Summaries: Great Pacific Life Assurance Corp. vs. Court of Appeals (GR 113899, 13 October 1999)

Great Pacific Life Assurance Corp. vs. Court of Appeals
[GR 113899, 13 October 1999]
Second Division, Quisumbing (J): 3 concur, 1 on official leave

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. On 11 November 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life insurance plan. In an application form, 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." On 15 November 1983, Grepalife issued Certificate B-18558, as insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness amounting to P86,200.00. On 6 August 1984, 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 on 15 November 1983. 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. On 20 October 1986, the widow of the late Dr. Leuterio, Medarda V. Leuterio, filed a complaint with the Regional Trial Court of Misamis Oriental, Branch 18, against Grepalife for "Specific Performance with Damages." During the trial, Dr. Hernando Mejia, who issued the death certificate, was called to testify. Dr. Mejia’s findings, based partly from the information given by the widow, stated that Dr. Leuterio complained of headaches presumably due to high blood pressure. The inference was not conclusive because Dr. Leuterio was not autopsied, hence, other causes were not ruled out. On 22 February 1988, the trial court rendered a decision in favor of the widow and against Grepalife. On 17 May 1993, the Court of Appeals sustained the trial court’s decision. Grepalife filed the petition for review.

Issue: Whether Dr. Leuterio failed to disclose that he had hypertension, which might have caused his death, and thus concealment can be interposed by Grepalife as a defense to annul the insurance contract.

Held: Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good faith, and fair dealing requires that he should communicate it to the assured, but he designedly and intentionally withholds the same. Grepalife merely relied on the testimony of the attending physician, Dr. Hernando Mejia, as supported by the information given by the widow of the decedent. Grepalife asserts that Dr. Mejia’s technical diagnosis of the cause of death of Dr. Leuterio was a duly documented hospital record, and that the widow’s declaration that her husband had "possible hypertension several years ago" should not be considered as hearsay, but as part of res gestae. On the contrary, the medical findings were not conclusive because Dr. Mejia did not conduct an autopsy on the body of the decedent. As the attending physician, Dr. Mejia stated that he had no knowledge of Dr. Leuterio’s any previous hospital confinement. Dr. Leuterio’s death certificate stated that hypertension was only "the possible cause of death." The widow’s statement, as to the medical history of her husband, was due to her unreliable recollection of events. Hence, the statement of the physician was properly considered by the trial court as hearsay. The insured, Dr. Leuterio, had answered in his insurance application that he was in good health and that he had not consulted a doctor or any of the enumerated ailments, including hypertension; when he died the attending physician had certified in the death certificate that the former died of cerebral hemorrhage, probably secondary to hypertension. Contrary to Grepalife’s allegations, there was no sufficient proof that the insured had suffered from hypertension. Aside from the statement of the insured’s widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension, Grepalife had not proven nor produced any witness who could attest to Dr. Leuterio’s medical history. Grepalife had failed to establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim. 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. Herein, Grepalife failed to clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance.

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