Authorized Driver: Any of The Following: (A) The Insured (B) Any Person Driving On The Insured's Order, or With His Permission

G.R. No.
96452 May 7, 1992
PERLA COMPANIA DE SEGUROS, INC. vs. THE COURT OF APPEALS, HERMINIO LIM and EVELYN LIM
G.R. No. 96493 May 7, 1992
FCP CREDIT CORPORATION vs. THE COURT OF APPEALS, Special Third Division, HERMINIO LIM and
EVELYN LIM
Facts:
On December 24, 1981, private respondents spouses Herminio and Evelyn Lim executed a
promissory note in favor Supercars, Inc. in the sum of P77,940.00, payable in monthly installments
according to the schedule of payment indicated in said note, and secured by a chattel mortgage over a
brand new red Ford Laser 1300 5DR Hatchback 1981 model with motor and serial No. SUPJYK-03780,
which is registered under the name of private respondent Herminio Lim and insured with the petitioner
Perla Compania de Seguros, Inc. (Perla for brevity) for comprehensive coverage under Policy No.
PC/41PP-QCB-43383.
On the same date, Supercars, Inc., with notice to private respondents spouses, assigned to
petitioner FCP Credit Corporation (FCP for brevity) its rights, title and interest on said promissory note
and chattel mortgage as shown by the Deed of Assignment.
At around 2:30 P.M. of November 9, 1982, said vehicle was carnapped while parked at the back
of Broadway Centrum along N. Domingo Street, Quezon City. On November 10, 1982, private
respondent Evelyn Lim reported said incident to the Land Transportation Commission in Quezon City, as
shown by the letter of her counsel to said office, in compliance with the insurance requirement. On
November 11, 1982, private respondent filed a claim for loss with the petitioner Perla but said claim was
denied on November 18, 1982 10 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 of said vehicle
which is in violation of the authorized driver clause of the insurance policy, which states, to wit:
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 Scheduled Vehicle, or has been permitted and is not disqualified by order of a
Court of Law or by reason of any enactment or regulation in that behalf.
On November 17, 1982, private respondents’ requests from petitioner FCP for a suspension of
payment on the monthly amortization agreed upon due to the loss of the vehicle and, since the
carnapped vehicle insured with petitioner Perla, said insurance company should be made to pay the
remaining balance of the promissory note and the chattel mortgage contract. Perla, however, denied
private respondents' claim. Consequently, petitioner FCP demanded that private respondents pay the
whole balance of the promissory note or to return the vehicle but the latter refused.
Issue:
1. Whether the loss of the collateral (car) exempted the debtor from his admitted obligations
under the promissory note particularly the payment of interest, litigation expenses and
attorney's fees
2. Whether the petitioner’s contention that it is the authorized driver clause that is applicable in
the present case
Held:
1. No. This Court agrees with petitioner FCP that private respondents are not relieved of their
obligation to pay the former the installments due on the promissory note on account of the loss
of the automobile. The chattel mortgage constituted over the automobile is merely an
accessory contract to the promissory note. Being the principal contract, the promissory note is
unaffected by whatever befalls the subject matter of the accessory contract. Therefore, the
unpaid balance on the promissory note should be paid, and not just the installments due and
payable before the automobile was carnapped, as erroneously held by the Court of Appeals.
2. It is the "THEFT"' clause, and not the "AUTHORIZED DRIVER" clause that should apply in the
present case. 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 appellants' 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. It is worthy to note that 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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G.R. No.

96452 May 7, 1992

G.R. No. 96493 May 7, 1992

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