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G.R. No. 113899 – 316 SCRA 677 – Mercantile Law – Law on Insurance – Parties to an Insurance Contract – Concealment
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.
ISSUE: Whether or not Grepalife is liable to pay the insurance claim.
HELD: Yes. Grepalife is liable to pay the insurance claim. Medarda is a proper party in interest (note that it was Wilfredo who has been paying the premium, as the insured, he is the real party in interest and this status was transferred to his widow). The group life insurance or “mortgage redemption insurance” provides that DBP as the mortgagee is merely an assignee of Wilfredo; and that in the event of Wilfredo’s death before his indebtedness to DBP is paid, proceeds from the insurance shall first be applied to the sum of the balance insured. But this does not cease Wilfredo to be a party to the insurance contract.
Grepalife failed to prove that Wilfredo concealed that he was suffering from hypertension at the time of his application. The doctor’s finding as to the cause of death is not conclusive because no autopsy was conducted. The doctor who issued the death certificate has no knowledge of Wilfredo’s hospital confinement [if there are any]. The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as a 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.
Grepalife must however pay the claim to Medarda considering that DBP already foreclosed the property.