Parties in Insurance Contract – Insurer and Insured

Great Pacific Life vs CA, 316 SCRA 677

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.

Interpretation of Insurance Contract

RIZAL SURETY vs. CA 336 SCRA 12

FACTS:

Rizal Surety & Insurance Company issued a fire insurance policy in favor of Transworld Knitting Mills, Inc. The subject policy stated that Rizal Surety is “responsible in case of loss whilst contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situated within own Compound xxx.” The policy also described therein the four-span building covered by the same.

On Jan. 12, 1981, fire broke out in the compound, razing the middle portion of its four-span building and partly gutting the left and right sections thereof. A two-storey building (behind said four-span building) was also destroyed by the fire.

ISSUE:

Whether or not Rizal Surety is liable for loss of the two-storey building considering that the fire insurance policy sued upon covered only the contents of the four-span building

HELD:

Both the trial court and the CA found that the so-called “annex” as not an annex building but an integral and inseparable part of the four-span building described in the policy and consequently, the machines and spare parts stored therein were covered by the fire insurance in dispute.

So also, considering that the two-storey building aforementioned was already existing when subject fire insurance policy contract was entered into on Jan. 12, 1981, having been constructed some time in 1978, petitioner should have specifically excluded the said two-storey building from the coverage of the fire insurance if minded to exclude the same but if did not, and instead, went on to provide that such fire insurance policy covers the products, raw materials and supplies stored within the premises of Transworld which was an integral part of the four-span building occupied by Transworld, knowing fully well the existence of such building adjoining and intercommunicating with the right section of the four-span building.

Also, in case of doubt in the stipulation as to the coverage of the fire insurance policy, under Art. 1377 of the New Civil Code, the doubt should be resolved against the Rizal Surety, whose layer or managers drafted the fire insurance policy contract under scrutiny.

In Landicho vs. Government Service Insurance System, the Court ruled that “the terms in an insurance policy, which are ambiguous, equivocal or uncertain x x x are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where forfeiture is involved, and the reason for this is that the insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company.”

American Home Assurance vs. Tantuco Gr.

FACTS:

Respondent Tantuco Enterprises, Inc. is engaged in the coconut oil milling and refining industry.It owns two oil mills which were separately covered by fire insurance policies issued by petitionerAmerican Home Assurance Co., Philippine Branch.

The first oil mill was insured for P3,000,000.00 under Policy No. 306-7432324-3 for the period March 1, 1991 to 1992. The new oil mill was insured forP6,000,000.00 under Policy No. 306-7432321-9 for the same term. Official receipts indicating payment for the full amount of the premium were issued by the petitioner's agent .A fire that broke out in the early morning of September 30,1991 gutted and consumed the new oil mill. Respondent immediately notified the petitioner of the incident but petitioner rejected respondent's claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It stated that the description of the insured establishment referred to another building thus: "Our policy nos. 306-7432321-9 (Ps 6M) and 306-7432324-4 (Ps 3M) extend insurance coverage to your oil mill under Building No. 5, whilst the affected oil mill was under Building No. 14. "

ISSUE:

Whether or not respondent can claim from the petitioner insurance company.

HELD:

In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to the insurance. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be. Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly intended to insure was the new oil mill. If the parties really intended to protect the first oil mill, then there is no need to specify it as new .In determining what the parties intended, the courts will read and construe the policy as a whole and if possible, give effect to all the parts of the contract, keeping in mind always, however, the prime rule that in the event of doubt, this doubt is to be resolved against the insurer. In determining the intent of the parties to the contract, the courts will consider the purpose and object of the contract.

Pan Malayan Insurance vs. CA   FACTS.

Petitioner Panmalay was an insurer of the car of CANLUBANG AUTOMOTIVE RESOURCE CORP. which was bumpt and damaged by the private respondent through its negligent driver. Petitioner PANMALAy paid the amount of insurance to the insured. Subrogated on the rights of the insured, petitioner demand payment from the private respondent who refused to pay the claim of the petitioner. Petitioner filed a complaint against private respondent before the RTC.

Private respondent filed a motion to dismiss arguing that payment under the "own damage" clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code, since indemnification thereunder was made on the assumption that there was no wrongdoer or no third party at fault. The RTC dismissed the complaint aswell as the motion for reconsideration and this was affirmed by the CA.

ISSUE.

Whether or not, the petitioner is allowed to recover the amount of insurance it had paid to the insured .

RULING:

Yes, according to the Supreme Court, Art. 2207 of the civil code states that If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violatedthe contract. This was founded on the well-settled principle of subrogation. If the insured property is destroyed or damaged through the fault or negligence of a party other than the assured, the insurer, upon payment to the assured, will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the assured operates as an equitable assignmentto the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss.

WHEREFORE, in view of the foregoing, the present petition is GRANTED. Petitioner's complaint for damages against private respondents is reinstated.So the case was remanded to the Trial Court for the trial of the merit.