FIELDMEN'S INSURANCE CO., INC. vs. MERCEDES VARGAS VDA. DE SONGCO, ET AL.

and COURT OF APPEALS

FACTS:

Federico Songco, a man of scant education, a first grader, owned a private jeepney. Sometime 1960, he
was induced by Fieldmen's Insurance agent Benjamin Sambat to apply for a Common Carrier's Liability
Insurance Policy covering his vehicle. Upon paying an annual premium of P16.50, Fieldmen's Insurance
issued Common Carriers Accident Insurance Policy No. 45-HO- 4254. The duration of which will be for
1 year, effective September 15, 1960 to September 15, 1961.

In 1961, the defendant company, upon payment of the corresponding premium, renewed the policy by
extending the coverage from October 15, 1961 to October 15, 1962. On October 29, 1961, during the
effectivity of the renewed policy, the insured vehicle collided with a car in Calumpit, Bulacan while being
driven by Rodolfo Songco, son of Federico (the vehicle owner). As a result, Federico Songco (father) and
Rodolfo Songco (son) died, Carlos Songco (another son), the latter's wife, Angelita Songco, and a family
friend sustained physical injuries.

Amor Songco, son of deceased Federico Songco, testified that when insurance Sambat was inducing his
father to insure his vehicle, he butted in because their vehicle is an "owner" private vehicle and not for
passengers. Sambat replied that whether the vehicle was an "owner" type or for passengers it could be
insured because their company is not owned by the Government.

The lower court held that Fieldmen’s Insurance cannot escape liability under a common carrier insurance
policy on the pretext that what were insured were a private vehicle and not a common carrier, the policy
being issued upon the agent’s insistence. CA affirmed the lower court.

ISSUE:

Whether or not the Songcos can claim the insurance proceeds despite the fact that the vehicle concerned
was an owner type and not a common carrier.

RULING:

YES. Fieldmen’s Insurance is estopped from declaring that the vehicle was not covered. It led Federico
Songco to believe that he could qualify under the Common Carrier's Liability Insurance Policy, and to
enter into a contract of insurance by paying the premiums due. With that, it cannot be permitted to change
its stand to the detriment of the heirs of the insured. It knew from the start that Frederico owned a private
vehicle. Its agent Sambat even convinced the insured twice, who is a man of scant education, and the
company did not object the former’s actions.

In detail, the basis of the ruling came from Qua Chee Gan v. Law Union and Rock Insurance -- Where
inequitable conduct is shown by an insurance firm, it is estopped from enforcing forfeitures in its favor, in
order to forestall fraud or imposition on the insured. Estoppel is primarily based on the doctrine of good
faith and the avoidance of harm that will befall the innocent party due to its injurious reliance.
Fieldmen’s Insurance incurred legal liability under the policy. Since some of the conditions in the policy
were impossible to comply with under the existing conditions at the time and inconsistent with the known
facts, the insurer is estopped from asserting breach of such conditions. Except for the fact that the
passengers were not fare-paying, their status as beneficiaries under the policy is recognized. Even if the
be assumed that there was an ambiguity, such must be strictly interpreted against the party that caused
them.

The contract of insurance is one of perfect good faith (uberrima fides) not for the insured alone, but
equally so for the insurer; in fact, it is more so for the latter, since its dominant bargaining position carries
with it stricter responsibility.

WHEREFORE, the decision of respondent Court of Appeals of July 20, 1965, is affirmed in its entirety.
Costs against petitioner Fieldmen's Insurance Co., Inc.