Case Digest: Insular Life Assurance Co., Ltd. vs. Feliciano (73 Phil 201)

Insurance Law | Concealment, Representations, Warranties, Conditions, Exceptions

Petitioner/Insurer: Insular Life Assurance Co., Ltd.

Respondent: Dr. Serafin D. Feliciano

Insured: Evaristo Feliciano

• In 1934, Evaristo Feliciano applied for two life insurance policies with Insular Life Assurance Co., Ltd.

• At the time of his application, Feliciano was suffering from advanced pulmonary tuberculosis.

• On the same date, Dr. Trepp, who had taken X-ray pictures of Feliciano’s lungs, informed Feliciano’s brother, Dr. Serafin D. Feliciano, that the insured was already in a very serious and practically hopeless condition.

• Despite this medical condition, the application form contained a question asking whether the applicant had ever suffered from any ailment or disease of the lungs, including pleurisy, pneumonia, or asthma.

• The answer written on the application to this question was “No.”

• The answers in the application were written by the company’s soliciting agent, Romulo M. David, allegedly in collusion with the medical examiner, Dr. Gregorio Valdez, in order to secure approval of the application and credit the sale to the agent in a sales contest.

• Before signing the application, the insured and his family informed the agent and the medical examiner that he had been ill and coughing for some time, had gone three times to Santol Sanatorium, and had undergone X-ray examinations.

• Notwithstanding this disclosure, the agent and medical examiner allegedly assured them that the applicant was a fit subject for insurance.

• Feliciano signed the application, which contained a declaration that all answers were full, complete, and true, and that he was a proper subject for life insurance.

• The application also stated that the policy would not take effect until the first premium had been paid and the policy delivered and accepted while the insured was in good health.

• The policies further provided that only specified high-ranking officers of the company could modify contracts, and that agents had no authority to waive requirements or bind the company by representations.

• The policies were issued in the amounts of P20,000 and P5,000, respectively.

• Feliciano accepted the policies and paid the premiums.

• On September 29, 1935, Feliciano died of pulmonary tuberculosis.

• The beneficiaries filed a claim for the proceeds of the policies.

• Court of Appeals: Ruled in favor of the beneficiaries and ordered the insurer to pay P25,000, representing the total value of the policies.

• Insular Life filed a motion for reconsideration before the Supreme Court.

• Whether the life insurance policies are valid and enforceable despite the false answers in the application regarding the insured’s medical condition.

• The Supreme Court ruled that the policies were null and void ab initio due to fraudulent misrepresentation.

• The Court held that when the insured signed the application in blank and authorized the agent and medical examiner to fill in the answers, he made them his agents for that purpose and became responsible for their acts.

• The insured was not supposed to sign the application in blank because he was aware that the answers would form the basis of the policy.

• The Court found that the insured knew he was suffering from advanced pulmonary tuberculosis and therefore knew he was not a proper subject for life insurance.

• The application explicitly stated that the policy would not take effect unless delivered and accepted while the insured was in good health, yet he accepted the policies despite his serious illness.

• The policies expressly provided that agents had no authority to bind the company or waive its requirements.

• By accepting the policies, the insured was deemed to have ratified the contents of the application and was charged with knowledge of its terms, whether he actually read them or not.

• The Court concluded that the insured acted in connivance with the agent and medical examiner in the fraudulent procurement of the policies.

• Under insurance law, material misrepresentation or concealment of a serious illness affecting the risk renders the policy void.

• Since pulmonary tuberculosis was material to the risk assumed by the insurer, the false answer voided the contract.

• The beneficiaries were therefore not entitled to the policy proceeds.

• The insurer was ordered only to refund the premiums paid, amounting to P1,389, with legal interest from the date of the complaint.

Evaristo Feliciano applied for life insurance despite suffering from advanced pulmonary tuberculosis, and although his serious illness was known to him and disclosed to the agent and medical examiner, the application falsely stated that he had no lung disease, after which he accepted and paid for two policies before later dying of the illness. The Supreme Court held that the policies were void ab initio because the insured was responsible for the material misrepresentation in the application and was deemed to have participated in the fraudulent procurement of the policies, thus limiting recovery to a refund of premiums.

OZAETA, J.:

In a four-to-three decision promulgated on September 13, 1941, this Court affirmed the judgment of the Court of Appeals in favor of the respondents and against the petitioner for the sum of P25,000, representing the value of two insurance policies issued by the petitioner Insular Life Assurance Co., Ltd. on the life of Evaristo Feliciano. A motion to reconsider and set aside said decision has been filed by the petitioner, and both parties have submitted exhaustive and luminous written arguments in support of their respective contentions.

The facts of the case are set forth in the majority and dissenting opinions heretofore handed down by this Court, the salient points of which may be briefly restated as follows:

Evaristo Feliciano, who died on September 29, 1935, was suffering with advanced pulmonary tuberculosis when he signed his applications for insurance with the petitioner on October 12, 1934. 

On that same date Doctor Trepp, who had taken X-ray pictures of his lungs, informed the respondent Dr. Serafin D. Feliciano, brother of Evaristo, that the latter "was already in a very serious and practically hopeless condition." 

Nevertheless the question contained in the application — "Have you ever suffered from any ailment or disease of the lungs, pleurisy, pneumonia or asthma?" — appears to have been answered , "No" And above the signature of the applicant, following the answers to the various questions propounded to him, is the following printed statement: 

I declare on behalf of myself and of any person who shall have or claim any interest in any policy issued hereunder, that each of the above answers is full, complete and true, and that to the best of my knowledge and belief I am a proper subject for life insurance. (Exhibit K.)

The false answer above referred to, as well as the others, was written by the Company's soliciting agent Romulo M. David, in collusion with the medical examiner Dr. Gregorio Valdez, for the purpose of securing the Company's approval of the application so that the policy to be issued thereon might be credited to said agent in connection with the inter-provincial contest which the Company was then holding among its soliciting agents to boost the sales of its policies. 

Agent David bribed Medical Examiner Valdez with money which the former borrowed from the applicant's mother by way of advanced payment on the premium, according to the finding of the Court of Appeals. Said court also found that before the insured signed the application he, as well as the members of his family, told the agent and the medical examiner that he had been sick and coughing for some time and that he had gone three times to the Santol Sanatorium and had X-ray pictures of his lungs taken; but that in spite of such information the agent and the medical examiner told them that the applicant was a fit subject for insurance.

Each of the policies sued upon contains the following stipulations:

This policy and the application herefor constitute the entire contract between the parties hereto. . . . Only the President, or the Manager, acting jointly with the Secretary or Assistant Secretary (and then only in writing signed by them) have power in behalf of the Company to issue permits, or to modify this or any contract, or to extend the same time for making any premium payment, and the Company shall not be bound by any promise or representation heretofore or hereafter given by any person other than the above-named officials, and by them only in writing and signed conjointly as stated.

The application contains, among others, the following statements:

18. — I [the applicant] hereby declare that all the above statements and answers as well as all those that I may make to the Company's Medical Examiner in continuation of this application, to be complete, true and correct to the best of my knowledge and belief, and I hereby agree as follows:

1. That his declaration, with the answers to be given by me to the Medical Examiner, shall be the basis of the policy and form part of same.

x x x           x x x          x x x

3. That the said policy shall not take effect until the first premium has been paid and the policy has been delivered to and accepted by me, while I am in good health.

4. That the agent taking this application has no authority to make, modify or discharge contracts, or to waive any of the Company's rights or requirements.

5. My acceptance of any policy issued on this application will constitute a ratification by me of any corrections in or additions to this application made by the Company in the space provided "For Home Office Corrections or Additions Only." I agree that photographic copy of this applications as corrected or added to shall constitute sufficient notice to me of the changes made. (Emphasis added.)

The petitioner insists that upon the facts of the case the policies in question are null and void ab initio and that all that the respondents are entitled to is the refund of the premiums paid thereon. 

After a careful re-examination of the facts and the law, we are persuaded that petitioner's contention is correct. To the reasons adduced in the dissenting opinion heretofore published, we only desire to add the following considerations:

When Evaristo Feliciano, the applicant for insurance, signed the application in blank and authorized the soliciting agent and/or medical examiner of the Company to write the answers for him, he made them his own agents for that purpose, and he was responsible for their acts in that connection. If they falsified the answers for him, he could not evade the responsibility for he falsification. He was not supposed to sign the application in blank. He knew that the answers to the questions therein contained would be "the basis of the policy," and for that every reason he was required with his signature to vouch for truth thereof.

Moreover, from the facts of the case we cannot escape the conclusion that the insured acted in connivance with the soliciting agent and the medical examiner of the Company in accepting the policies in question. Above the signature of the applicant is the printed statement or representation: " . . . I am a proper subject for life insurance." In another sheet of the same application and above another signature of the applicant was also printed this statement: "That the said policy shall not take effect until he first premium has been paid and the policy as been delivered to and accepted by me, while I am in good health." When the applicant signed the application he was "having difficulty in breathing, . . . with a very high fever." He had gone three times to the Santol Sanatorium and had X-ray pictures taken of his lungs. He therefore knew that he was not "a proper subject for life insurance." When he accepted the policy, he knew that he was not in good health. Nevertheless, he not only accepted the first policy of P20,000 but then and there applied for and later accepted another policy of P5,000.

We cannot bring ourselves to believe that the insured did not take the trouble to read the answers contained in the photostatic copy of the application attached to and made a part of the policy before he accepted it and paid the premium thereon. He must have notice that the answers to the questions therein asked concerning his clinical history were false, and yet he accepted the first policy and applied for another. 

In any event, he obligated himself to read the policy when he subscribed to this statement: "My acceptance of any policy issued on this application will constitute a ratification by me of any corrections in or additions to this application made by the Company . . ." By accepting the policy he became charged with knowledge of its contents, whether he actually read it or not. He could not ostrich-like hide his head from it in order to avoid his part of the bargain and at the same time claim the benefit thereof. He knew, or was chargeable with knowledge, from the very terms of the two policies sued upon (one of which is printed in English and the other in Spanish) that the soliciting agent and the medical examiner had no power to bind the Company by any verbal promise or oral representation. The insured, therefore, had no right to rely — and we cannot believe he relied in good faith — upon the oral representation. The insured, therefore, had no right to rely — and we cannot believe he relied in good faith — upon the oral representation of said agent and medical examiner that he (the applicant) was a fit subject for insurance notwithstanding that he had been and was still suffering with advanced pulmonary tuberculosis.

From all the facts and circumstances of this case, we are constrained to conclude that the insured was a coparticipant, and coresponsible with Agent David and Medical Examiner Valdez, in the fraudulent procurement of the policies in question and that by reason thereof said policies are void ab initio.

Wheretofore, the motion for reconsideration is sustained and the judgment of the Court of Appeals is hereby reversed. Let another judgment be entered in favor of the respondents and against the petitioner for the refund of the premiums amounting to P1,389, with legal interest thereon from the date of the complaint, and without any finding as to costs.