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Great Pacific Life Assurance Corp. vs.. Court of Appeals (2)

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GREAT PACIFIC LIFE ASSURANCE CORP. VS. COURT OF APPEALS

316 SCRA 677 (G.R. NO. 113899)

OCTOBER 13, 1999

 

Petitioner:          Great Pacific Life Assurance Corp.

Respondent:      Court of Appeals and Medarda v. Eleuterio

J. Quisumbing:

FACTS:

A contract of group life insurance was executed between petitioner Great Pacific Life Assurance Corporation and Development Bank of the Philippines. Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP.

On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life plan. In an application form, Dr. Leuterio answered the questions concerning his health conditions as follows:

“7. Have you ever had, or consulted, a physiciam 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 the best of your knowledge, in good health?

Answer [x] Yes [  ] No.”

On 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 ₱ 86,200.00.

On August 6, 1984, Dr. Leuterio died due to “massive cerebral hemorrhage.” Consequently, DBP submitted a death claim at 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 non-disclosure constituted concealment that justified the denial of the claim.

ISSUE:

1)      Whether 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?

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.

HELD

On the first issue the Court held, that we must consider the insurable interest in mortgaged properties and the parties to this type of contract. The rationale of a group insurance policy of mortgagors, otherwise known as the “mortgage redemption insurance,” is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death; the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. Consequently, 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 the mortgagor continues to be a party to the contract. 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.

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