Illegitimate favorites

Who are entitled to the proceeds of an insurance policy of the insured upon his death, the legitimate heirs or the designated beneficiaries? This is the issue answered in this case of Romy.

Romy was married to Julie with whom he had three children. As years passed and as Romy became more and more successful in his business, his marriage and family life however turned for the worse. He began womanizing and would usually go home late especially because of frequent spats with Julie who stood her ground and constantly denounced his profligate ways.

With this strained relations, Romy easily fell into the loving arms of the sweet and alluring Vina who easily enticed him with her endearing ways even if she knew that Romy was already married. Their frequent meetings eventually led into an illicit co-habitation during which they also begot three children.

In fact Romy became closer to Vina and her three children whom they named Vangie, Carlo and Tricie. To ensure their visible means of support in case something happened to him, Romy even procured two life insurance policies from IL worth P2 million, and two pension plans from GPL worth P1.5 million. He declared that Vina was his legitimate wife and designated her and her children as beneficiaries in the two IL policies. Later on however, he revoked the designation of Vina in one of the IL policies. In the GPL policies, Vina was not designated as beneficiary anymore.

Something indeed happened to Romy as he met a violent death several months later. While the investigation surrounding Romy’s death was still going on where Vina was even one of the primary suspects, Vina and her three children already filed their claim for the insurance proceeds of the insurance policies and pension plans.

For its part, IL disqualified Vina as a beneficiary in the remaining policy where she was still named as beneficiary when it found out that she was not Romy’s legal wife, but divided the proceeds of the two policies among the three children as the remaining three beneficiaries. It only withheld the shares of Carlo and Tricie pending submission of the letters of guardianship, but released the shares of Vangie who was already of age.

On the other hand, in the case of GPL, since Vina was not designated as beneficiary, it claimed that only the three illegitimate children as designated beneficiaries were entitled to the proceeds. Nevertheless it did not release their shares because it discovered that Romy misrepresented his age in the application for insurance.

When Julie and her three children, who were the legitimate heirs of Romy learned about the  insurance policies in IL and GPL, they sued Vina and her children Vangie, Carlo and Tricie as well as the two insurance companies. They claimed that the proceeds of the insurance policies were part of Romy’s estate to which they were entitled as legitimate heirs and that Vangie, Carlo and Tricie were only entitled to one half of their shares. Thus they contended that the release of the proceeds to Vangie and the impending release to Carlo and Tricie were not in accordance with the law and jurisprudence on donation (Arts. 752 and 772). Were they correct?

No. Under Article 2011 of the Civil Code, insurance contracts shall be governed by special laws, i.e., the Insurance Code. And Section 53 of the Insurance Code provides that, “the insurance proceeds shall be applied exclusively to the proper interest of the person in whose name and for whose benefit it is made, unless otherwise specified in the policy.

Hence 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 maturation of the policy. Third parties are not entitled. The only exception is where the insurance contract intends to benefit third parties in the form of favorable stipulations or indemnity. In such a case, the third parties may directly sue and claim from the insurer.

Julie and her children are third parties to the insurance contract with IL and GPL, and thus are not entitled to the proceeds thereof since there is no stipulation in the contracts favorable to them.. The revocation of Vina as a beneficiary in one policy and her disqualification as such in another policy are of no moment considering that the designation of the illegitimate children as beneficiaries in Romy’s insurance policies remains valid since the naming of the children of illicit relationships as beneficiaries of insurance policies are not prohibited by law.

Thus, the shares of Vina in the insurance proceeds forfeited by the lower court under Article 739 of the Civil Code prohibiting such donations, or by the insurers themselves for reasons based on the insurance contracts, must be awarded to the illegitimate children, the designated beneficiaries, to the exclusion of Julie and her children the legitimate heirs. It is only where the insured has not designated any beneficiary or when the designated beneficiary is disqualified by law to receive the proceeds, that said proceeds shall become part of the estate of the insured to which the legitimate heirs have better rights (Maramag et.al, vs. De Guzman et. al. G.R.181132, June 5, 2009).

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