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This article was originally published on June 1, 2022 and has been updated to reflect recent legal developments.
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Under Section 387 of the Insurance Code, it shall be unlawful for any land transportation operator or owner of a motor vehicle to operate the same in the public highways unless there is in force in relation thereto a policy of insurance or guaranty in cash or surety bond issued in accordance with the provisions on Compulsory Motor Vehicle Liability Insurance, to indemnify the death, bodily injury, and/or damage to property of a third-party or passenger, as the case may be, arising from the use thereof.
“Movement is the universal language of personal freedom.” – Louis Chevrolet
Motor vehicle ownership provides individuals with greater freedom of movement,. However, owning a motor vehicle is not as simple as purchasing a product for everyday use.
This is because the Land Transportation Office (LTO) requires strict compliance with legal prerequisites before a motor vehicle may be registered or its registration renewed. In particular, the LTO does not allow the registration or renewal of any motor vehicle without requiring the owner or operator to present proof of compliance with the law mandating that such vehicle be insured.
In the Philippines, the most basic form of motor vehicle insurance is the Compulsory Third Party Liability Insurance (CTPLI). CTPLI covers expenses arising from bodily injury or death suffered by a third party as a result of an accident involving the use of the insured motor vehicle. It constitutes the minimum insurance coverage required for motor vehicle registration with the LTO.
The law governing CTPLI is Republic Act No. 10607, otherwise known as the Insurance Code.
What is a motor vehicle?
Under Section 386 of the Insurance Code, a motor vehicle is any vehicle as defined in Section 3, paragraph (a) of Republic Act No. 4136, otherwise known as the “Land Transportation and Traffic Code”, to wit:
“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, fork-lifts, amphibian trucks, and cranes if not used on public highways, vehicles which run only on rails or tracks, and tractors, trailers and traction engines of all kinds used exclusively for agricultural purposes.”
Who is a third party?
Section 386(c) defines a third party as any person other than a passenger as defined in this section 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, bodily injury, or damage to property arising out of and in the course of employment.
Who is a passenger?
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 vehicle’s operator or his agents to ride without fare. (Section 386(b), Insurance Code)
Compulsory Motor Vehicle Liability Insurance (CMVLI)
Under Section 387 of the Insurance Code, it shall be unlawful for any land transportation operator or owner of a motor vehicle to operate the same in the public highways unless there is in force in relation thereto a policy of insurance or guaranty in cash or surety bond issued in accordance with the provisions of this chapter to indemnify the death, bodily injury, and/or damage to property of a third-party or passenger, as the case may be, arising from the use thereof.
Furthermore, Section 390 states that every land transportation operator and every owner of a motor vehicle shall, before applying for the registration or renewal of registration of any motor vehicle, at his option, either secure an insurance policy or surety bond issued by any insurance company authorized by the Commissioner or make a cash deposit in such amount as herein required as limit of liability for purposes specified in Section 387.
Also under Section 390, is the minimum liability coverage for death or bodily injury suffered by third parties. The amount of coverage varies depending on the type of vehicle and its capacity or weight.
For public utility vehicles, the law requires a minimum coverage per passenger or third party, subject to a maximum amount per accident based on the vehicle’s authorized capacity.
For private vehicles, the required coverage is likewise determined based on the classification or weight of the vehicle, with minimum amounts prescribed by law.
These amounts represent only the minimum statutory coverage, and actual insurance policies may provide higher coverage depending on the terms agreed upon.
Insurance Memorandum Circular 2024-01
Under the Insurance Memorandum Circular (IMC) 2024-01 has increased the limit for third-party liability claims to Two Hundred Thousand Pesos (PhP200,000).
The Memorandum Circular has also increased death indemnity to Two Hundred Thousand Pesos (PhP200,000), along with burial and funeral expense coverage being increased up to Thirty Thousand Pesos (PhP30,000).
In cases of No Fault Indemnity, any claim for death or bodily injuries sustained by a passenger or third party shall be paid without necessity of proving fault or negligence of any kind provided the total indemnity in respect of any person shall be Thirty Thousand Pesos (PhP30,000.00) for all motor vehicles.
The Circular further provides that premium rates for one-year and three-year CMVLI coverage set forth in IMC No. 4-2006 shall remain in force and effect. Premium adjustments arising from the increase in benefits as provided in this Circular shall be subject to study once sufficient data are gathered during the implementation of said Circular.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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