11. Great Pacific Life Assurance Corp V.

CA (GRN 113899, 13 October 1999)

FACTS:

Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with Development Bank
of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP.

One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions concerning

his test, attesting among others that he does not have any heart conditions and that he is in good health to the best of
his knowledge.

However, after about a year, Dr. Leuterio died due to “massive cerebral hemorrhage.” When DBP submitted a death
claim to Grepalife, the latter denied the claim, alleging 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.

Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for “Specific Performance with Damages.”
Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP.

ISSUE:

Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract from a
complaint filed by the widow of the decedent/mortgagor

HELD:

The rationale of a group of 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. 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.
The insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon.
Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of
another person, such as a mortgagee.

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

12. Sunlife Assurance Company of Canada V. CA (245 SCRA 268, GRN 105135, 22 June 1995)

FACTS:

Robert John Bacani procured a life insurance contract for himself from petitioner-company, designating his mother
Bernarda Bacani, herein private respondent, as the beneficiary. He was issued a policy valued at P100,000.00 with
double indemnity in case of accidental death. Sometime after, the insured died in a plane crash. Bernarda filed a claim
with petitioner, seeking the benefits of the insurance policy taken by her son. However, said insurance company

rejected the claim on the ground that the insured did not disclose material facts relevant to the issuance of the policy,
thus rendering the contract of insurance voidable. Petitioner discovered that two weeks prior to his application for
insurance, the insured was examined and confined at the Lung Center of the Philippines, where he was diagnosed for
renal failure. The RTC, as affirmed by the CA, this fact was concealed, as alleged by the petitioner. But the fact that was
concealed was not the cause of death of the insured and that matters relating to the medical history of the insured is
deemed to be irrelevant since petitioner waived the medical examination prior to the approval and issuance of the

insurance policy.

ISSUE: Whether or not the concealment of such material fact, despite it not being the cause of death of the insured, is
sufficient to render the insurance contract voidable

HELD:

YES. Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the
other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no

warranty, and which the other has no means of ascertaining. Anent the finding that the facts concealed had no bearing
to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to
disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of
the proposed insurance policy or in making inquiries. The SC, therefore, ruled that petitioner properly exercised its
right to rescind the contract of insurance by reason of the concealment employed by the insured. It must be

emphasized that rescission was exercised within the two-year contestability period as recognized in Section 48 of The
Insurance Code. WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals is REVERSED and SET
ASIDE.

13. Vda de Canilang V. CA (223 SCRA 443, GRN 92492, 17 June 1993)

FACTS:

Canilang was found to have suffered from sinus tachycardia and bronchitis after a check-up from his doctor. The next
day, he applied for a “non-medical” insurance policy with respondent Grepalife naming his wife, Thelma Canilang, as
his beneficiary with the face value of Php19,700.
He died of “congestive heart failure,” “anemia,” and “chronic anemia.” When Thelma filed a claim with Great Pacific, it
was denied on the ground that Jaime concealed material information.
Thelma filed a complaint against Great Pacific with the Insurance Commission for recovery of the insurance proceeds.
She testified that she was not aware of any serious illness suffered by Jaime, and that what she knew was that he died
because of a kidney disorder. Great Pacific presented a physician who explained that Jaime’s application had been
approved based on his medical declaration, and that medical examinations are required only in cases where applicant
indicated that he has undergone medical consultation and hospitalization.
The Insurance Commissioner ordered Great Pacific to pay P19,700 plus legal interest and P2,000.00 as attorney’s fees.
On appeal by Great Pacific, the Court of Appeals reversed. It found that the failure of Jaime Canilang to disclose
previous medical consultation and treatment constituted material information which should have been communicated
to Great Pacific to enable the latter to make proper inquiries.

ISSUE:

Whether or not Canilang was guilty of misrepresentation

HELD:

Yes. Petition denied.

There was a right of the insurance company to rescind the contract if it was proven that the insured committed fraud in
not affirming that he was treated for heart condition and other ailments stipulated.
Apart from certifying that he didn’t suffer from such a condition, Canilang also failed to disclose that he had twice
consulted a doctor who had found him to be suffering from “sinus tachycardia” and “acute bronchitis.”

Under the Insurance Code:

Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment.
Sec. 28. Each party to a contract of insurance must communicate to the other, in good faith, all factors within his
knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the
means of ascertaining.

The information concealed must be information which the concealing party knew and should have communicated. The
test of materiality of such information is contained in Section 31 which provides that “materiality is to be determined
not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the
communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his
inquiries.”

The information which Jaime Canilang failed to disclose was material to the ability of Great Pacific to estimate the
probable risk he presented as a subject of life insurance. Had he disclosed his visits to his doctor, the diagnosis made
and medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific
would have made further inquiries and would have probably refused to issue a non-medical insurance policy.
Materiality relates rather to the “probable and reasonable influence of the facts” upon the party to whom the
communication should have been made, in assessing the risk involved in making or omitting to make further inquiries
and in accepting the application for insurance; that “probable and reasonable influence of the facts” concealed must,
of course, be determined objectively, by the judge ultimately.

The Insurance Commissioner had also ruled that the failure of Great Pacific to convey certain information to the insurer
was not “intentional” in nature, for the reason that Canilang believed that he was suffering from minor ailment like a
common cold. Section 27 stated that “concealment whether intentional or unintentional entitles the injured party to
rescind a contract of insurance.”

The failure to communicate must have been intentional rather than inadvertent. Canilang could not have been
unaware that his heart beat would at times rise to high and alarming levels and that he had consulted a doctor twice in
the two (2) months before applying for non-medical insurance. Indeed, the last medical consultation took place just
the day before the insurance application was filed. In all probability, Jaime Canilang went to visit his doctor precisely
because of the ailment.

Canilang’s failure to set out answers to some of the questions in the insurance application constituted concealment.

14. Insurance Life Assurance Co. V. Pineda (40 O.G. No 3, p285)

Facts:
On Jan. 15 1963, Dimayuga processed an ordinary life insurance policy from Philamlife and designated his wife and
children as irrevocable beneficiaries.

On Feb. 22, 1980, Dimayuga filed a petition in court to amend the designation of the beneficiaries in his policy from
irrevocable to revocable.

Lower Court granted the petition.

Issue:

Whether or not the court erred in granting Dimayuga’s petition.

Held:

YES.

Under the Insurance Act, the beneficiary designated in a life insurance contract cannot be changed without the
consent of the beneficiary because he has a vested interest in the policy. The policy contract states that the
designation of the beneficiaries is irrevocable. Therefore, based on the said provision of the contract, not to mention
the law then applicable, it is only with the consent of all the beneficiaries that any change or amendment in the poicy
may be legally and validly effected. The contract between the parties is the law binding on them. (This case rule is no
longer controlling under the Insurance Code.)