Qua Chee Gan v.

Law Union Rock

Facts: Qua Chee Gan, a merchant, owned 4 warehouses in Albay which were used for the storage or
copra and hemp in which the appelle deals with exclusively.

The warehouses together with the contents were insured with Law Union since 1937 and the loss made
payable to PNB as mortgagee of the hemp and copra.

A fire of undetermined cause broke out in July 21, 1940 and lasted for almost 1 whole week.

Bodegas 1, 3, and 4 including the merchandise stored were destroyed completely.

Insured then informed insurer of the unfortunate event and submitted the corresponding fire claims, which
were later reduced to P370T.

Insurer refused to pay claiming violations of the warranties and conditions, filing of fraudulent claims and
that the fire had been deliberately caused by the insured.

Insured filed an action before CFI which rendered a decision in favor of the insured.

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.