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Philippine Supre m e C ourt Jurisprude nce > Ye ar 1984 > Fe bruary 1984 De cisions > G.R . No. L-34768
Fe bruary 24, 1984 - JAMES STO KES, ET AL. v. MALAYAN INSUR ANC E C O., INC .:

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FIRST DIVISION

[G.R. No. L-34768. February 24, 1984.]

JAMES STOKES, as Attorney-in-Fact of Daniel Stephen Adolfson and DANIEL STEPHEN

ADOLFSON, Plaintiffs-Appellees, v. MALAYAN INSURANCE CO., INC., Defendant-Appellant.

Rodrigo M. Nera for Plaintiffs-Appellees.

Pio B. Salomon, Jr., for Defendant-Appellant.

SYLLABUS

1. MERC ANTILE LAW; INSURANC E C ONTRAC T; C OMPLIANC E WITH TERMS THEREOF, A C ONDITION
PREC EDENT TO REC OVERY. — A contract of insurance is a contract of indemnity upon the terms and
conditions specified therein. When the insurer is called upon to pay in case of loss or damage, he has
the right to insist upon compliance with the terms of the contract. If the insured cannot bring himself
within the terms and conditions of the contract, he is not entitled as a rule to recover for the loss or
damage suffered. For the terms of the contract constitute the measure of the insurer’s liability, and
compliance therewith is a condition precedent to the right of recovery. (Young v. Midland Textile
Insurance C o., 30 Phil. 617.)

DebtKollect Company, Inc.
2. ID.; ID.; ID.; "AUTHORIZED DRIVER" C LAUSE, MEANING. — Under the "authorized driver" clause,
an authorized driver must not only be permitted to drive by the insured. It is also essential that he is
permitted under the law and regulations to drive the motor vehicle and is not disqualified from so
doing under any enactment or regulation. At the time of the accident, Stokes had been in the
Philippines for more than 90 days. Hence, under the law, he could not drive a motor vehicle without a
Philippine driver’s license. He was therefore not an "authorized driver" under the terms of the
insurance policy in question, and MALAYAN was right in denying the claim of the insured.

3. ID.; ID.; AC C EPTANC E OF PREMIUM WITHIN THE STIPULATED PERIOD FOR PAYMENT DOES NOT
ESTOP INSURER FROM INTERPOSING ANY VALID DEFENSE. — Acceptance of premium within the
stipulated period for payment thereof, including the agreed period of grace, merely assures continued
effectivity of the insurance policy in accordance with its terms. Such acceptance does not estop the
insurer from interposing any valid defense under the terms of the insurance policy.

4. C IVIL LAW; PRINC IPLE OF ESTOPPEL, DEFINED; NOT APPLIC ABLE TO C ASE AT BAR. — The
principle of estoppel is an equitable principle rooted upon natural justice which prevents a person
from going back on his own acts and representations to the prejudice of another whom he has led to
rely upon them. The principle does not apply to the instant case. In accepting the premium payment
of the insured, MALAYAN was not guilty of any inequitable act or representation. There is nothing
inconsistent between acceptance of premium due under an insurance policy and the enforcement of
its terms.

ChanRobles Intellectual Property

DE CISION
Division
PLANA, J.:

This is an appeal by Malayan Insurance C ompany, Inc. (MALAYAN) from a decision of C ourt of First
Instance of Manila ordering it to pay the insured under a car insurance policy issued by MALAYAN to
Daniel Stephen Adolfson against own damage as well as third party liability. c h a n ro b le s v irtu a la wlib a
r ry c h a n ro b le s .c o m:c h a n ro b le s .c o m.p h

The facts are not in dispute, Adolfson had a subsisting MALAYAN car insurance policy with the above
coverage on November 23, 1969 when his car collided with a car owned by C esar Poblete, resulting
in damage to both vehicles. At the time of the accident, Adolfson’s car was being driven by James
Stokes, who was authorized to do so by Adolfson. Stokes, an Irish citizen who had been in the
Philippines as a tourist for more than ninety days, had a valid and subsisting Irish driver’s license but
without a Philippine driver’s license.

After the collision, Adolfson filed a claim with MALAYAN but the latter refused to pay, contending that
Stokes was not an authorized driver under the "Authorized Driver" clause of the insurance policy in
relation to Section 21 of the Land Transportation and Traffic C ode.

Under the insurance policy, "authorized driver" refers to —

"(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." ca
r la wv irtu a 1 a wlib a
r ry

The cited Section 21 of the Land Transportation and Traffic C ode provides: jg c :c h a n ro b le s .c o m.p h

"Operation of motor vehicles by tourists. — Bona fide tourists and similar transients who are duly
licensed to operate motor vehicles in their respective countries may be allowed to operate motor
 vehicles during but not after ninety days of their sojourn in the Philippines.

x x x

"After ninety days, any tourist or transient desiring to operate motor vehicles shall pay fees and
obtain and carry a license as hereinafter provided." (Emphasis supplied.)

Unable to convince MALAYAN to pay, Stokes and Adolfson brought suit before the C ourt of First
Instance of Manila and succeeded in getting a favorable judgment, although Stokes had ceased to be
authorized to drive a motor vehicle in the Philippines at the time of the accident, he having stayed
therein as a tourist for over 90 days without having obtained a Philippine driver’s license. The C ourt
held that Stokes’ lack of a Philippine driver’s license was not fatal to the enforcement of the insurance
policy; and the MALAYAN was estopped from denying liability under the insurance policy because it
accepted premium payment made by the insured one day after the accident. It said: jg c :c h a n ro b le s .c o m.p h

"Defendant cannot evade liability under the policy by virtue of the above provision of the Land
Transportation and Traffic C ode. This is an insurance case. The basis of insurance contracts is good
faith and trust between the insurer and the insured. The matter of the failure on the part of Stokes to
have a Philippine driver’s license is not such a defect that can be considered as fatal to the contract
of insurance, because the fact is that Stokes still had a valid and unexpired Irish license. As a matter
of fact, the traffic officer who investigated the incident gave Stokes a traffic violation receipt and not
a ticket for driving without license.

"Then the C ourt believes that defendant is in estoppel in this case because it allowed the plaintiff to
pay the insurance premium even after the accident occurred. Admitting for the sake of argument that
there was a violation of the terms of the policy before the incident, the admission or acceptance by
the insurance company of the premium should be considered as a waiver on its part to contest the
claim of the plaintiffs." ca
r la wv irtu a 1 a wlib a
r ry

In this appeal, the two issues resolved by the court a quo are raised anew. We find the appeal
meritorious.

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1. A contract of insurance is a contract of indemnity upon the terms and conditions specified therein.
When the insurer is called upon to pay in case of loss or damage, he has the right to insist upon
compliance with the terms of the contract. If the insured cannot bring himself within the terms and
conditions of the contract, he is not entitled as a rule to recover for the loss or damage suffered. For
the terms of the contract constitute the measure of the insurer’s liability, and compliance therewith is
a condition precedent to the right of recovery. (Young v. Midland Textile Insurance C o., 30 Phil. 617.)
Under the "authorized driver" clause, an authorized driver must not only be permitted to drive by the
insured. It is also essential that he is permitted under the law and regulations to drive the motor
vehicle and is not disqualified from so doing under any enactment or regulation. c h a n ro b le s v irtu a la wlib a
r ry

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At the time of the accident, Stokes had been in the Philippines for more than 90 days. Hence, under
the law, he could not drive a motor vehicle without a Philippine driver’s license. He was therefore not
an "authorized driver" under the terms of the insurance policy in question, and MALAYAN was right in
denying the claim of the insured. ca
r la wn a d

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2. Acceptance of premium within the stipulated period for payment thereof, including the agreed
period of grace, merely assures continued effectivity of the insurance policy in accordance with its
terms. Such acceptance does not estop the insurer from interposing any valid defense under the
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The principle of estoppel is an equitable principle rooted upon natural justice which prevents a person
from going back on his own acts and representations to the prejudice of another whom he has led to
rely upon them. The principle does not apply to the instant case. In accepting the premium payment
of the insured, MALAYAN was not guilty of any inequitable act or representation. There is nothing
inconsistent between acceptance of premium due under an insurance policy and the enforcement of
its terms.
c h a n ro b le s v irtu a la wlib a
r ry

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