G.R. No. 113899, 13 October 1999, 89 SCRA 543

FACTS:

A contract of group life insurance was executed between petitioner 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.
Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life insurance plan. In an application form, Dr. Leuterio answered questions concerning his health condition. Among those questions were: 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? Dr. Leuterio answered “no.” and answered “yes” to the question: Are you now, to the best of your knowledge, in good health?
Grepalife issued Certificate No. B-18558, as insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness amounting P86,200.00. On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage. Consequently, DBP submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied for an insurance coverage on November 15, 1983. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such nondisclosure constituted concealment that justified the denial of the claim. The widow of the late Dr. Leuterio, respondent Medarda V. Leuterio, filed a complaint against Grepalife for Specific Performance with Damages. During the trial, Dr. Hernando Mejia, who issued the death certificate, was called to testify. Dr. Mejia’s findings, based partly from the information given by the respondent widow, stated that Dr. Leuterio complained of headaches presumably due to high blood pressure. The inference was not conclusivebecause Dr. Leuterio was not autopsied, hence, other causes were not ruled out.
The trial court rendered a decision in favor of respondent widow and against Grepalife. The Court of Appeals sustained the trial court’s decision. Hence, the present petition.

ISSUE:

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

HELD:

The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that: In the event of the debtor’s death before his indebtedness with the Creditor [DBP] shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor. When DBP submitted the insurance claim against petitioner, the latter denied payment thereof, interposing the defense of concealment committed by the insured. Thereafter, DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot of private respondent. In Gonzales La O vs. Yek Tong Lin Fire & Marine Ins. Co. we held: 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 named or unnamed, and although it is expressly made payable to another as his interest may appear or otherwise. *** Although a policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet the mortgagor may sue thereon in his own name, especially where the mortgagees interest is less than the full amount recoverable under the policy, *** And in volume 33, page 82, of the same work, we read the following: 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. 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.

*Case digest by Lindsay Arra Calapiz, LLB-IV, Andres Bonifacio College Law School, SY 2018-2019