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316 SCRA 677 (1999)

  • INSURANCE LAW: Parties in Insurance Contract

FACTS:

Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP.

One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions concerning his test, attesting among others that he does not have any heart conditions and that he is in good health to the best of his knowledge.

However, after about a year, Dr. Leuterio died due to “massive cerebral hemorrhage.” When DBP submitted a death claim to Grepalife, the latter denied the claim, alleging that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim.

Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for “Specific Performance with Damages.” Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP.

ISSUE:

  • Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor

HELD:

The rationale of a group of insurance policy of mortgagors, otherwise known as the “mortgage redemption insurance,” is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death, the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund. Such loss-payable clause does not make the mortgagee a party to the contract.

The insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person, such as a mortgagee.

And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.