GENERAL CONCEPTS this approval had in some way to be communicated by the company to the

applicant.
Enriquez v. Sun Life Assurance Company of Canada
G.R. No. L-15895, 29 November 1920 The further admitted facts are that the head office in Montreal did accept the
application, did cable the Manila office to that effect, did actually issue the
FACTS: On September 24, 1917, Joaquin Herrer made application to the Sun policy and did, through its agent in Manila, actually write the letter of
Life Assurance Company of Canada through its office in Manila for a life notification and place it in the usual channels for transmission to the addressee.
annuity. 2 days later, he paid P6,000 to the manager of the company’s Manila The fact as to the letter of notification thus fails to concur with the essential
office and was given a receipt. elements of the general rule pertaining to the mailing and delivery of mail.

The application was immediately forwarded to the head office of the company at Judgment is reversed, and the plaintiff shall have and recover from the defendant
Montreal, Canada. On November 26, 1917, the head office gave notice of the sum of P6,000 with legal interest from November 20, 1918, until paid,
acceptance by cable to Manila. The policy was then issued at Montreal. without special finding as to costs in either instance.
Subsequently, Atty. Aurelio Torres wrote to the Manila office of the company
stating that Herrer desired to withdraw his application. The following day the Eternal Gardens v. The Philippine American Life Insurance Company
local office replied to Mr. Torres, stating that the policy had been issued, and G.R. No. 166245, 9 April 2008
called attention to the notification of November 26, 1917. This letter was
received by Mr. Torres on the morning of December 21, 1917. Mr. Herrer died FACTS: On December 10, 1980, Philamlife entered into an agreement
on December 20, 1917. denominated as Creditor Group Life Policy No. P-19202 with Eternal Gardens
Memorial Park Corporation. Under the policy, which was renewable annually,
Rafael Enriquez, as administrator of the estate of the late Joaquin Ma. Herrer, the clients of Eternal who purchased burial lots from it on installment basis
brought an action to recover from Sun Life the sum of P6,000 paid by the would be insured by Philamlife, and the amount of insurance coverage depended
deceased for a life annuity. The trial court rendered judgment for the defendant. upon the existing balance of the purchased burial lots.
On appeal, the appellate court affirmed the decision of the trial court.
Eternal was required under the policy to submit to Philamlife a list of all new lot
ISSUE: W/N Mr. Herrer received notice of acceptance of his application thereby purchasers, together with a copy of the application of each purchaser, and the
perfecting his life annuity. amounts of the respective unpaid balances of all insured lot purchasers. Eternal
complied by submitting a letter dated December 29, 1982, a list of insurable
HELD: NO. The contract for life annuity was not perfected because it had not balances of its lot buyers for October 1982 which includes John Chuang which
been proved satisfactorily that the acceptance of the application ever came to the was stamped as received by Philamlife.
knowledge of the applicant. An acceptance of an offer of insurance not actually
or constructively communicated to the proposer does not make a contract of Chuang died on August 2, 1984 with a balance of P100,000. On April 25, 1986,
insurance, as the locus poenitentiae is ended when an acceptance has passed Philamlife had not furnished Eternal with any reply on its insurance claim so the
beyond the control of the party. latter demanded its claim from the former. In response to the demand, Philamlife
denied the insurance claim holding that since the application was submitted only
In resume, therefore, the law applicable to the case is found to be the second on November 15, 1984, after his death, Mr. John Uy Chuang was not covered
paragraph of article 1262 of the Civil Code providing that an acceptance made by under the Policy since his application was not approved. Moreover, the
letter shall not bind the person making the offer except from the time it came to acceptance of the premiums is only in trust for and not a sign of approval.
his knowledge. The pertinent fact is, that according to the provisional receipt,
three things had to be accomplished by the insurance company before there was a The RTC ruled in favor of Eternal. On appeal, the CA reversed.
contract: (1) There had to be a medical examination of the applicant; (2) there
had to be approval of the application by the head office of the company; and (3) ISSUE: W/N Philam’s inaction or non-approval meant the perfection of the
insurance contract.
INSURANCE LAW CASE DIGESTS ARIEL A. MOLINA, CPA
HELD: YES. In the policy, it is provided that: “The insurance of any eligible
Lot Purchaser shall be effective on the date he contracts a loan with the Assured. ISSUE: W/N a healthcare agreement is an insurance contract.
However, there shall be no insurance if the application of the Lot Purchaser is
not approved by the Company.” HELD: YES. Section 2 (1) of the Insurance Code defines a contract of insurance
as an agreement whereby one undertakes for a consideration to indemnify
The seemingly conflicting provisions must be harmonized to mean that upon a another against loss, damage or liability arising from an unknown or contingent
party’s purchase of a memorial lot on installment from Eternal, an insurance event. An insurance contract exists where the following elements concur: 1) The
contract covering the lot purchaser is created and the same is effective, valid, and insured has an insurable interest; 2) The insured is subject to a risk of loss by the
binding until terminated by Philamlife by disapproving the insurance application. happening of the designated peril; 3) The insurer assumes the risk; 4) Such
The second sentence of the policy is in the nature of a resolutory condition which assumption of risk is part of a general scheme to distribute actual losses among a
would lead to the cessation of the insurance contract. large group of persons bearing a similar risk; and 5) In consideration of the
insurer's promise, the insured pays a premium.
A contract of insurance, being a contract of adhesion, par excellence, any
ambiguity therein should be resolved against the insurer. Moreover, the mere Section 3 of the Insurance Code states that any contingent or unknown event,
inaction of the insurer on the issuance application must not work to prejudice the whether past or future, which may damnify a person having an insurable interest
insured; it cannot be interpreted as a termination of the insurance contract. The against him, may be insured against. Every person has an insurable interest in the
termination of the insurance contract by the insurer must be explicit and life and health of himself.
unambiguous.  
In the case at bar, the insurable interest of respondent's husband in obtaining the
Philamcare Health Systems, Inc. v. CA health care agreement was his own health. The health care agreement was in the
G.R. No. 125678, 18 March 2002 nature of non-life insurance, which is primarily a contract of indemnity. Once the
member incurs hospital, medical or any other expense arising from sickness,
FACTS: Ernani Trinos, deceased husband of respondent Julita Trinos, was issued injury or other stipulated contingent, the health care provider must pay for the
a Health Care Agreement for a health coverage with petitioner. During the period same to the extent agreed upon under the contract.
of his coverage, he suffered a heart attack and was confined in the hospital.
Respondent tried to claim the benefits under the health care agreement, but Further, the petitioner cannot rely on the stipulation regarding “Invalidation of
petitioner denied her claim. Thus, respondent paid the hospitalization expenses Agreement.
herself.
Under Section 27 of the Insurance Code, "a concealment entitles the injured
The trial court ruled in favor of the respondent. This was affirmed by the Court party to rescind a contract of insurance." The right to rescind should be exercised
of Appeals. previous to the commencement of an action on the contract. In this case, no
rescission was made. Besides, the cancellation of health care agreements as in
Petitioner points out that only medical and hospitalization benefits are given insurance policies require the concurrence of the following conditions: 
under the agreement without any indemnification, unlike in an insurance contract 1. Prior notice of cancellation to insured;
where the insured is indemnified for his [Link], since Health Care 2. Notice must be based on the occurrence after effective date of the policy of
Agreements are only for a period of one year, as compared to insurance contracts one or more of the grounds mentioned;
which last longer, petitioner argues that the incontestability clause does not 3. Must be in writing, mailed or delivered to the insured at the address shown in
apply, as the same requires an effectivity period of at least two years. Petitioner the policy;
further argues that it is not an insurance company, which is governed by the 4. Must state the grounds relied upon provided in Section 64 of the Insurance
Insurance Commission, but a Health Maintenance Organization under the Code and upon request of insured, to furnish facts on which cancellation is
authority of the DOH. based.

INSURANCE LAW CASE DIGESTS ARIEL A. MOLINA, CPA

None of the above pre-conditions was fulfilled in this case. When the terms of an
insurance contract contain limitations on liability, courts should construe them in Respondent appealed the CTA decision to the CA. CA held that petitioner’s
such a way as to preclude the insurer from non-compliance with his obligation. health care agreement was in the nature of a non-life insurance contract subject
Being a contract of adhesion, the terms of an insurance contract are to be to DST. Petitioner moved for reconsideration but CA denied.
construed strictly against the party which prepared the contract — the insurer.
Petitioner filed a petition to the SC, which denied and affirmed CA’s petition. SC
By reason of the exclusive control of the insurance company over the terms and held that petitioner's health care agreement during the pertinent period was in the
phraseology of the insurance contract, ambiguity must be strictly interpreted nature of non-life insurance which is a contract of indemnity. SC also ruled that
against the insurer and liberally in favor of the insured, especially to avoid petitioner's contention that it is a health maintenance organization (HMO) and
forfeiture. This is equally applicable to Health Care Agreements. not an insurance company is irrelevant because contracts between companies like
petitioner and the beneficiaries under their plans are treated as insurance
Finally, the petitioners alleges that respondent was not the legal wife of the contracts. Petitioner filed the present motion for reconsideration.
deceased member considering that at the time of their marriage, the deceased was
previously married to another woman who was still alive. The health care ISSUE/S: 1) W/N petitioner as a Health Maintenance Organization, is engaged
agreement is in the nature of a contract of indemnity. Hence, payment should be in the insurance business.
made to the party who incurred the expenses. It is not controverted that 2) W/N a health care agreement is an insurance contract.
respondent paid all the hospital and medical expenses. She is therefore entitled to
reimbursement. HELD: 1) NO. Petitioner is an HMO and under RA 7875, an HMO is "an entity
that provides, offers or arranges for coverage of designated health services
Philippine Health Care Providers, Inc. v. CIR needed by plan members for a fixed prepaid premium".
G.R. No. 167330, September 18, 2009
Various courts in the United States, whose jurisprudence has a persuasive effect
FACTS: Petitioner is a domestic corporation whose primary purpose is to on our decisions, have determined that HMOs are not in the insurance business.
establish, maintain, conduct and operate a prepaid group practice health care One test that they have applied is whether the assumption of risk and
delivery system or a health maintenance organization to take care of the sick and indemnification of loss (which are elements of an insurance business) are the
disabled persons enrolled in the health care plan and to provide for the principal object and purpose of the organization or whether they are merely
administrative, legal, and financial responsibilities of the organization.  incidental to its business. If these are the principal objectives, the business is that
Individuals enrolled in its health care programs pay an annual membership fee of insurance. But if they are merely incidental and service is the principal
and are entitled to various preventive, diagnostic and curative medical services purpose, then the business is not insurance.
provided by its duly licensed physicians, specialists and other professional
technical staff participating in the group practice health delivery system at a Applying the "principal objects and purpose test", there is significant American
hospital or clinic owned, operated or accredited by it. case law supporting the argument that a corporation (such as an HMO, whether
or not organized for profit), whose main object is to provide the members of a
In 2007, respondent demanded the payment of deficiency taxes including group with health services, is not engaged in the insurance business.
surcharges and interest for taxable years 1996 and 1997. Deficiency assessment
(documentary stamp tax) was imposed on petitioner’s health care agreement with American courts have pointed out that the main difference between an HMO and
the members of its health care program pursuant to Section 185 of the 1997 Tax an insurance company is that HMOs undertake to provide or arrange for the
Code. provision of medical services through participating physicians while insurance
companies simply undertake to indemnify the insured for medical expenses
Petitioner protested the assessment. As respondent did not act on the protest, incurred up to a pre-agreed limit.
petitioner filed a petition for review in the CTA seeking the cancellation of the
deficiency VAT and DST assessments. CTA cancelled the deficiency DST Overall, petitioner appears to provide insurance-type benefits to its members
assessment against petitioner. (with respect to its curative medical services), but these are incidental to the

INSURANCE LAW CASE DIGESTS ARIEL A. MOLINA, CPA

principal activity of providing them medical care. The "insurance-like" aspect of e.   Although risk is a primary element of an insurance contract, it is not
petitioner's business is miniscule compared to its non-insurance activities. necessarily true that risk alone is sufficient to establish it. There is a need to
distinguish prepaid service contracts (like those of petitioner) from the usual
Therefore, since it substantially provides health care services rather than insurance contracts.
insurance services, it cannot be considered as being in the insurance business.
  Petitioner, as an HMO, undertakes a business risk when it offers to provide
2)  NO, the agreement is not an insurance contract. In Blue Cross and health services: the risk that it might fail to earn a reasonable return on its
Philamcare, the Court pronounced that a health care agreement is in the nature of investment. But it is not the risk of the type peculiar only to insurance
non-life insurance, which is primarily a contract of indemnity. However, those companies. Insurance risk, also known as actuarial risk, is the risk that the cost of
cases did not involve the interpretation of a tax provision. Instead, they dealt with insurance claims might be higher than the premiums paid. The amount of
the liability of a health service provider to a member under the terms of their premium is calculated on the basis of assumptions made relative to the insured.
health care agreement. Such contracts, as contracts of adhesion, are liberally In sum, an examination of petitioner's agreements with its members leads us to
interpreted in favor of the member and strictly against the HMO. For this reason, concluded that it is not an insurance contract within the context of our Insurance
we reconsider our ruling that Blue Cross and Philamcare are applicable. Code.

Section 2 (1) of the Insurance Code defines a contract of insurance as an Tiu v. Arriesgado
agreement whereby one undertakes for a consideration to indemnify another G.R. No. 138060, 1 September 2004
against loss, damage or liability arising from an unknown or contingent event.
An insurance contract exists where the following elements concur: 1) The FACTS: On march 15, 1987, the cargo truck driven by Sergio Pedrano, owned
insured has an insurable interest; 2) The insured is subject to a risk of loss by the by Condor, was parked along the right side of the national highway as its rear tire
happening of the designed peril; 3) The insurer assumes the risk; 4) Such exploded. A spare tire was placed six fathoms away from the stalled truck as
assumption of risk is part of a general scheme to distribute actual losses among a warning to incoming vehicles. Passenger bus owned by petitioner and driven by
large group of persons bearing a similar risk; and 5) In consideration of the Virgilio Te Laspinas hit the stalled truck. The impact damaged the right side of
insurer's promise, the insured pays a premium. The agreements between thebus and left several passengers injured, including the Arriesgado spouses.
petitioner and its members do not possess the said elements. The reasons are: Pedro Arriesgado lost consciousness and suffered a fracture while his wife Felisa
a.  In our jurisdiction, a commentator of our insurance laws has pointed out that, died.
even if a contract contains all the elements of an insurance contract, if its primary
purpose is the rendering of service, it is not a contract of insurance. The primary Respondent Arriesgado filed a complaint for breach of contract of carriage,
purpose of the parties in making the contract may negate the existence of an damages, and attorney’s fees before the RTC of Cebu City against petitioners,
insurance contract. bus operator William Tiu and driver Virgilio Te Las Pinas. The petitioners, for
b.  There is nothing in petitioner's agreements that gives rise to a monetary their part, filed a Third-Party Complaint on August 21, 1987 against the
liability on the part of the member to any third party-provider of medical services following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII),
which might in turn necessitate indemnification from petitioner. petitioner Tiu’s insurer; respondent Benjamin Condor, the registered owner of
c.  According to the agreement, a member can take advantage of the bulk of the the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They
benefits anytime, e.g., laboratory services, x-ray, routine annual physical alleged that petitioner Laspiñas was negotiating the uphill climb along the
examination and consultations, vaccine administration as well as family planning national highway of Sitio Aggies, Poblacion, Compostela, in a moderate and
counseling, even in the absence of any peril, loss or damage on his or her part.  normal speed. It was further alleged that the truck was parked in a slanted
d.  In case of emergency, petitioner is obliged to reimburse the member who manner, its rear portion almost in the middle of the highway, and that no early
receives care from a non-participating physician or hospital. However, this is warning device was displayed.
only a very minor part of the list of services available. The assumption of the
expense by petitioner is not confined to the happening of a contingency but The respondent PPSII, for its part, admitted that it had an existing contract with
includes incidents even in the absence of illness or injury. petitioner Tiu, but averred that it had already attended to and settled the claims of
those who were injured during the incident.13 It could not accede to the claim of
INSURANCE LAW CASE DIGESTS ARIEL A. MOLINA, CPA
respondent Arriesgado, as such claim was way beyond the scheduled indemnity bumped the deceased was driven by Pepito Into, operated and owned by
as contained in the contract of insurance. defendant Destrajo.

The trial court ruled in favor of respondent Arriesgado. Upon appeal, the CA The heirs of Lope Maglana, Sr., here petitioners, filed an action for damages and
affirmed the trial court’s decision. Hence, this petition. attorney's fees against operator Patricio Destrajo and the Afisco Insurance
Corporation  before the then CFI of Davao. An information for homicide thru
ISSUE: W/N PPSII’s insurance policy covers the damages for the death of Felisa reckless imprudence was also filed against Pepito Into.
Arriesgado.
During the pendency of the civil case, Into was sentenced to suffer an
HELD: YES. A perusal of the records will show that when the petitioners filed indeterminate penalty of imprisonment and fine.
the Third-Party Complaint against respondent PPSII, they failed to attach a copy
of the terms of the insurance contract itself. Only Certificate of Cover No. CFI ruled that Destrajo had not exercised sufficient diligence as the operator of
054940 issued in favor of "Mr. William Tiu, Lahug, Cebu City" signed by the jeepney. Petitioners filed a motion for the reconsideration of the of the
Cosme H. Boniel was appended to the third-party complaint. The date of dispositive portion of the decision contending that AFISCO should not merely be
issuance, July 22, 1986, the period of insurance, from July 22, 1986 to July 22, held secondarily liable because the Insurance Code provides that the insurer's
1987. liability is "direct and primary and/or jointly and severally with the operator of
the vehicle, although only up to the extent of the insurance coverage."  Hence,
In fact, respondent PPSII did not dispute the existence of such contract, and they argued that the P20,000.00 coverage of the insurance policy issued by
admitted that it was liable thereon. It claimed, however, that it had attended to AFISCO, should have been awarded in their favor.
and settled the claims of those injured during the incident.
AFISCO argued that since the Insurance Code does not expressly provide for a
As can be gleaned from the Certificate of Cover, such insurance contract was solidary obligation, the presumption is that the obligation is joint.
issued pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It
was expressly provided therein that the limit of the insurer’s liability for each The lower court denied the motion for reconsideration ruling that since the
person was ₱12,000, while the limit per accident was pegged at ₱50,000. An insurance contract "is in the nature of suretyship, then the liability of the insurer
insurer in an indemnity contract for third party liability is directly liable to the is secondary only up to the extent of the insurance coverage." 
injured party up to the extent specified in the agreement but it cannot be held
solidarily liable beyond that amount. The respondent PPSII could not then just Petitioners filed a second motion for reconsideration reiterating that the liability
deny petitioner Tiu’s claim; it should have paid ₱12,000 for the death of Felisa of the insurer is direct, primary and solidary with the jeepney operator because
Arriesgado,59 and respondent Arriesgado’s hospitalization expenses of the petitioners became direct beneficiaries under the provision of the policy
₱1,113.80, which the trial court found to have been duly supported by receipts. which, in effect, is a stipulation pour autrui.  This motion was likewise denied
The total amount of the claims, even when added to that of the other injured for lack of merit.
passengers which the respondent PPSII claimed to have settled, would not
exceed the ₱50,000 limit under the insurance agreement. ISSUE: W/N the insurance company is directly and solidarily liable with the
negligent operator up to the extent of its insurance coverage.
Vda De Maglana v. Consolacion
G.R. No. 60506, 6 August 1992 HELD: The insurance company can be held directly liable by petitioners but is
not is likewise solidarily liable with Destrajo.  
FACTS: Lope Maglana was an employee of the Bureau of Customs whose work
station was at Lasa, here in Davao City. When Maglana was on his way to his The particular provision of the insurance policy on which petitioners base their
work station, driving a motorcycle owned by the Bureau of Customs, he met an claim is as follows:
accident that resulted in his death. He died on the spot. The PUJ jeep that Sec. 1 — LIABILITY TO THE PUBLIC 1. The Company will, subject to the
Limits of Liability, pay all sums necessary to discharge liability of the insured

INSURANCE LAW CASE DIGESTS ARIEL A. MOLINA, CPA

 in respect of (a) death of or bodily injury to any THIRD PARTY; xxx  3. In Villacorta v. The Insurance Commission
the event of the death of any person entitled to indemnity under this Policy, G.R. No. L-54171, 28 October 1980
the Company will, in respect of the liability incurred to such person
indemnify his personal representatives in terms of, and subject to the terms FACTS: Jewel Villacorta was the owner of a 1976 Colt Lancer, insured with the
and conditions hereof.  Empire Insurance Company under Private Car Policy for P35,000.00 — Own
Damage; P30,000.00 — Theft; and P30,000.00 — Third Party Liability, effective
The above-quoted provision leads to no other conclusion but that AFISCO can be for one year from May 16, 1977. Before its expiration, the vehicle was brought to
held directly liable by petitioners. Where an insurance policy insures directly the Sunday Machine Works, Inc., for general check-up and repairs. It was then
against liability, the insurer's liability accrues immediately upon the occurrence allegedly taken by (6) persons and driven out to Montalban, Rizal. While going
of the injury or even upon which the liability depends, and does not depend on North at Montalban, Rizal, it met an accident, hitting a gravel and sand truck
the recovery of judgment by the injured party against the insured. parked at the right side of the road going south. The driver, Benito Mabasa, and
one of the passengers died and the other four sustained physical injuries. The car
The underlying reason behind the third party liability of the Compulsory Motor also suffered damage. Villacorta then filed a claim for total loss with the Empire
Vehicle Liability Insurance is to protect injured persons against the insolvency of Insurance Company but was denied.
the insured who causes such injury, and to give such injured person a certain  
beneficial interest in the proceeds of the policy. Since petitioners had received The Insurance Commission, dismissed petitioner's complaint, sustaining
from AFISCO the sum of P5,000.00 under the no-fault clause, AFISCO's respondent insurer's contention that the accident did not fall within the provisions
liability is now limited to P15,000.00. of the policy either for the Own Damage or Theft coverage, invoking the policy
provision on "Authorized Driver" clause, which provides that, "the policy limits
While it is true that where the insurance contract provides for indemnity against the use of the insured vehicle to (2) persons only, namely: the insured himself or
liability to third persons, such third persons can directly sue the insurer, however, any person on his (insured's) permission. Under the second category, the words
the direct liability of the insurer under indemnity contracts against third party "any person' is qualified by the phrase on the insured's order or with his
liability does not mean that the insurer can be held solidarily liable with the permission.' to make the insurance company liable for the driver's negligence.
insured and/or the other parties found at fault. The liability of the insurer is based Villacorta and her husband admitted that they did not know nor consented for
on contract; that of the insured is based on tort. Benito Mabasa to drive the vehicle at the time of the accident. Apparently, this is
in violation of the 'Authorized Driver' clause of the policy.
The Court then proceeded to distinguish the extent of the liability and manner of  
enforcing the same in ordinary contracts from that of insurance contracts. While Respondent commission likewise upheld private respondent's assertion that the
in solidary obligations, the creditor may enforce the entire obligation against one car was not “stolen”, thus, not covered by the Theft clause, ruling that "The
of the solidary debtors, in an insurance contract, the insurer undertakes for a element of 'taking' in Art. 308 of the RPC means that the act of depriving another
consideration to indemnify the insured against loss, damage or liability arising of a movable thing must be coupled with the intention, at the time of the 'taking',
from an unknown or contingent event.  Thus, petitioner therein, which, under the of withholding it with the character of permanency. The fact that the car was
insurance contract is liable only up to P20,000.00, cannot be made solidarily taken for a joy ride should not be construed to mean 'taking' under Art. 308 of the
liable with the insured for the entire obligation of P29,013.00 otherwise there RPC. If at all, the same was merely temporary, which is not insured against.
would result an evident breach of the concept of solidary obligation.
ISSUE: W/N the respondent Commission’s dismissal of the complaint is proper.
We conclude that the liability of AFISCO based on the insurance contract is
direct, but not solidary with that of Destrajo which is based on Article 2180 of HELD: NO. First, respondent commission's ruling that Benito Mabasa was not
the Civil Code.  As such, petitioners have the option either to claim the P15,000 an "authorized driver" of Villacorta is too restrictive and contrary to the
from AFISCO and the balance from Destrajo or enforce the entire judgment from established principle that insurance contracts, being contracts of adhesion, call
Destrajo subject to reimbursement from AFISCO to the extent of the insurance for greater strictness with a view of protecting the weaker party from abuse. The
coverage. 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, or with his permission,
INSURANCE LAW CASE DIGESTS ARIEL A. MOLINA, CPA
such as 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 a 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 employees of the shop owner diverts the use
of the car to his own unauthorized purpose in violation of the trust reposed in the
shop by the insured car owner does 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.
 
Secondly, (since when a car is unlawfully taken, it is the theft clause, not the
"authorized driver" clause, that applies), where a car is unlawfully taken, be they
employees of the car shop or not to whom it had been entrusted, and was taken
for a joy ride without the owner's consent or knowledge, such taking constitutes
the nature of theft as defined in Art 308 of the RPC. "Who are liable for theft. —
Theft is committed by any person who, with intent to gain but without violence
against or intimidation of persons nor force upon things, shall take personal
property of another without the latter's consent," for purposes of recovering the
loss under the subject policy.
 
The evidence does not warrant respondent commission's findings that it was a
mere "joy ride". The police found from the waist of the Benito Mabasa
Bartolome who smashed the car and was found dead right after the incident "one
cal. 45 Colt. and one apple type grenade," hardly materials one would bring
along on a "joy ride". Then, again, it is equally evident that the taking proved to
be quite permanent rather than temporary, for the car was totally smashed in the
fatal accident and was never returned in a useful condition to Villacorta.

Palermo v. Pyramid Insurance Co.

INSURANCE LAW CASE DIGESTS ARIEL A. MOLINA, CPA