ALANO, DHAN DARYL B.

INSURANCE LAW
LAW 3D

RCBC VS CA

FATCS:
GOYU applied for credit facilities and accommodations with RCBC at its Binondo Branch. As
security for its credit facilities with RCBC, GOYU executed two real estate mortgages and two chattel
mortgages in favor of RCBC. Under each of these four mortgage contracts, GOYU committed itself to
insure the mortgaged property with an insurance company approved by RCBC, and subsequently, to
endorse and deliver the insurance policies to RCBC.

GOYU obtained in its name a total of ten insurance policies from MICO. Alchester Insurance
Agency, Inc., the insurance agent where GOYU obtained the Malayan insurance policies, issued nine
endorsements in favor of RCBC seemingly upon instructions of GOYU

One of GOYUs factory buildings was gutted by fire. Consequently, GOYU submitted its claim for
indemnity on account of the loss insured against. MICO denied the claim on the ground that the
insurance policies were either attached pursuant to writs of attachments/garnishments issued by
various courts or that the insurance proceeds were also claimed by other creditors of GOYU alleging
better rights to the proceeds than the insured. GOYU filed a complaint for specific performance and
damages. RCBC, one of GOYUs creditors, also filed with MICO its formal claim over the proceeds of the
insurance policies, but said claims were also denied for the same reasons that MICO denied GOYUs
claims.

The RTC rules that since the endorsement of the policies by GOYU to RCBC did not contain any
signatures of the former’s officers, said endorsements are defective, therefore, RCBC did not obtain any
right against the proceeds.

The CA affirmed this decision. Hence this appeal.

ISSUE:

Whether or not RCBC, as mortgagee, has any right over the insurance policies taken by GOYU,
the mortgagor, in case of the occurrence of loss.

RULING:
 It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in
the same mortgaged property, such that each one of them may insure the same property for his own
sole benefit. There is no question that GOYU could insure the mortgaged property for its own exclusive
benefit. In the present case, although it appears that GOYU obtained the subject insurance policies
naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous acts,
must be given due consideration in order to better serve the interest of justice and equity.

RCBC, in good faith, relied upon the endorsement documents sent to it as this was only pursuant
to the stipulation in the mortgage contracts. We find such reliance to be justified under the
circumstances of the case. GOYU failed to seasonably repudiate the authority of the person or persons
who prepared such endorsements. Over and above this, GOYU continued, in the meantime, to enjoy the
benefits of the credit facilities extended to it by RCBC. After the occurrence of the loss insured against, it
was too late for GOYU to disown the endorsements for any imagined or contrived lack of authority of
Alchester to prepare and issue said endorsements. If there had not been actually an implied ratification
of said endorsements by virtue of GOYUs inaction in this case, GOYU is at the very least estopped from
assailing their operative effects. 

This Court can not over stress the fact that upon receiving its copies of the endorsement
documents prepared by Alchester, GOYU, despite the absence of its written conformity thereto,
obviously considered said endorsement to be sufficient compliance with its obligation under the
mortgage contracts since RCBC accordingly continued to extend the benefits of its credit facilities and
GOYU continued to benefit therefrom. Just as plain too is the intention of the parties to constitute RCBC
as the beneficiary of the various insurance policies obtained by GOYU. The intention of the parties will
have to be given full force and effect in this particular case. The insurance proceeds may, therefore, be
exclusively applied to RCBC, which under the factual circumstances of the case, is truly the person or
entity for whose benefit the policies were clearly intended.
PALILEO VS COSIO

FACTS:
plaintiff obtained from defendant a loan in the sum of P12,000 subject to the following
conditions. To secure the payment of the aforesaid loan, defendant required plaintiff to sign a
document known as "Conditional Sale of Residential Building", purporting to convey to defendant,
with right to repurchase, a two-story building of strong materials belonging to plaintiff. This document
did not express the true intention of the parties which was merely to place said property as security
for the payment of the loan.

After the execution of the aforesaid document, defendant insured the building against fire
with the Associated Insurance & Surety Co., Inc. for the sum of P15,000, the insurance policy having
been issued in the name of defendant. The building was partly destroyed by fire and, after proper
demand, defendant collected from the insurance company the indemnity. Plaintiff demanded from
defendant that she be credited with the necessary amount to pay her obligation out of the insurance
proceeds but defendant refused to do so.

The Trial Court rendered in favor of plaintiff and ordered defendant to apply the proceeds of
the policy to the former’s obligation to the latter.

ISSUE:

Whether or not the defendant- Mortgagee is entitled to the proceeds of the insurance policy.

RULING:

The rule is that "where a mortgagee, independently of the mortgagor, insures the mortgaged
property in his own name and for his own interest, he is entitled to the insurance proceeds in case of
loss, but in such case, he is not allowed to retain his claim against the mortgagor, but is passed by
subrogation to the insurer to the extent of the money paid." In that event, upon the destruction of the
property the insurance money paid to the mortgagee will not inure to the benefit of the
mortgagor, and the amount due under the mortgage debt remains unchanged. The
mortgagee, however, is not allowed to retain his claim against the mortgagor, but it passes by
subrogation to the insurer, to the extent of the insurance money paid."

Considering the foregoing rules, it would appear that the lower court erred in declaring that
the proceeds of the insurance taken out by the defendant on the property mortgaged inured to the
benefit of the plaintiff and in ordering said defendant to deliver to the plaintiff the difference between
her indebtedness and the amount of insurance received by the defendant, for, in the light of the
majority rule we have above enunciated, the correct solution should be that the proceeds of the
insurance should be delivered to the defendant but that her claim against the plaintiff should be
considered assigned to the insurance company who is deemed subrogated to the rights of the
defendant to the extent of the money paid as indemnity.

GREAT PACIFIC LIFE INSURANCE CORP. VS CA

FACTS:

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

Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in
the group life insurance plan. 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.

Grepalife issued Certificate No. B-18558, as insurance coverage of Dr. Leuterio, to the
extent of his DBP mortgage indebtedness amounting to eighty-six thousand, two hundred
(P86,200.00) pesos.

Dr. Leuterio died due to massive cerebral hemorrhage. Consequently, DBP submitted a
death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not physically
healthy when he applied for an insurance coverage. 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.

The widow of the late Dr. Leuterio, respondent Medarda V. Leuterio, filed a complaint with
the Regional Trial Court against Grepalife for Specific Performance with Damages.

The trial court rendered a decision in favor of respondent widow and against Grepalife
ordering the latter to pay DBP the proceeds of the policy which the Court of Appeals sustained.

ISSUE:

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?

RULING:

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.7 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.

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 named or unnamed, and although it is
expressly made payable to another as his interest may appear or otherwise. * * * Although a policy
issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet
the mortgagor may sue thereon in his own name, especially where the mortgagees interest is less
than the full amount recoverable under the policy, * * *.

Insured may be regarded as the real party in interest, although he has assigned the policy
for the purpose of collection, or has assigned as collateral security any judgment he may obtain.

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,14 the widow of the decedent Dr. Leuterio may file the suit against
the insurer, Grepalife.