G.R. No. 47593 ; September 13, 1941
THE INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. SERAFIN D. FELICIANO and ANGEL, FLORENDA, EUGENIO, HERMINIO and LETICIA, all surnamed FELICIANO, represented by their guardian ad litem SERAFIN D. FELICIANO, respondents.

FACTS

Evaristo Feliciano applied for insurance with the Insular Life Assurance Co., Ltd., and two policies totaling P25,000 were issued. He died on September 29, 1935. The company refused payment, alleging the policies were fraudulently obtained because the insured gave false answers in his application and medical report regarding his health. The lower court found that at the time of application and medical examination, Feliciano was already suffering from tuberculosis, a fact not disclosed in the documents. The court further found that Feliciano signed the application and examiner’s report in blank, and the agent and medical examiner later filled them in, making it appear he was a fit subject for insurance. The court also held that the insured and his family did not conceal his health condition and had informed the agent and examiner that the applicant had been sick, coughing, and had visited the Santol Sanatorium three times. The Court of Appeals sustained these factual findings.

ISSUE

Whether an insurance company can avoid a policy when its agent knowingly and intentionally wrote answers in the application that differed from those truthfully provided by the insured.

RULING

No. The Supreme Court affirmed the lower courts’ judgments in favor of the respondents (the beneficiaries). The Court held that where an insurance company’s agent, after obtaining correct answers from the applicant, fills in false answers without the applicant’s knowledge, the insurer cannot use the falsity of those answers to avoid liability on the policy. The insurer is bound by the acts of its agent, who acted as its general representative in soliciting and processing the application. The Court reasoned that as between two innocent parties—the insurer who selected and authorized the agent and the insured who relied on that agent—the loss should fall on the party who created the situation by appointing the agent. The fact that the insured, who could not read English, signed the application without reading it was not negligence or bad faith, as he was justified in trusting the company’s accredited agent. The Court acknowledged this rule might expose companies to fraud but emphasized that protection lies in their own hands through greater care in selecting agents. The petition was dismissed, and the judgment was affirmed.