Lessons Applicable:
- Credit in Life and Health Insurance (Insurance)
- Mortgagor (Insurance)
Laws Applicable: Sec. 8 of Insurance Code
FACTS:
- A contract of group life insurance was executed between Great Pacific Life Assurance Corporation Grepalife) and Development Bank of the Philippines (DBP)
- Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP
- November 11, 1983: Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life insurance plan
- Dr. Leuterio answered questions concerning his health condition as follows:“7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment?Answer: No. If so give details ___________.8. Are you now, to the best of your knowledge, in good health?Answer: [ x ] Yes [ ] No.”[4]
- November 15, 1983: Grepalife issued Certificate No. B-18558, as insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness amounting to P86,200
- August 6, 1984: Dr. Leuterio died due to “massive cerebral hemorrhage.”
- DBP submitted a death claim to Grepalife
- Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied
- RTC: Favored Medarda V. Leuterio (widow) and held Grepalife (insurer) liable to pay DBP (creditor of the insured Dr. Wilfredo Leuterio)
- CA sustained
ISSUE:
- W/N DBP has insurable interest as creditor - YES
- W/N Grepalife should be held liable - YES
HELD:
1. YES
- 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
- Section 8 of the Insurance Code provides:
“Unless the policy provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor.”
- The insured Dr. Wilfredo Leuterio did not cede to the mortgagee all his rights or interests in the insurance. When Grepalife denied payment, DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot of Dr. Wilfredo Leuterio
- Insured may be regarded as the real party in interest, although he has assigned the policy for the purpose of collection, or has assigned as collateral security any judgment he may obtain
2. YES
- medical findings were not conclusive because Dr. Mejia did not conduct an autopsy
- widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension
- Grepalife failed to establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim
- fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer
- The policy states that upon receipt of due proof of the Debtor’s death during the terms of this insurance, a death benefit in the amount of P86,200.00 shall be paid. In the event of the debtor’s death before his indebtedness with the creditor shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if there is any shall then be paid to the beneficiary/ies designated by the debtor.
- DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagor’s outstanding loan
- insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries
- Equity dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio protest). Hence, it cannot collect the insurance proceeds, after it already foreclosed on the mortgage
