GREPALIFE vs. CA G.R. No. 113899, October 13, 1999.

Facts: A contract of group life insurance was executed between petitioner and DBP wherein the former agreed to insure the lives of eligible housing loan mortgages of the latter. Dr. Leuterio was one of those who applied for membership in the said insurance plan. In the application for, when asked whether he is suffering from any physical impairment, he answered in the negative; and when asked whether he is good health to the best of his knowledge, he answered in the affirmative. Petitioner approved the application and issued the corresponding certificate. Dr. Leuterio died due to “massive cerebral hemorrhage”. When DBP submitted a claim to petitioner, it was denied on the ground that Dr. Leuterio was not physically healthy when he applied for an insurance coverage and that he did not disclose he had been suffering from hypertension. Allegedly such non-disclosure constituted concealment. The widow of Dr. Leuterio filed a complaint against petitioner for specific performance with damages.


Issues:
1) Is the widow of the insured-mortgagor a real party in interest in a claim under the life insurance contract?
2) Is there concealment that will vitiate the insurance contract?
3) Can the mortgagor of DBP hold the insurer liable without proof of the actual outstanding mortgage payable?


Held: 1) Yes. Where the mortgagor pays the insurance premium under the group insurance policy, making the loans payable to the mortgagee, the insurance is on the mortgagor’s interest (because (a) the proceeds will be applied to the payment of mortgage debt, thereby relieving the heirs of mortgagor from paying the obligation; and (b) in the event of death, the mortgage obligation will be extinguished by the application of insurance proceeds to mortgage indebtedness), 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.

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 incurred might have recovered, the widow of Dr. Leuterio may file the suit against the insurer Grepalife.

2) No. Concealment exists where the assured had knowledge of a fact material to the risk, and with honesty, good faith and fair dealing requires that he should communicate it to the assured, but he designedly and intentionally withheld the same.

The fraudulent intent on the part of the insured need be established to entitle the insurers to rescind the contract. Misrepresentation as the defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance.

3) Yes. A life insurance is a valued policy. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or death is the sum fixed in the policy.