G.R. No. 105562 September 27, 1993
LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA ALARCON, DINA LORENA AYO, CELIA CALUMBAG and LUCIA LONTOK, petitioners, vs. HON. COURT OF APPEALS and THE INSULAR LIFE ASSURANCE COMPANY, LIMITED, respondents.

FACTS

Petitioners are beneficiaries under Group Policy No. G-004694 procured by Prime Marine Services, Inc. (PMSI) from private respondent Insular Life Assurance Company, Ltd. to cover its sea-based employees. Their husbands/sons, covered employees of PMSI, perished at sea on 17 February 1986 when M/V Nemos sank. Petitioners sought to claim death benefits and approached Capt. Rosendo Nuval, President and General Manager of PMSI, for assistance. Except for spouses Alarcon, petitioners executed special powers of attorney authorizing Capt. Nuval to “follow up, ask, demand, collect and receive” indemnities due them relative to the sinking. PMSI, as policyholder, filed the insurance claims with Insular Life, submitting these powers of attorney. Insular Life issued six checks payable to the petitioners and released them to PMSI’s treasurer upon Capt. Nuval’s phone instructions. Capt. Nuval endorsed and deposited the checks into his personal account. On 3 July 1989, petitioners learned of their entitlement to the insurance benefits and sought to recover them from Insular Life, which denied liability, claiming extinction upon delivery of the checks to PMSI. Petitioners filed an administrative complaint with the Insurance Commission (IC Case No. RD-058), praying for payment of their claims and imposition of sanctions on Insular Life for violating the Insurance Code. The Insurance Commission ruled in favor of petitioners, ordering Insular Life to pay fines, settle the claims of Dina Ayo and Lucia Lontok, and show cause why its officers should not be sanctioned. Insular Life appealed to the Court of Appeals, which modified the decision by eliminating the monetary awards to Ayo and Lontok. Petitioners appealed to the Supreme Court via certiorari.

ISSUE

The primary issue is whether Insular Life validly extinguished its obligation to pay the insurance proceeds to the petitioner-beneficiaries by delivering the checks to Capt. Nuval/ PMSI based on the special powers of attorney executed by the petitioners.

RULING

The Supreme Court GRANTED the petition, SET ASIDE the Decision and Resolution of the Court of Appeals, and REINSTATED the Decision of the Insurance Commission. The Court held that Insular Life did not validly discharge its obligation to the beneficiaries. The special powers of attorney executed by the petitioners did not specifically authorize Capt. Nuval to collect the insurance proceeds from Insular Life; they pertained to other death benefits from entities like OWWA and PANDIMAN. Insular Life failed to exercise the diligence of a good father of a family in verifying the scope of Capt. Nuval’s authority. Furthermore, the Court ruled that the Insurance Commission had jurisdiction over the case as it involved the regulation of the insurance business and the imposition of administrative sanctions, which are within its authority under the Insurance Code. The Court also found Insular Life liable for violating Section 180 of the Insurance Code regarding the release of proceeds to minor beneficiaries without court authority or bond, where the amount exceeded P20,000.00. The obligation to pay the insurance proceeds to the rightful beneficiaries remained unpaid and unextinguished.