Compulsory Motor Vehicle

Liability Insurance
(CMVLI)
Under Sec 3 (a) of RA No. 4136, a motor
vehicle shall mean any vehicle propelled by
any power other than muscular power
using the public highways, but excepting
road rollers, trolley cars, street sweepers,
sprinklers, lawn mowers, bulldozers,
graders, forklifts, amphibian trucks, and
cranes if not used in public highways,
vehicles which run only on rails or tracks,
and tractors, trailers and traction engines of
all kinds used exclusively for agricultural
purposes.
Meaning of Motor Vehicle Liability
Insurance (CMVLI) is a protection
coverage that will answer for legal
liability for losses and damages for
bodily injuries or property damage that
may be sustained by another arising
from the use and operation of a motor
vehicle by its owner.
How protection is obtained.
Purely on voluntary basis by a motor
vehicle owner to meet his needs in
connection with whatever liability may
be incurred in operating the vehicle. At
present, however, motor vehicle
liability insurance must, to a certain
extent, be taken on compulsory basis
by a motor vehicle owner.
Prerequisite regarding the operation and
registration of motor vehicles.
Sec. 387 of the Insurance Code enjoins a land
transportation operator (LTO) or a motor vehicle
owner (MVO) not to operate his vehicle in public
highways unless there is in force in relation
thereto a policy insurance or guaranty in cash
or surety bond to indemnify the death or
bodily injury of the third party or passenger,
as the case may be, arising from the use thereof
what the law mandates is third party liability
coverage for such death or bodily injury.
The LTO will register or renew the
registration of a motor vehicle only if
there in force in relation thereto such
insurance or guaranty in cash or
surety bond (Sec.376).
Passenger is any fare-paying person
being transported and conveyed in and by
a motor vehicle for transportation of
passengers for compensation, including
persons, expressly authorized by law or by
the vehicles operator or his agents to ride
without fare.
Third party is any person other than a
passenger as defined above and shall also
exclude a member of the household, or a
member of the family within the second degree of
consanguinity or affinity, of a motor vehicle owner
or land transportation operator, as likewise
defined herein, or his employee in respect of
death or bodily injuries arising out of and in
course of employment.
Spirit behind or need for compulsory third
party liability insurance
The overriding consideration in compelling motor
vehicle owners or operators to have third party
liability insurance or surety bonds is to assure
victims of motor vehicle accidents and/ or their
dependents, especially when they are poor
immediate financial assistance or indemnity
regardless of the financial capability of motor
vehicle owners or operators responsible for the
accident sustained.
 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 injured.
(Schafer vs. Judge, RTC 167 SCRA 386)
(1986); First Integrated Bonding & Insurance
Co. Inc. vs, Hernando, 199 SCRA 796 (1991).
The injured or the heirs of a deceased
victim of a vehicular accident may sue directly
the insurer of the vehicle. (GSIS vs. CA, 308
SCRA 559) (1997).
Although the victim may proceed directly against the
insurer for indemnity, the third party liability is up to the
extent of the insurance policy and those required by
law. While it is true that where the insurance contract
provides for indemnity against liability to third persons,
and such third persons can directly sue the insurer, the
direct liability of the insurer under indemnity contracts
against third party liability does not mean that the insurer
can be held liable in solidum with the insured and/or the
other parties found at fault. The liability of the insurer is
based on contract; that of the insured carrier or
vehicle owner is based on tort. (Tiu vs. Arriesgado,
437 SCRA 426) (2004).
 Surety bond or bond in so far as the
subject matter herein is concerned, means an
undertaking to secure the indemnification of
passenger and third party-liability for death or
bodily injuries arising from motor vehicle
accidents.
Public Highway shall mean every public
thoroughfare, public boulevard, driveway,
avenue, park, alley and callejon, but shall not
include roadway upon grounds owned by
private persons, colleges, universities, or
other similar institutions.
"Section 397. Any person having any claim upon the
policy issued pursuant to this chapter shall, without any
unnecessary delay, present to the insurance company
concerned a written notice of claim setting forth the
nature, extent and duration of the injuries sustained as
certified by a duly licensed physician. Notice of claim
must be filed within six (6) months from the date of
accident, otherwise, the claim shall be deemed
waived. Action or suit for recovery of damage due to loss
or injury must be brought, in proper cases, with the
Commissioner or the courts within one (1) year from
denial of the claim, otherwise, the claimants right of
action shall prescribe.
If the written notice of claim is filed beyond six (6)
months from the date of the accident, that claim
shall be deemed waived. If the action for
recovery is brought after one (1) year from
denial of the claim, the right of action shall
prescribe (Vda. de Gabriel vs. CA, 264 SCRA
137 (1996).
Absent a written notice of claim, no cause
of action can accrue for there can be no
opportunity for the insurer to even reject a
claim if none has been filed in the first
place. (Travellers Insurance Surety
Corp. vs. CA, 272 SCRA 536 (1997).
In a case, an extrajudicial demand for payment
was made on the insurance company but the
company failed to respond to the same.
Nevertheless, the complaint was filed even
before a denial of the claim was made by the
company. It was held that for all legal purposes,
the prescriptive period has not begun to run. The
cause of action arises only and starts to run
upon the denial of the claim by the insurer.
(Summit Guaranty & Insurance Co. Inc., vs.
Arnaldo, 158 SCRA 332 (1988).
To prevent insurance companies from evading
their responsibility to the insured through the
clever scheme of making the insured believe that
their claims would be settled in order that the
latter will not find it necessary to immediately
bring suit, the one-year period under Sec. 384
was changed from the date of the accident to
denial of the claim. The insureds cause of
action does not accrue until the insurer
refuses, expressly or impliedly, to comply
with its duty. (Country Bankers Insurance
Corp. vs. Travellers Insurance & Surety Corp.,
176 SCRA 523 (1989);
Own damage coverage to the insured
motor vehicle is not also required by law.
The parties, however, may agree upon a
separate insurance to cover damage to
property.
Effect of insureds violation of policy condition
on insurers liability to third-party claimant.
The primary purpose of compulsory third party
liability insurance is to afford protection to third
persons who are not parties to the contract and who
might suffer loss or injury on account of the accident.
To allow, therefore, the insurer to escape liability by
interposing the defense that the owner of the insured
motor vehicle has violated the contract would be to
defeat the very purpose of the law. (Bonifacio Bus
vs. Towers Assurance Corp., I. C. case No. 451,
Dec. 9, 1977).
Persons subject to the CMVLI requirement.

Motor Vehicle Owner (MVO) or one who is the

actual legal owner of a motor vehicle in whose
name such vehicle is registered with the Land
Transportation Office; or

Land Transportation Operator (LTO) or one

who is the owner of a motor vehicle or vehicles
being used for conveying passengers for
compensation including school buses. (Sec. 390)
After the cash deposit has been proceeded
against by the Insurance Commissioner,
such cash deposit should be replenished or
such surety bond should be restored by the
MVO or LTO in the right amount or
amounts required as limit of liability within
60 days after impairment or expiry, as the
case may be, otherwise he shall secure the
insurance policy required.
Scope of coverage required.
For owners of private motor vehicles, the
coverage must be comprehensive against
third party liability for death or bodily injuries.
In case a private motor vehicle is being used to
transport passengers for compensation, such
coverage shall, in addition, include passenger
liability; and
For operators of land transportation, the
coverage must also be comprehensive against
both passenger and third-party liabilities for death
or bodily injuries. The insurer may extend
additional other risks at its option.
 What do you mean of a
No-Fault Indemnity Claim?
 No-Fault Indemnity Claim
The term no-fault connotes that the victim of a
tort can recover for his loss from his insurer
without regard to his own contributory fault or the
fault of the tortfeasor. The fundamental purpose
of the no-fault provision is to guarantee
compensation or indemnity to persons
suffering loss in motor vehicle accidents.
No-Fault Indemnity Claim- Restrictions:

Claim subject to certain conditions.- Under Section 391,

the insurance company concerned shall pay any claim for
death or bodily injuries sustained by a passenger or third
party without the necessity of proving fault or negligence
of any kind subject to certain conditions. This no-fault
claim does not apply to property damage. If the total
indemnity claim exceeds P5,000 (now P15,000) and there
is controversy in respect thereto, the finding of fault may
be availed of by the insurer only as to the excess. The
first P5,000 (now P15,000) should be paid without regard
to fault.
Restrictions: No-Fault Indemnity Claim

Claim against insurer of vehicle in which victim is an

occupant.- Sec. 391 (par.iii) is very clear that the claim
shall lie against the insurer of the vehicle in which the
occupant is riding, mounting or dismounting from. That
said vehicle might not be the one that caused the
accident is of no moment since the law itself provides that
the party paying the claim may recover against the owner
of the vehicle responsible for the accident. The essence
of a no-fault indemnity insurance is to provide victims
of vehicular accidents or their heirs immediate
compensation although in a limited amount, pending
final determination of who is responsible for the accident
and liable for the victims injuries or death.
Restrictions: No-Fault Indemnity Claim
Claim against insurer of vehicle responsible for accident.
In any other case (i.e., the victim is not an occupant of a
vehicle), the claim shall lie against the insurer of the
directly offending vehicle. Sec. 386 (par. Iii.) uses the
general term occupant to distinguish it from a
passenger and a third party and a third party (Sec.
386 (b and c). Thus, as used, occupant includes
both a passenger and a third party so long as
they are riding in or mounting or dismounting from a
motor vehicle. (Perla Compania de Seguros, Inc. vs.
Ancheta, 164 SCRA 144) (1988).
What is an Authorized Drivers Clause?
 Authorized Drivers Clause

The Clause limits the use of the insured vehicle to two (2)
persons only, namely, the insured himself or any person on
his (insureds) permission. Under the second category, the
words any person is qualified by the phrase xxx on the
insureds order or with his permission. Thus, if the person
driving is other than the insured, he must have been duly
authorized by the insured to drive the vehicle, to make the
insurance company liable for the drivers negligence. The main
purpose of the authorized driver clause is that a person other
than the insured owner, who drives the vehicle on the insureds
order or with his permission, must be a duly licensed driver
and has no qualification to drive as motor vehicle. (Villacorta
vs. Insurance Commission, 100 SCRA 467 (1980).
Authorized Drivers Clause

The requirement of a license does not apply

where the person driving 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 subject to the
penal provisions of the motor vehicle law.
(Palermo vs. Pyramid Insurance Co., Inc., 161
SCRA 677) (1988).
What is a Theft Clause?

Where a car is unlawfully and wrongfully

taken without the owners consent or
knowledge, such taking constitutes, theft,
and therefore, it is the theft clause and
not the authorized driver clause that
should apply.
 Theft Clause

Where a car is unlawfully and wrongfully

taken without the owners consent or
knowledge, such taking constitutes, theft,
and therefore, it is the theft clause and
not the authorized driver clause that
should apply.
 Theft Clause

Theft is an entirely different legal concept from

that of accident, and clearly, the risk against
accident is distinct from the risk against theft. The
authorized driver clause in a typical insurance
policy is in contemplation or anticipation or
accident. There is no causal connection
between the possession of a valid drivers
license and the loss of a vehicle. (Perla
Compania de Seguros, Inc. vs. CA, 208 SCRA
487 (1992).