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.
