G.R. No. L-4611 – 98 Phil. 85 – Mercantile Law – Law on Insurance – Ambiguity; To be resolved against insurer – Contract of Adhesion
Qua Chee Gan owns four warehouses in Albay. He was using these warehouses to house crops like copra and hemp. All warehouses were insured by Law Union and Rock Insurance for the amount of P370,000.00. The insurance states that Qua Chee Gan should install 11 hydrants in the warehouses’ premises. Qua Chee Gan installed only two, but Law Union nevertheless went on with the insurance policy and collected premiums from Qua Chee Gan. The insurance contract also provides that “oil” should not be stored within the premises of the warehouses.
In 1940, three of the warehouses were destroyed by fire. The damage caused amounted to P398k. Qua Chee Gan filed an insurance claim with Law Union but the latter refused to pay as it alleged that after investigation from their part, they found out that Qua Chee Gan caused the fire. Law Union in fact sued Qua Chee Gan for Arson.
Qua Chee Gan was acquitted in the arson case. He then demanded that Law Union pay up. This time, Law Union averred that the insurance contract is void because Qua Chee Gan failed to install 11 hydrants; and that gasoline was found in one of the warehouses.
ISSUE: Whether or not the insurance contract is void.
HELD: No. Law Union cannot exempt itself from paying Qua Chee Gan because it is estopped from invoking the same. It is a well settled rule of law that an insurer which with knowledge of facts entitling it to treat a policy as no longer in force, receives and accepts a premium on the policy, estopped to take advantage of the forfeiture.
Also, gasoline is not one of those items specifically prohibited from the premises of the warehouses. What was mentioned was the word “oil” which could mean anything (from palm oil to lubricant and not gasoline or kerosene). This ambiguity is to be interpreted against Law Union because a contract of insurance is a contract of adhesion. Further, oil is incidental to Qua Chee Gan’s business, it being used for motor fuel.
