Who are entitled to the life insurance proceeds, the estate of the insured or the designated beneficiaries? If the designated beneficiaries are the illegitimate children of the insured, should the proceeds be reduced based on the rules on legitime giving them only 1/2 of the share of the legitimate children? These are the interesting questions raised and resolved in this case between the legitimate wife and children of Larry on one hand and his concubine and illegitimate children on the other hand.
The case stemmed from the insurance policies which Larry obtained from two insurance companies (IL and GPL). The IL insured Larry under two policies wherein he designated his concubine Edna and his three children as beneficiaries. Subsequently, Larry revoked the designation of Edna in one policy and IL disqualified her as beneficiary in the other policy. On the other hand, in the insurance policy obtained from GPL, Larry did not name Edna but only the three illegitimate children as beneficiaries.
When Larry died under circumstances indicating foul play with Edna even being a suspect, his legitimate wife Vicky and her legitimate children filed a petition with the Regional Trial Court (RTC) against Edna, her children and the two insurance companies (IL and GL) for revocation of the polices because they are void and/or reduction of insurance proceeds because they are in-officious. The basis of their claim is that Edna being a concubine of Larry and a suspect in his murder is disqualified from being a beneficiary of the insurance policies and that Edna’s children with Larry being illegitimate children are entitled to a lesser share of the insurance proceeds. They also alleged that pursuant to Section 12 of the Insurance Code, Edna’s share in the proceeds should be forfeited in their favor, the former having brought about the death of Larry. Thus they prayed that the share of Edna and portions of the shares of Larry’s illegitimate children should be awarded to them as legitimate heirs of Larry entitled to their respective legitimes. Will their suit prosper?
No. It is evident from the face of the complaint that Vicky and her children are not entitled to a favorable judgment in the light of Article 2011 of the Civil Code which expressly provides that insurance contract shall be governed by special laws i.e. the Insurance Code. Section 53 of said Code states that “the proceeds of insurance shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy”.
Pursuant thereto, it is obvious that the only persons entitled to claim the insurance proceeds are either the insured, if still alive, or the beneficiary, if the insured is already deceased, upon the maturation of the policy. The exception to this rule is when the insurance contract intends to benefit third persons who are not parties to the same, in the form of favorable stipulations or indemnity. In such a case, third parties may directly sue and claim from the insurer.
In this case it is clear from the petition filed before the RTC that Vicky and her children were not named as beneficiaries in the insurance policies issued by IL and GPL. They are third parties to the insurance contract and thus are not entitled to the proceeds thereof. Accordingly IL and GPL have no legal obligations to turn over the insurance proceeds to them. The revocation of Edna as beneficiary in one policy and her disqualification in another are of no moment considering that the designation of the illegitimate children in Larry’s policies remains valid. Because the insured is not legally prohibited in naming as beneficiaries the children of illicit relationship, the shares of Edna in the insurance policies whether forfeited by the court in view of prohibition on donations to concubine under Article 739 of the Civil Code or by the insurers themselves for reasons based on the insurance contracts, must be awarded to the said illegitimate children, the designated beneficiaries, to the exclusion of Vicky and her children. It is only when the insured has not designated any beneficiary or when the designated beneficiary is disqualified by law to receive the proceeds that the insurance policy shall redound to the benefit of the estate of the insured (Heirs of Maramag vs. Insular Life et. Al. G.R. 181132, June 5, 2009)
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