ROAD MISHAPS AND INSURANCE

There are a lot of misconceptions when it comes to insurance. While it is true that the insurance industry in the Philippines has taken a huge leap in view of the passage of the New Insurance Code in 2013, little interest has been afforded by the society to this business sector.  Little is known about the huge contribution of this industry to our economy.  But I do not wish to dwell on that for now.  I am rather inclined to address a specific issue affecting insurance: Is the tortfeasor (another term for “wrongdoer”) exempt from civil liability because the injured (another term for “victim”) or the property damaged or lost is already covered by an insurance policy?

It is a common occurrence that in road mishaps or vehicular accidents, the wrongdoer would insist that he/she should be freed from monetary liability, either for the repair of the vehicle or for the “indemnity” for the life lost, because the victim or the injured party or the damaged vehicle is insured.  I myself have experienced this and I really had to argue on this matter. [Caveat: The use of the term “accident” is somewhat a misnomer because an accident is beyond our control or outside the sway of human will, but I will still use this term anyway with the understanding that what we are talking about here is a situation where there is an element of negligence on the part of the wrongdoer.  Okay?]

In insurance, we have the so-called Collateral Source Rule. Under this rule, if a victim receives compensation for his injuries from a source wholly independent of the wrongdoer, the payment should not be deducted from the damages which the injured would otherwise collect from the tortfeasor.  So, when the injured receives indemnification from an insurance company pursuant to an insurance policy, the wrongdoer cannot benefit therefrom. The injured can still proceed against or sue the wrongdoer for damages. That the injured or victim received money from the insurer does not even mitigate the liability of the wrongdoer.  

This, to my mind, is especially applicable to life insurance.  It is because of the intrinsic value of life. Meaning, the value of life of the deceased can never be quantified and any amount received as proceeds of the life insurance can never be equal to the value of the life of the victim. That is why life insurance is hardly considered as a contract of indemnity.

It is said though that the Collateral Source Rule is not applicable in property insurance, such as car insurance.  This is so because in property insurance, the insurer is subrogated (meaning, “substituted” or “put into the shoes of”) to the rights of the insured once the insurer has already indemnified the insured for the loss or damage. I submit, however, that this contention is true only when the entire loss or damage is covered by the insurance policy, but not when the property involved is not under-insured. There is under-insurance when the value of the policy is less than the actual value of the property. Also, in cases where the policy owner is made a co-insurer of the property by participating or sharing in the cost of the repair, I submit that the policy owner is still entitled to recover the same from the wrongdoer.  The victim should not also be barred from recovering kindred damages, which are not covered by the policy.