G.R. No. 47593 - Insular Life Assurance Co., Ltd. vs. Feliciano

Evaristo Feliciano, who later died on September 29, 1935, applied for life insurance on October 12, 1934, while suffering from advanced pulmonary tuberculosis.
Prior to signing the application, it was known from the fact that he had been sick, coughing, and had visited the Santol Sanatorium three times with X-ray records indicating a serious lung condition.
On the day of application, Doctor Trepp, after taking X-ray photographs, informed Dr. Serafin D. Feliciano (the respondent and brother of the insured) that Evaristo was “already in a very serious and practically hopeless condition.”

Despite his evident ill health, the application questions regarding past lung diseases were answered “No.”
The false responses, including the answer to whether he had ever suffered from lung ailments, were recorded by the company’s soliciting agent, Romulo M. David.
Medical Examiner Dr. Gregorio Valdez, in collusion with Agent David, filled in or corrected the application for the purpose of securing the issuance of the policies.
Agent David bribed Dr. Valdez using funds borrowed from the insured’s mother as an advanced premium payment.
Additional testimony revealed that the insured and his family had informed both the agent and the examiner about his health condition, yet these facts were disregarded in the application’s completion.

Each policy included a stipulation that the policy and application together constituted the entire contract, expressly limiting modifications to specific, duly authorized company officials and in writing.
The application contained several declarations, including:

A statement declaring that all answers given were “full, complete and true,” and vouching for the applicant’s fitness for insurance.
A clause stating that the policy would take effect only upon payment of the first premium and receipt of the actual policy while the insured was in good health.
A disclaimer that the soliciting agent did not have the authority to modify, discharge, or waive any provisions of the contract.
A ratification clause indicating that acceptance of the policy implied acceptance of any corrections or additions by the company.

Despite evident symptoms and knowledge of his poor health, the insured not only accepted a policy for P20,000 but also applied for and accepted a subsequent policy for P5,000.
It is inferred that the insured, by signing the application and accepting the policies, assumed responsibility for the content therein—even though some parts were filled in by the company’s agents.
The fact that the insured signed an application “in blank” and later ratified its contents contributed to the complexity of determining responsibility for the falsified entries.

The petitioner (Insular Life Assurance Co., Ltd.) argued that, based on the circumstances, the policies were null and void ab initio, entitling the respondents only to a refund of the premiums paid.
The Court of Appeals initially rendered a judgment in favor of the respondents for the value of the policies (P25,000), considering the findings of fraudulent procurement.
A motion to reconsider was later filed by the petitioner, prompting a re-examination of both the evidentiary facts and the legal issues at hand.

Whether the application containing falsified answers, which was completed by the agent and the medical examiner in collusion, constitutes grounds for declaring the life insurance policies void ab initio.
Whether the insured, by signing the application (even if in blank or without full inspection of the entries), assumed responsibility for the accuracy of all recorded answers and, thus, participated in the fraud.
Whether the acceptance of the policy—despite the insured’s evident ill health and explicit knowledge of ongoing symptoms—amounted to an implicit ratification of the falsified representations.
If the fraudulent procurement of the policies by the insured, the agent, and the examiner renders the insurance contract null, what remedy should be afforded to the respondents (e.g., refund of premiums versus enforcement of the policy’s value).