Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-36480 May 31, 1988

ANDREW PALERMO, plaintiff-appellee, 
vs.
PYRAMID INSURANCE CO., INC., defendant- appellant.

GRIÑO-AQUINO, J:

The Court of Appeals certified this case to Us for proper disposition as the only question involved is the
interpretation of the provision of the insurance contract regarding the "authorized driver" of the insured motor
vehicle.

On March 7, 1969, the insured, appellee Andrew Palermo, filed a complaint in the Court of First Instance of
Negros Occidental against Pyramid Insurance Co., Inc., for payment of his claim under a Private Car
Comprehensive Policy MV-1251 issued by the defendant (Exh. A).

In its answer, the appellant Pyramid Insurance Co., Inc., alleged that it disallowed the claim because at the time
of the accident, the insured was driving his car with an expired driver's license.

After the trial, the court a quo rendered judgment on October 29, 1969 ordering the defendant "to pay the
plaintiff the sum of P20,000.00, value of the insurance of the motor vehicle in question and to pay the costs."

On November 26, 1969, the plaintiff filed a "Motion for Immediate Execution Pending Appeal." It was opposed
by the defendant, but was granted by the trial court on December 15, 1969.

The trial court found the following facts to be undisputed:

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 P 20,000.00
and against third party liability for P 10,000.00. Plaintiff paid the defendant P 361.34 premium
for one year, March 12, 1968 to March 12, 1969, for which defendant issued Private Car
Comprehensive Policy No. MV-1251, marked Exhibit "A."

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 am 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. (Decision, Oct. 29,
1969, p. 68, Record on Appeal.)

Appellant alleges that the trial court erred in interpreting the following provision of the Private Car
Comprehensive Policy MV-1251:

AUTHORIZED DRIVER:

Any of the following:

(a) The Insured.

(b) Any person driving on the Insured's order or with his permission. Provided that the person
driving is 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. (Exh. "A.")

There is no merit in the appellant's allegation that the plaintiff was not authorized to drive the insured motor
vehicle because his driver's license had expired. The driver of the insured motor vehicle at the time of the
accident was, the insured himself, hence an "authorized driver" under the policy.

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.

This view may be inferred from the decision of this Court in Villacorta vs. Insurance Commission, 100 SCRA
467, where it was held that:

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.

In an American case, where the insured herself was personally operating her automobile but without a license
to operate it, her license having expired prior to the issuance of the policy, the Supreme Court of
Massachusetts was more explicit:

... Operating an automobile on a public highway without a license, which act is a statutory
crime is not precluded by public policy from enforcing a policy indemnifying her against liability
 for bodily injuries The inflicted by use of the automobile." (Drew C. Drewfield McMahon vs.
Hannah Pearlman, et al., 242 Mass. 367, 136 N.E. 154, 23 A.L.R. 1467.)

WHEREFORE, the appealed decision is affirmed with costs against the defendant-appellant.

SO ORDERED.

Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

ANDREW PALERMO vs. PYRAMID INSURANCE CO., INC. [G.R. No. L-36480 May 31, 1988]

Facts:
Petitioner, having purchased a brand new Nissan Cedric de Luxe Sedan, insured the same with the
defendant insurance company against any loss or damage for P 20,000.00 and against third party liability
for P 10,000.00. Plaintiff paid the defendant P 361.34 premium for one year 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. while driving the automobile in
question, the plaintiff met a violent accident. The insured, Andrew Palermo, filed a complaint in the
Court of First Instance against Pyramid Insurance Co., Inc., for payment of his claim under a Private Car
Comprehensive Policy issued by the defendant. In its answer, Pyramid Insurance Co., Inc., alleged that it
disallowed the claim because at the time of the accident, the insured was driving his car with an expired
driver's license. the court a quo rendered judgment ordering the defendant to pay the plaintiff value of
the insurance of the motor vehicle in question and to pay the costs."

Issue:
Whether the insured is considered an unauthorized driver if he has an expired driver’s license,
thus the insurer is not liable under the policy.

Ruling:
There is no merit in the appellant's allegation that the plaintiff was not authorized to drive the insured
motor vehicle because his driver's license had expired. The driver of the insured motor vehicle at the
time of the accident was, the insured himself, hence an "authorized driver" under the policy. 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.