FIELDMEN’S INSURANCE CO. vs. VDA.

DE SONGCO

FACTS:

Federico Songco owned a private jeepney. On September 15, 1960, he was induced by Fieldmen's
insurance agent Benjamin Sambat to apply for a Common Carrier's Liability Insurance Policy covering his
motor vehicle. He was issued a Common Carriers Accident Insurance Policy. On the next year, he
renewed the policy by paying the annual premium. During the effectivity of the renewed policy, the
insured vehicle collided with another car while being driven by Rodolfo Songco, a duly licensed driver
and son of Federico (the vehicle owner). As a result, Federico Songco (father) and Rodolfo Songco (son)
died, along with other passengers.

A claim was filed but was denied by the insurance company on the pretext that what was insured was a
private vehicle and not a common carrier. During the trial, it was declared by a witness that when
insurance agent Benjamin Sambat was inducing Songco to insure his vehicle, the latter butted in saying,
“Our vehicle is a private vehicle and not for passengers.” But the agent replied: “Regardless of whether
your vehicle was an owner-type or for passengers, it could still be insured because our company is not
owned by the Government. And the Government has nothing to do with their company.”

The Court of Appeals rendered a decision in favor of the claimants. It held that 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. After Fieldmen's Insurance Co. had led the insured Songco
to believe that he could qualify under the common carrier liability insurance policy, it could not,
thereafter, be permitted to change its stand to the detriment of the heirs of the insured. The failure to
apply the Doctrine of Estoppel in this case would result in a gross travesty of justice.

ISSUE:

Whether or not the insurance claim is proper?         

RULING:
The fact that the insured owned a private vehicle, not a common carrier, was something which the
company knew all along. In fact, it exerted the utmost pressure on the insured, a man of scant
education, to enter into the contract of insurance. The Court of Appeals also held that since some of the
conditions contained in the policy were impossible to comply with under the existing conditions at the
time, the insurer is estopped from asserting breach of such conditions.

The Supreme Court, in affirming the decision of the Court of Appeals, took judicial notice of the fact that
nowadays, monopolies, cartels and concentration of capital, endowed with overwhelming economic
power, manage to impose upon parties dealing with them cunningly prepared agreements that the
weaker party may not change one whit, his participation in the agreement being reduced to the
alternative of “take it or leave it” labelled since Raymond Saleilles as contracts by adherence (contrats
d'adhesion), in contrast to those entered into by parties bargaining on an equal footing, such contracts
(i.e. insurance policies & international bills of lading) obviously call for greater strictness and vigilance on
the part of courts of justice with a view to protecting the weaker party from abuses.

Citing the case of Qua Chee Gan vs. Law Union & Rock Insurance, "The contract of insurance is one of
perfect good faith (uberima 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."