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GREAT PACIFIC LIFE ASSURANCE CORP. v. CA

FACTS:

A contract of group life insurance was entered into between Great Pacific Life Assurance Corporation (Grepalife) and Development Bank of the Philippines (DBP). Dr. Wilfredo Leuterio, a housing debtor of DBP, applied for insurance coverage under the group life insurance plan. In the application form, Dr. Leuterio indicated that he had not consulted a physician for any health conditions and that he was in good health. Grepalife issued an insurance certificate for Dr. Leuterio's DBP mortgage indebtedness. However, Dr. Leuterio passed away due to a massive cerebral hemorrhage and DBP submitted a death claim to Grepalife. Grepalife denied the claim, alleging that Dr. Leuterio did not disclose his hypertension condition that caused his death. The widow of Dr. Leuterio, Medarda V. Leuterio, filed a complaint against Grepalife, seeking specific performance with damages. The trial court and Court of Appeals ruled in favor of the widow, holding Grepalife liable for the insurance claim. Grepalife appealed the decision, raising issues of liability, concealment, and proof of outstanding mortgage payable to DBP.

ISSUES:

  1. Whether the Court of Appeals erred in holding petitioner (Grepalife) liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor.

  2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had hypertension, which would vitiate the insurance contract.

  3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty-six thousand, two hundred (P86,200.00) pesos without proof of the actual outstanding mortgage payable by the mortgagor to DBP.

RULING:

  1. The Supreme Court held that the widow of Dr. Leuterio, as an heir, can file the suit against the insurer, Grepalife, and the action does not fail for lack of inclusion of the DBP.

  2. The Court found that there was no sufficient proof that Dr. Leuterio had suffered from hypertension and, therefore, there was no concealment. Thus, Grepalife cannot refuse payment of the claim on this ground.

  3. The Court ruled that the insurance proceeds should be paid to the heirs of Dr. Leuterio since DBP had already foreclosed on the mortgage, preventing it from collecting the insurance proceeds.

PRINCIPLES:

  • Insurable Interest: A group insurance policy covering a mortgagor's interest also protects the mortgagee by ensuring mortgage debt payment upon the mortgagor's death.

  • Contract Parties in Insurance: The mortgagee is not necessarily a party to the insurance contract but an appointee of the insurance fund.

  • Concealment: To invalidate an insurance contract based on concealment, the insurer must establish a fraudulent intent by the insured to withhold material information.

  • Valued Policy in Life Insurance: A life insurance policy is generally a valued policy, meaning the insurer pays the fixed sum stated in the policy upon proof of death.

  • Unjust Enrichment: A mortgagee that has already secured debt repayment through foreclosure cannot claim the insurance proceeds as it would result in unjust enrichment.