JEWEL VILLACORTA vs.

THE INSURANCE COMMISSION

G.R. No. L-54171 October 28, 1980

FACTS:

Jewel Villacorta was the owner of a Colt Lance covered by a comprehensive motor insurance issued by responded
Empire Insurance Company effective May 16, 1977 to May 16, 1978. The insurance covers loss or damage of the
car (a) by accidental collision or overturning, or collision or overturning consequent upon mechanical breakdown or
consequent upon wear and tear; (b) by fire, external explosion, self-ignition or lightning or burglary, housebreaking
or theft; and (c) by malicious act. Further, the “Authorized Driver Clause” in the policy limits the use of the car by the
insured himself or any person under his permission

On May 9, 1978, the vehicle was brought to Sunday Machine Works, Inc. for general check up and repairs.
However, on May 11, 1978, the car being taken by Benito Mabasa and other five passengers on the way to
Montalban Rizal, was involved in a collision with a gravel and sand truck. The collision caused the death of the
drive, Benito Mabasa who was found possessing a 45 calibre and a grenade, and another passenger, and the
physical injuries of other four passengers.

As the car suffered extensive damage, petitioner filed a claim with respondent insurance company. However, the
latter denied invoking the authorized driver clause in the policy as the insured was not aware of the use of the car
did not know the driver, and contending further the taking of car did not constitute theft.

ISSUE:

Whether Empire Insurance Company can invoke the Authorized Driver Clause.

RULING:

No, Empire Insurance Company cannot invoke the Authorized Driver Clause to deny liability on the insurance claim.

The main purpose of the "authorized driver" clause is that a person other than the insured owner, who drives the car
on the insured's order, such as his regular driver, or with his permission, such as a friend or member of the family or
the employees of a car service or repair shop must be duly licensed drivers and have no disqualification to drive a
motor vehicle.

A car owner who entrusts his car to an established car service and repair shop necessarily entrusts his car key to
the shop owner and employees who are presumed to have the insured's permission to drive the car for legitimate
purposes of checking or road-testing the car. The mere happenstance that the employee(s) of the shop owner
diverted the use of the car to his own illicit or unauthorized purpose in violation of the trust reposed in the shop by
the insured car owner did not mean that the "authorized driver" clause has been violated such as to bar recovery,
provided that such employee is duly qualified to drive under a valid driver's license.

Further, the taking of the car constituted the nature of theft under Article 308 of the Revised Penal Code as the car
was unlawfully or wrongfully taken without the owner’s knowledge.

It was unlikely for the driver to be possessing a 45 calibre and an apple type grenade car if the car would have
been used for a joy ride or any other purpose. Further, there usage was without the consent of the owner.

Hence, the insurer must therefore indemnify the petitioner-owner for the total loss of the insured car in the sum of
P35,000.00 under the theft clause of the policy, subject to the filing of such claim for reimbursement or payment as it
may have as subrogee against the Sunday Machine Works, Inc.
PALERMO VS PYRAMID INSURANCE
677 SCRA 161

FACTS:
On October 12, 1968, after having purchased a brand new Nissan Cedric de Luxe Sedan car bearing Motor
No. 087797 from the Ng Sam Bok Motors Co. in Bacolod City, plaintiff insured the same with the defendant
insurance company against any loss or damage for P20,000.00 and against third party liability for P10,000.00.
Plaintiff paid the defendant P361.34 premium for one year, March 12, 1968 to March 12, 1969, for which
defendant issued Private Car Comprehensive Policy No. MV-1251.

The automobile was, however, mortgaged by the plaintiff with the vendor, Ng Sam Bok Motors Co., to secure
the payment of the balance of the purchase price, which explains why the registration certificate in the name of
the plaintiff remains in the hands of the mortgagee, Ng Sam Bok Motors Co.

On April 17, 1968, while driving the automobile in question, the plaintiff met a violent accident. The La Carlota
City fire engine crashed head on, and as a consequence, the plaintiff sustained physical injuries, his father,
Cesar Palermo, who was with him in the car at the time was likewise seriously injured and died shortly
thereafter, and the car in question was totally wrecked.

The defendant was immediately notified of the occurrence, and upon its orders, the damaged car was towed
from the scene of the accident to the compound of Ng Sam Bok Motors in Bacolod City where it remains
deposited up to the present time.

The insurance policy, Exhibit ‘A,’ grants an option unto the defendant, in case of accident either to indemnify
the plaintiff for loss or damage to the car in cash or to replace the damaged car. The defendant, however,
refused to take either of the above-mentioned alternatives for the reason as alleged, that the insured himself
had violated the terms of the policy when he drove the car in question with an expired driver’s license.”

ISSUE:
Whether THE EXPIRED LICENSE WOULD NOT PREVENT THE INSURED FROM RECOVERING the
proceeds of the insurance

RULING:
YES. While the Motor Vehicle Law prohibits a person from operating a motor vehicle on the highway without a
license or with an expired license, an infraction of the Motor Vehicle Law on the part of the insured, is not a bar
to recovery under the insurance contract. It however renders him subject to the penal sanctions of the Motor
Vehicle Law.

The requirement that the driver be “permitted. in accordance with the licensing or other laws or regulations to
drive the Motor Vehicle and is not disqualified from driving such motor vehicle by order of a Court of Law or by
reason of any enactment or regulation in that behalf,” applies only when the driver “is driving on the insured’s
order or with his permission.” It does not apply when the person driving is the insured himself.

The main purpose of the ‘authorized driver’ clause, as may be seen from its text, is that a person other than the
insured owner, who drives the car on the insured’s order, such as his regular driver, or with his permission,
such as a friend or member of the family or the employees of a car service or repair shop, must be duly
licensed drivers and have no disqualification to drive a motor vehicle.