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Dec 3, 2008

208 SCRA 487 (1992)

  • INSURANCE LAW: Warranties
  • Authorized Driver Clause applies only in accidents, etc. but not to theft

Spouses Lim purchased a brand new red Ford Laser car from Supercars, Inc. in a sale by installment secured by a chattel mortgage. The same car is insured with Perla Compania de Seguros (Perla). On the same day, Supercars, Inc. assigned its rights, title and interest to FCP Credit Corporation (FCP).

On a later date, the vehicle was carnapped. Spouses Lim filed a claim for loss with Perla but this was denied on the ground that Evelyn Lim, who was using the vehicle before it was carnapped, was in possession of an expired driver’s license at the time of the loss, in violation of the authorized driver clause of the insurance policy.

  • Whether or not Perla is liable despite the alleged violation of the authorized driver clause in the insurance contract


The Supreme Court held that Perla is liable to pay the insurance claim.

The comprehensive motor car insurance policy issued by Perla covered loss or damage to the car: (a) xxx; (b) by fire, external explosion, self-ignition or lightning or burglary, housebreaking or theft; (c) xxx.

Where a car is admittedly unlawfully and wrongfully taken without the owner’s consent or knowledge, such taking constitutes theft, and therefore, it is the “THEFT” clause, and not the “AUTHORIZED DRIVER” clause that should apply.

The Court of Appeals was correct in holding that:

“…Theft is an entirely different legal concept from that of accident. Theft is committed by a person with the intent to gain or, to put it in another way, with the concurrence of the doer’s will. On the other hand, accident, although it may proceed or result from negligence, is the happening of an event without the concurrence of the will of the person by whose agency it was caused. (Bouvier’s Law Dictionary).

Clearly, the risk against accident is distinct from the risk against theft. The “authorized driver clause” in a typical insurance policy is in contemplation or anticipation of accident in the legal sense in which it should be understood, and not in contemplation or anticipation of an event such as theft. The distinction – often seized upon by insurance companies in resisting claims from their assureds – between death occurring as a result of accident and death occurring as a result of intent may, by analogy, apply to the case at bar. Thus, if the insured vehicle had figured in an accident at the time she drove it with an expired license, then, appellee Perla Compania could properly resist appellant’s claim for indemnification for the loss or destruction of the vehicle resulting from the accident. But in the present case, the loss of the insured vehicle did not result from an accident where intent was involved; the loss in the present case was caused by theft, the commission of which was attended by intent.”

There is no causal connection between the possession of a valid driver’s license and the loss of a vehicle. To rule otherwise would render car insurance practically a sham since an insurance company can easily escape liability by citing restrictions which are not applicable or germane to the claim, thereby reducing indemnity to a shadow.

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