this legal period for payment lapses and before the insured vehicle is recovered, the insurer's obligation to pay for the loss becomes final. The insured cannot be compelled to accept a recovered vehicle at this point. The SC also highlighted that the insurance would lose its purpose if an insured had to wait indefinitely for a vehicle to be recovered or was forced to buy a replacement only to have the original vehicle returned later. In this case, even when the car was recovered, it was unserviceable and missing parts, making the loss effectively permanent.

For its prolonged and unjust delay, the SC ordered UCPB to pay Wilfrido PHP 1.8 million in insurance proceeds, plus double interest on the amount, as well as attorney's fees and damages.

Put It In Drive: How to Move Forward

The Supreme Court's decision strengthens the fact that an insurance company cannot use the eventual recovery of a stolen vehicle as an excuse to avoid paying a valid claim, especially when that recovery happens long after the legal period for processing the claim has lapsed. This ruling solidifies the purpose of an insurance contract: to indemnify the insured against loss, not to subject them to indefinite waiting or legal maneuvering.

For Filipino car owners, this case provides a valuable lesson. If your vehicle is stolen, act swiftly to protect your rights:

• Report the incident to the police immediately.

• File a claim with your insurance provider without delay and submit all required documents.

• Document every interaction with your insurer, including the dates and times of follow-ups.

To ensure your rights are protected, especially against an uncooperative insurance company, you may need to seek legal counsel. Whether you are in Manila or in a region like Western Visayas, a legal consultation with a skilled professional is your best defense. A trusted Iloilo law firm or a reputable law firm in Manila can help you understand your rights and the legal process. By consulting an experienced Iloilo litigation attorney or an attorney in Manila, you can secure the law services you need to hold your insurance provider accountable.