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PERLA COMPANIA DE SEGUROS v. CA

FACTS:

Private respondents Herminio and Evelyn Lim executed a promissory note in favor of Supercars, Inc. for the purchase of a vehicle. The promissory note was secured by a chattel mortgage and the vehicle was insured with petitioner Perla Compania de Seguros, Inc. (Perla). Supercars, Inc. assigned its rights on the promissory note and chattel mortgage to petitioner FCP Credit Corporation (FCP). The vehicle was carnapped while parked in Quezon City, and private respondent Evelyn Lim immediately reported the incident to the authorities. Private respondents filed a claim for the loss with Perla, but it was denied due to an expired driver's license. Petitioner FCP demanded payment from private respondents, but they refused to pay. Petitioner FCP filed a complaint against private respondents, who filed a third-party complaint against Perla. The trial court ruled in favor of petitioner FCP, but the Court of Appeals reversed the decision. Petitioner Perla filed a petition seeking to annul the decision of the Court of Appeals.

ISSUES:

  1. Whether or not private respondents violated the insurance contract by using the vehicle with an expired driver's license.

  2. Whether or not the loss of the collateral exempts the debtor from the obligations under the promissory note.

RULING:

  1. The Court found no merit in petitioner Perla's argument that private respondents violated the insurance contract. The authorized driver clause, which states the conditions for an authorized driver, is not applicable to the "Theft" clause of the insurance contract. Therefore, private respondents' use of the vehicle with an expired driver's license does not invalidate their insurance claim.

  2. The Court did not provide a ruling on the second issue raised by petitioner FCP.

PRINCIPLES:

  • The terms and conditions of an insurance contract should be strictly construed against the insurer in case of doubt. (Doctrine of strict construction)

  • The terms of an insurance policy should be clear and should not be interpreted against the insured. (Doctrine of reasonable interpretation)