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

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

This is an appeal by Malayan Insurance Company, Inc. (MALAYAN) from a decision of Court 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.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

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 Cesar 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 Code.

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."cralaw
virtua1aw library

The cited Section 21 of the Land Transportation and Traffic Code provides:jgc:chanrobles.com.ph

"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 Court 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 Court 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:

"Defendant cannot evade liability under the policy by virtue of the above provision of the Land
Transportation and Traffic Code. 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 Court 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."cralaw virtua1aw library

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

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 Co., 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.chanrobles virtual lawlibrary

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.cralawnad

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 terms of the insurance policy.

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.chanroblesvirtualawlibrary

WHEREFORE, the appealed judgment is reversed. The complaint is dismissed. Costs against the
appellees.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Relova and Gutierrez, Jr., JJ., concur.