Insurance Case Digest: Palileo v. Cosio (1955)

G.R. No. L-7667           November 28, 1955

Lessons Applicable: Mortgagor (Insurance)

Laws Applicable: 

FACTS:

• Cherie Palileo (debtor-mortgagor) filed a complaint against Beatriz Cosio (creditor-mortgagee) praying that their transaction be one of a loan with an equitable mortgage to secure the payment of the loan.  The original counsel of Cosio Atty. Guerrero being appointed Undersecretary of Foreign Affairs so she forgot the date of the trial and she was substituted.
• it is a loan of P12,000 secured by a "Conditional Sale of Residential Building" with right to repurchase.  After the execution of the contract, Cosio insured in her name the building with Associated Insurance & Surety Co. against fire.
• The building was partly destroyed by fire so she claimed an indemnity of P13,107
• Palileo demanded that the amount of insurance proceeds be credited to her loan
• RTC: it is a loan with equitable mortgage so the insurance proceeds should be credited to the loan and refund the overpayment.

ISSUE: W/N Cosio as mortgagee is entitled to the insurance proceeds for her own benefit

HELD: YES.  Modify.  collection of insurance proceeds shall not be deemed to have compensated the obligation of the Palileo to Cosio, but bars the Cosio from claiming its payment from the Palileo; and Cosio shall pay to Palileo P810 representing the overpayment made by Palileo by way of interest on the loan. 

• When the the mortgagee may insure his interest in the property independently of the mortgagor , 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
• It is true that there are authorities which hold that "If a mortgagee procures insurance on his separate interest at his own expense and for his own benefit, without any agreement with the mortgagor with respect thereto, the mortgagor has no interest in the policy, and is not entitled to have the insurance proceeds applied in reduction of the mortgage debt" But these authorities merely represent the minority view 

Insurance Case Digest: Saura Import & Export Co., Inc. v. Philippine International Surety Co., Inc. (1963)

G.R. No. L-15184   May 31, 1963

Lessons Applicable: Mortgagor (Insurance)

Laws Applicable: 

FACTS:

• Saura Import & Export Co Inc., mortgaged to the Phil. National Bank, a parcel of land.
• The mortgage was amended to guarantee an increased amount, bringing the total mortgaged debt to P37,000
• On the land mortgage is a building owned by Saura Import & Export Co Inc. which was insured with Philippine International Surety (Insurer) even before the mortgage contract so it was required to endorse to mortgagee PNB
• October 15, 1954: Barely 13 days after the issuance of the fire insurance policy, the insurer cancelled it.  Notice of the cancellation was given to PNB (mortgagee). But Saura (insured) was not informed. 
• April 6, 1955: The building and all its contents worth P40,685.69 were burned so Saura filed a claim with the Insurer and mortgagee Bank
• RTC: dismissed

ISSUE: W/N Philippine International Surety should be held liable for the claim because notice to only the mortgagee is not substantial

HELD:YES. Appealed from is hereby reversed.  Philippine International Surety Co., Inc., to pay Saura Import & Export Co., Inc., P29,000

• It was the primary duty of Philippine International Surety to notify the insured, but it did not
• If a mortgage or lien exists against the property insured, and the policy contains a clause stating that loss, if any, shall be payable to such mortgagee or the holder of such lien as interest may appear, notice of cancellation to the mortgagee or lienholder alone is ineffective as a cancellation of the policy to the owner of the property.
• liability attached principally the insurance company, for its failure to give notice of the cancellation of the policy to Saura
• it is unnecessary to discuss the errors assigned against appellee bank

Insurance Case Digest: San Miguel Brewery v. Law Union and Rock Insurance Co. (1920)

G.R. No. L-14300  January 19, 1920

Lessons Applicable: 

• Mortgagor (Insurance)
• Measure of Insurable Interest (Insurance) 
• Effect of Change of Interest in Thing Insured (Insurance)
• Effect of transfer of thing insured (Insurance)

Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec. 50,sec.55 (now sec. 58) of the Insurance Code (all old law)

FACTS:

• In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to insure the mortgaged property for its full value and to indorse the policies in such manner as to authorize the Brewery Company to receive the proceeds in case of loss and to retain such part thereof as might be necessary to satisfy the remainder then due upon the mortgage debt. Instead, however, of effecting the insurance himself Dunn authorized and requested the Brewery Company to procure insurance on the property in the amount of P15,000 at Dunn's expense.  
• San Miguel insured the property only as mortgagee.
• Dunn sold the propert to Henry Harding.  The insurance was not assigned by Dunn to Harding.
• When it was destroyed by fire, the two companies settled with San Miguelto the extent of the mortgage credit.  
• RTC: Absolved the 2 companies from the difference.  Henry Harding is not entitled to the difference between the mortgage credit and the face value of the policies.
• Henry Harding appealed.

ISSUE: 
1. W/N San Miguel has insurable interest as mortgagor only to the extent of the mortgage credit - YES
2. W/N Harding has insurable interest as owner - NO

HELD: affirmed

• section 19 of the Insurance Act:
• a change of interest in any part of a thing insured unaccompanied by a corresponding change of interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person
• section 55:
• the mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy and the thing insured
• Undoubtedly these policies of insurance might have been so framed as to have been "payable to the San Miguel Brewery, mortgagee, as its interest may appear, remainder to whomsoever, during the continuance of the risk, may become the owner of the interest insured." (Sec 54, Act No. 2427.) Such a clause would have proved an intention to insure the entire interest in the property, not merely the insurable interest of the San Miguel Brewery, and would have shown exactly to whom the money, in case of loss, should be paid. But the policies are not so written.
• The blame for the situation thus created rests, however, with the Brewery rather than with the insurance companies, and there is nothing in the record to indicate that the insurance companies were requested to write insurance upon the insurable interest of the owner or intended to make themselves liable to that extent
• If by inadvertence, accident, or mistake the terms of the contract were not fully set forth in the policy, the parties are entitled to have it reformed.  But to justify the reformation of a contract, the proof must be of the most satisfactory character, and it must clearly appear that the contract failed to express the real agreement between the parties
• In the case now before us the proof is entirely insufficient to authorize reformation. 

Insurance Case Digest: Great Pacific Life Assurance Corp. v. CA (1999)

G.R.No. 113899  October 13, 1999
Lessons Applicable: 

• Credit in Life and Health Insurance (Insurance)
• Mortgagor (Insurance)

Laws Applicable: Sec. 8 of Insurance Code

FACTS:

• A contract of group life insurance was executed between Great Pacific Life Assurance Corporation Grepalife) and Development Bank of the Philippines (DBP)
• Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP
• November 11, 1983: 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 health condition as follows:
  
  
  “7.  Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment?
  
  
  Answer:  No.  If so give details ___________.
  
  
  8.  Are you now, to the best of your knowledge, in good health?
  
  
  Answer:  [ x ] Yes [    ] No.”[4]
  
  
• November 15, 1983: Grepalife issued Certificate No. B-18558, as insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness amounting to P86,200
• August 6, 1984: Dr. Leuterio died due to “massive cerebral hemorrhage.” 
• DBP submitted a death claim to Grepalife
• Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied
• RTC: Favored Medarda V. Leuterio (widow) and held Grepalife (insurer) liable to pay DBP (creditor of the insured Dr. Wilfredo Leuterio)
• CA sustained

ISSUE: 

1. W/N DBP has insurable interest as creditor - YES
2. W/N Grepalife should be held liable - YES

HELD: 

1. YES

• 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
• Section 8 of the Insurance Code provides:

“Unless the policy provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor.”

• The insured Dr. Wilfredo Leuterio did not cede to the mortgagee all his rights or interests in the insurance. When Grepalife denied payment, DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot of Dr. Wilfredo Leuterio
• 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

2. YES

• medical findings were not conclusive because Dr. Mejia did not conduct an autopsy
• widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension
• Grepalife failed to establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim
• 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
• The policy states that upon receipt of due proof of the Debtor’s death during the terms of this insurance, a death benefit in the amount of P86,200.00 shall be paid. In the event of the debtor’s death before his indebtedness with the creditor shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if there is any shall then be paid to the beneficiary/ies designated by the debtor.
• DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagor’s outstanding loan
• insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries
• Equity dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio protest).  Hence, it cannot collect the insurance proceeds, after it already foreclosed on the mortgage