G.R. No. L-26827 June 29, 1984
Agapito Gutierrez, plaintiff-appellee, vs. Capital Insurance & Surety Co., Inc., defendant-appellant.

FACTS

Capital Insurance & Surety Co., Inc. insured Agapito Gutierrez’s jeepney against third-party liability for one year from December 7, 1961. The policy contained a specific condition in Item 13, declaring that an authorized driver must hold a valid professional driver’s license. It explicitly stated that “a driver with an expired Traffic Violation Receipt or expired Temporary Operator’s Permit is not considered an authorized driver.” On May 29, 1962, the insured jeepney met with an accident resulting in the death of a passenger, Agatonico Ballega.
The driver, Teofilo Ventura, possessed a valid professional driver’s license for 1962-1963, but it had been confiscated by traffic authorities. At the time of the accident, he only held a carbon copy of a Traffic Violation Report (TVR) issued on February 22, 1962, which also served as a Temporary Operator’s Permit valid for only 15 days from its receipt. Consequently, at the time of the May 29 accident, Ventura was operating the vehicle with an expired Temporary Operator’s Permit. Gutierrez paid the victim’s widow P4,000 and sought reimbursement from the insurer, which was refused, leading to this action.

ISSUE

Whether the insurance company is liable to reimburse the insured despite the driver operating the vehicle with an expired Temporary Operator’s Permit at the time of the accident.

RULING

No, the insurance company is not liable. The Supreme Court reversed the lower court’s decision and dismissed the complaint. The ruling is anchored on the explicit and unambiguous terms of the insurance contract. Paragraph 13 of the policy definitively stipulated that a driver with an expired TVR or Temporary Operator’s Permit is not an authorized driver. Since Ventura was driving with an expired permit at the time of the accident, he was expressly excluded from the policy’s coverage as an unauthorized driver.
The Court emphasized that the rights and obligations of the parties are governed strictly by the insurance contract, which constitutes the law between them. The insured’s argument that the TVR should be considered coterminous with the validity period of the confiscated license, while potentially relevant for traffic law purposes, is irrelevant to the insurance contract. The policy independently defined the conditions for an “authorized driver,” and this contractual definition is binding. The insurer validly incorporated this exclusion to limit its risk, and the insured’s failure to comply with this warranty bars recovery. The expiration of the temporary permit created a breach of a policy condition, absolving the insurer of liability.