Qua Chee Gan v. Law Union and Rock Insurance

QUA CHEE GAN v. LAW UNION AND ROCK INSURANCE

1955 / JBL Reyes / Appeal from CFI judgment

Qua Chee Gan owned 4 warehouses or bodegas used for the storage of copra and hemp, which were insured with Law Union, and the lose made payable to PNB as mortgage of the hemp and copra. Fire broke out and destroyed bodegas 1, 3 ad 4. QCG informed LU by telegram, and the next day, fire adjusters arrived to conduct an investigation. LU resisted payment, claiming violation of warranties and conditions, filing of fraudulent claims, and that the fire had been deliberately caused by QCG or by other persons in connivance with him.

            QCG, his brother, and some employees were indicted and tried for arson, but they were acquitted. Thereafter, the civil suit to collect the insurance money proceeded to its trial. CFI rendered a decision in QCG’s favor.

CFI AFFIRMED; LAW UNION LIABLE

On false and fraudulent claims

CFI found that the discrepancies were a result of QCG’s erroneous interpretation of the provisions of the insurance policies and claim forms, caused by his imperfect English, and that the misstatements were innocently made and without intent to defraud. The rule is that to avoid a policy, the false swearing must be willful and with intent to defraud which was not the cause.

On the storage of gasoline

Ambiguities or obscurities must be strictly interpreted against the party that caused them. This rigid application of the rule has become necessary in view of current business practices. In contrast to contracts entered into by parties bargaining on an equal footing, a contract of insurance calls for greater strictness and vigilance on the part of courts of justice with a view to protect the weaker party from abuses and imposition, and prevent their becoming traps for the unwary. The contract of insurance is one of perfect good faith (uferrimal fidei) 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.

            QCG admitted that there were 36 cans of gasoline in Bodega 2. Gasoline is not specifically mentioned among the prohibited articles listed in the hemp warranty. The cause relied upon LU speaks of oils. In ordinary parlance, “oils” means “lubricants” and not gasoline or kerosene. The prohibition of keeping gasoline could have been expressed clearly and unmistakably.

On fire hydrants warranty

LU is estopped from claiming that there was a violation of such warranty, since it knew that from the start, the number of hydrants it demanded never existed, yet it issued policies and received premiums.