The Insular Life Assurance Co., LTD v. Feliciano G.R. No. L-47593 Sept.

13, 1941 Facts:

Evaristo Feliciano (Evaristo) filed and was issued with 2 insurance policies worth P25k by The Insular Life Assurance Co., LTD (Insular Life) When Evaristo died in 1935, Insular life refused to pay on the ground that the policies were fraudulently obtained, the insured having given false answers and statements in the application as well as in the medical report. Evaristos kin and their guardian then filed an action to recover the amount of the insurance TC: for the Felicianos o Evaristo was made to sign a blank application and medical examiners form o That both the agent and the medical examiner have knowledge with regards to Evaristos health condition (Evaristo was then suffering from tuberculosis), but due to an inter-provincial contest which the compamy was holding among its soliciting agents to boost the sales of the policies, the agent bribed the medical examiner so that it was the two of them who filled up Evaristos application and examiners form, making it appear that the latter was a fit subject for insurance CA: sustain TCs findings o an insurance company has no right to avoid a policy where its agent knowingly and intentionally wrote down the answers in the application differing from those made by the insured, in disregard of the exception that when the agent, instead of serving the interests of his principal, acts in his own or another's interest and adversely to that of his principal, the said principal is not bound by said acts of the agent.

Issue: Held:

WON CA erred in its decision.

No, it did not. In the present case, the agent knew all the time the true state of health of the insured. The insurer's medical examiner approve the application knowing full well that the applicant was sick. The situation is one in which one of two innocent parties must bear a loss for his reliance upon a third person. In this case, it was the insurer who gave the agent authority to deal with the applicant. It was the one who selected the agent, thus implying that the insured could put his trust on him. It was the one who drafted and accepted the policy and consummated the contract. It seems reasonable that as between the two of them, the one who employed and gave character to the third person as its agent should be the one to bear the loss. The weight of authority is that if an agent of the insurer, after obtaining from an applicant for insurance a correct and truthful answer to interrogatories contained in the application for insurance, without knowledge of the applicant fills in false answers, either fraudulently or otherwise, the insurer cannot assert the falsity of such answers as a defense to liability on the policy, and this is true generally without regard to the subject matter of the answers or the nature of the agent's duties or limitations on his authority, at least if not brought to the attention of the applicant. The fact that the insured did not read the application which he signed, is not indicative of bad faith. It has been held that it is not negligence for the insured to sign an application without first reading it if the

insurer by its conduct in appointing the agent influenced the insured to place trust and confidence in the agent.