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Insurance Case Digest: Qua Chee Gan v. Law Union and Rock Insurance Co., Ltd. (1955)

G.R. No.L-4611        December 17, 1955
Lessons Applicable: Ambiguous Provisions Interpreted Against Insurer (Insurance)

  • Qua Chee Gan, a merchant of Albay, owned four bodegas which he insured with Law Union & Rock Insurance Co., Ltd (Law Union) since 1937 and the lose made payable to the Philippine National Bank (PNB) as mortgage of the hemp and crops, to the extent of its interest
  • July 21, 1940 morning: fire broke out in bodegas 1,2 and 4 which lasted for almost a week. 
    • Qua Chee Gan informed Law Union by telegram
  • Law Union rejected alleging that it was a fraudulent claim that the fire had been deliberately caused by the insured or by other persons in connivance with him
  • Que Chee Gan, with his brother, Qua Chee Pao, and some employees of his, were indicted and tried in 1940 for the crime of arson but was  subsequently acquitted
  • During the pendency of the suit, Que Chee Gan paid PNB
  • Law Union states that ff. assignment of errors:
    • 1. memo of warranty requires 11 hydrants instead of 2 
    • 2. violation of hemp warranty against storage of gasoline since it prohibits oils
    • 3. fire was due to fraud
    • 4. burned bodegas could not possibly have contained the quantities of copra and hemp stated in the fire claims
ISSUE: W/N Qua Chee Gan should be allowed to claim.

HELD: YES. Affirmed.
  • 1. It is a well settled rule of law that an insurer which with knowledge of facts entitling it to treat a policy as no longer in force, receives and accepts a preium on the policy, estopped to take advantage of the forfeiture
  • 2. oils (animal and/or vegetable and/or mineral and/or their liquid products having a flash point below 300o Fahrenheit", and is decidedly ambiguous and uncertain; for in ordinary parlance, "Oils" mean "lubricants" and not gasoline or kerosene
    • by reason of the exclusive control of the insurance company over the terms and phraseology of the contract, the ambiguity must be held strictly against the insurer and liberraly in favor of the insured, specially to avoid a forfeiture
  • 3. trial Court found that the discrepancies were a result of the insured's erroneous interpretation of the provisions of the insurance policies and claim forms, caused by his imperfect knowledge of English, and that the misstatements were innocently made and without intent to defraud.
  • 4. Similarly, the 20 per cent overclaim on 70 per cent of the hemo stock, was explained by the insured as caused by his belief that he was entitled to include in the claim his expected profit on the 70 per cent of the hemp, because the same was already contracted for and sold to other parties before the fire occurred