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Case 5 Cormrev 1
Case 5 Cormrev 1
Facts:
1. A contract of group life insurance was executed between petitioner Great Pacific Life Assurance Corporation (Grepalife) and DBP wherein Grepalife
agreed to insure the lives of eligible housing loan mortgagors of DBP. One of the DBP’s morgagors was Dr. Wilfredo Leuterio. He applied for
membership in the group life insurance plan wherein he answered in the application form, certain questions concerning his health condition by
answering NO to a question “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?” He answered YES to a question, “Are you now, to the best of your knowledge, in good
health?”
2. Because Dr. Leuterio is said to be in good health, Grepalife issued insurance coverage to him, to the extent of his mortgage indebtedness to DBP
amounting to P86,200.
3. Later, Dr. Leuterio died due to "massive cerebral hemorrhage." So DBP submitted a death claim to Grepalife. However, Grepalife denied the
claim alleging that Dr. Leuterio was not physically healthy when he applied for an insurance coverage because Leuterio did not disclose during his
application that he had been suffering from hypertension, which caused his death. According to Grepalife, the non-disclosure of this material
fact constitute concealment that justified them to deny the claim of DBP. Because of the denial of Grepalife of its claim, DBP foreclosed the residential
lot of the spouses Leuterio, in satisfaction of mortgagor's outstanding loan.
4. By that, the widow of the late Dr. Leuterio (Medarda), private respondent in this case, filed a complaint with the RTC, against Grepalife for Specific
Performance with Damages.
5. The trial court rendered a decision in favor of private respondent widow Medarda and against Grepalife which was also later on sustained by the CA.
Hence this petition by Grepalife insisting that the widow was not the real party in interest in the insurance claim as it was between Grepalife and the
DBP, and that DBP was not joined in the suit. Moreover, it insisted that it is not liable to DBP as beneficiary in a group of life insurance contract from
a complaint filed by the widow of the deceased mortgagor.
Issue: Whether or not the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a group life insurance contract
from a complaint filed by the widow of the decedent/mortgagor.
Held: NO
1. The Supreme Court held in the Negative. Petitioner Grepalife is liable. However, it is liable not to DBP because the loan was already satisfied
by foreclosing the house of respondent. Hence, the insurance proceeds shall inure to the benefit of the heirs of the deceased person or his
beneficiaries, the private respondent widow, in this case.
2. In resolving the issue in this case, the court considers the insurable interest in mortgaged properties and the parties to the group insurance policy
or otherwise known as the "mortgage redemption insurance." This mortgage redemption insurance is a device for the protection of both the
mortgagee and the mortgagor. On the part of the mortgagee or the creditor, it can claim proceeds from such insurance as payment of the mortgage
debt when the debtor mortgagor dies during the existence of the mortgage contract, his heirs are relieved from paying the obligation. On the other
hand, on the part of the mortgagor in the event of his death, the mortgage obligation will be extinguished by the application of the
insurance proceeds to the mortgage indebtedness.
3. In applying this concept, where the mortgagor pays the insurance premium under the group insurance policy, making the loss payable to the
mortgagee, the insurance is on the mortgagor's interest and as such, a party to a contract NOT the mortgagee. The Mortgagee is simply an
appointee of the insurance fund.
4. Hence, as stated in the policy 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."
As I mentioned earlier, since the indebtedness of the insure to DBP had already been settled when DBP FORECLOSED the residential lot of private
respondent when Grepalife denied its death claim, interposing the defense of concealment committed by the insured, then it cannot anymore claim
said insurance proceeds. This insurance proceeds will inure to the benefit of his heirs, the widow Medarda is entitled to received