MOTOR CAR INSURANCE

1. Define Motor Car Insurance.

It is a contract whereby one (1) party promises for a consideration to indemnify the other for direct loss or damage of the
insured vehicle and to pay any claim for death of or bodily injury to and property damage of any Third Party caused by or
arising from the ownership or operation of the vehicle.

In summary, the motor car insurance shall cover the following:

a. Death or bodily injury or death of a third party.

b. Property damage to third parties and

c. Loss of or Damage to the insured vehicle.

2. What are the kinds of motor car insurance policies?

There are five (5) kinds of motor car insurance policies?

a. Private Car

b. Commercial Vehicle

c. Motor Trade

d. Motor Cycle

e. Land Transportation Operators Policy

II. COVERAGES

3. What is a comprehensive motor car insurance policy?

A comprehensive motor car insurance policy is one in which all four (4) sections are availed of by the insured. It shall
cover death or bodily injury or death of a third party, property damage to third parties, and damage to or theft of the
insured vehicle.

4. What are the four (4) main sections of Standard Motor Car Insurance policy?

They are as follows:

a. Section 1 - Compulsory Third Liability Insurance (CTPL)

b. Section 2 - No Fault Indemnity Clause

c. Section 3 - Own Damage Cover

d. Section 4 - Excess Third Party Bodily Injury Cover

Other than the CTPL, the rest are optional covers. Availment of the rest of the sections is subject to the payment of
additional premium.

2.a. Compulsory Third Party Liability Insurance (CTPL)

5. What are the brief features of CTPL?

It is a compulsory insurance cover for death and/or bodily injury. It is a pre-requisite for the registration of ones motor
vehicle.

The overriding consideration in compelling motor vehicle owners or operators to have a third party liability insurance is to
assure victims or their dependents, especially when they are poor, immediate financial assistance or indemnity,
regardless of the financial capacity of the motor vehicle owners or operators responsible for the accident.

The insurers liability is primary and accrues immediately upon the occurrence of the injury or event upon which the
liability depends, and does not depend on the recovery of judgment by the injured party against the insured.
6. Will the CTPL respond. the vehicle involved is the accident is not owned by the insured?

It depends. If is it is a private car, the claim will be paid. Under the Private Car Motor Insurance Policy, the policy shall
indemnify the insured while "personally driving a private car not belonging to him and not hired to him under a hire
purchase agreement."

What is the nature of the insureds liability under the CTPL?

The insurers liability is primary and accrues immediately upon the occurrence of the injury or event upon which liability
depends, and does not depend on the recovery of judgment by the injured party against the insured. [2]

9. What is extent of liability of an insurer in any given accident?

The limit of liability of an insurer shall be Php 100,000.00 per accident regardless of the number of passengers killed or
injured. This is notwithstanding the courts finding that the insured will have to pay more than the total sum insured. [3]

10. Sheryl insured her newly-acquired car, a Nissan Maxima against loss or damage from Php 50,000.00 with the XYZ
Insurance Corp. (XYZ). Under the policy, the car must be driven only by an authorized driver who is either: (1) the insured, or (2)
any person driving on the insureds 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.

During the effectivity of the policy, the car, then driven by Sheryl herself, who had no drivers license, met an accident and was
extensively damaged. The estimated cost of repair was Php 40,000.00. Sheryl immediately notified XYZ but the latter refused to
pay on the policy alleging the she violated the terms thereof when she drove it without a drivers license.

Is the insurer correct? (1991 Bar Examination)

No. The provision requiring the driver to be not in violation of any motor vehicle law applies only if the one driving the
insured vehicle is other than the insured. Since Sheryl is the insured herself. The insurer is liable to pay her for the loss
she suffered.

11. Mayari obtained a comprehensive insurance policy on his car. The policy carried the stand authorized driver clause which
states that the insurance company is not liable for any loss, accident or damage sustained while the car is being driven by someone
other than a duly authorize driver. Kaibigan had been driving for the past fives years but it appears that his drivers license was
irregularly because he cannot read or write; neither did he take any of the prescribed drivers test. After the initial license was
issued, merely asked his wife to go to the LTO to get the renewal of his license. Mayari did not know about the irregularity in the
drivers license of Kaibigan.

Can Mayari recover on the insurance policy? Explain. (1986 Bar Examination)

Mayari cannot recover under the policy since Kaibigan, at the time of the accident, did not qualify as an authorized driver.
An irregular license is not a license at all.

Will the policy respond if the driver of the insured vehicle gets involved in an accident with an expired license?

It depends.

Yes. If the driver is the insured himself. 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 law on the part of the insured is not a bar to
recovery under the insurance contract. It, however, renders him liable to the penal provisions of the motor vehicle law.[4]

No. If the driver is other than the insured himself, the requirement that the driver must not be in violation of motor vehicle
law applies.[5]

13. In case the insured vehicle is unlawfully taken and was subsequently damaged, will the claim be denied on account of the
Authorized Drivers Clause?

No. The Authorized Drivers Clause will not apply in case of theft. Theft is an entirely different legal concept from that of an
accident and risk against accident is distinct from the risk against theft. There is no causal connection between the
possession of a valid drivers license and the loss of the insured vehicle.[6]

14. Can a third party file a claim directly against the motor car insurance?
Yes. If the claim will be made against Section 1 - Compulsory Third Liability Insurance (CTPL). If the claimant is a third
party, the claim shall lie against the insurer of the directly offending vehicle. [7]

If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he
communicated his acceptance to the Principal before its revocation. A mere incidental benefit or interest of a person is
not sufficient. The contracting parties must have clearly and deliberately conferred favor upon a third person. [8]

15. Who is a third party?

It is defined as any person other than a passenger, excluding: (1) a member of the household, (2) or a member of the
family within the second degree of consanguinity or affinity, of the insured vehicles owner or (3) his employee in respect
of death, bodily injury or damage to property arising out of and in the course of employment.

ADDITIONAL BAR QUESTIONS

Insurance; Perfection of Insurance Contracts (2003)

Josie Gatbonton obtained from Warranty Insurance Corporation a comprehensive motor vehicle
insurance to cover her brand new automobile. She paid, and the insurer accepted payment in check.
Before the check could be encashed, Josie was involved in a motor vehicle accident where her car
became a total wreck. She sought payment from the insurer. Could the insurer be made liable under

the insurance coverage? (6%)

SUGGESTED ANSWER:

(per Dondee) Yes, because there was a perfected contract of insurance the moment there is a meeting
of the minds with respect to the object and the cause of payment. The payment of check is a valid
payment unless upon encashment the check bounced.