G.R.No. 113899, 13 October 1999, 316 SCRA 677
There was an existing group life insurance executed between Great Pacific Life Assurance (Grepalife) and the Development Bank of the Philippines (DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. In November 1983, Wilfredo Leuterio, mortgagor of DBP applied to be a member of the group life insurance. He filled out a form where he indicated he never consulted any physician regarding any illness (heart condition etc) and that he is in good health. He was eventually included in the group life insurance and he was covered for the amount of his indebtedness (P86,200.00).
In August 1984, Wilfredo died. DBP submitted a death claim but it was denied by Grepalife as it insisted that Wilfredo actually concealed that he was suffering from hypertension at the time of his insurance application. Grepalife relied on the statement made by the doctor who issued Wilfredo’s death certificate wherein it was stated that Wilfredo’s immediate cause of death was massive cerebral hemorrhage secondary to hypertension or hypertension as a “possible cause of death”.
Since Grepalife refused to pay the insurance claim filed by DBP, Medarda Leuterio (widow) sued Grepalife. Grepalife assailed the suit and insisted that Medarda is not a proper party in interest. The lower court ruled in favor of Medarda and the court ordered Grepalife to pay the amount of the insurance to DBP. The Court of Appeals affirmed this decision in 1993. Grepalife appealed to the Supreme Court. In 1995, pending resolution of the case in the SC, DBP foreclosed the property of Medarda.
Whether or not DBP has insurable interest as creditor.
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.
*Case digest by Honeyleth Luvie T. Hayag, Ll.B.-4, Andres Bonifacio Law School, SY 2018-2019