ISABELA ROQUE, doing busines under the name and style of Isabela Roque Timber

Enterprises and ONG CHIONG vs. HON. INTERMEDIATE APPELATE COURT and PIONEER
INSURANCE AND SURETY CORPORATION
Common Carrier: Manila Bay Lightrage Corporation (manila Bay)
Insured/petitioner: Isabela Roque (doing business under Isabela Roque Timber Enterprises
Insurer: Pioneer Insurance and Surety Corporation (Pioneer)
Facts: Manila Bay, a common carrier, entered into a contract with Roque whereby the former
would load and carry on board its barge Mable 10 about 422.18 cubic meters of logs from
Malampaya Sound, Palawan to North Harbor, Manila. Roque insured the logs against loss for
P100,000.00 with Pioneer.
The 811 pieces of logs loaded on the barge never reaches its destination. It found out that the
barge where the logs were loaded was not seaworthy such that it developed a leak. One of the
hatches was left open causing water to enter the barge and because the barge was not provided
with the necessary cover or tarpaulin, the ordinary splash of sea waves brought more water
inside the barge.
Roque demanded Manila Bay payment of P150,000.00 for the loss of the shipment plus
P100,000.00 as unrealized profits but the latter ignored the demand. Another letter was sent to
Pioneer claiming the full amount of P100,000.00 under the insurance policy but Pioneer refused
to pay on the ground that its liability depended upon the "Total loss by Total Loss of Vessel only".
Trial court ruled in favor of Roque against Pioneer, but the decision was reversed by appellate
court.
Issues:
1. WON in cases of Marine Cargo Insurance, there is warranty of seaworthiness by the cargo
owner.
2. WON that the loss of the cargo in this case was cause by perils of the ship and not by
perils of the sea.
Held:
1. Yes. The liability of the insurance company is governed by law. Section 113 of the
Insurance Code provides: In every marine insurance upon a ship or freight, or freightage,
or upon anything which is the subject of marine insurance, a warranty is implied that the
ship is seaworthy. The fact that the term "cargo" can be the subject of marine insurance
and that once it is so made, the implied warranty of seaworthiness immediately attaches
to whoever is insuring the cargo whether he be the shipowner or not.
Since the law provides for an implied warranty of seaworthiness in every contract of
ordinary marine insurance, it becomes the obligation of a cargo owner to look for a reliable
common carrier which keeps its vessels in seaworthy condition. The shipper of cargo may
have no control over the vessel but he has full control in the choice of the common carrier
that will transport his goods. Or the cargo owner may enter into a contract of insurance
which specifically provides that the insurer answers not only for the perils of the sea but
also provides for coverage of perils of the ship.
2. The loss of the cargo was due to the perils of the ship rather than the perils of the sea. In
Roques complaint, it is alleged that "the barge Mable 10 of defendant carrier developed a
leak which allowed water to come in and that one of the hatches of said barge was
negligently left open by the person in charge thereof causing more water to come in and
that "the loss of said plaintiffs' cargo was due to the fault, negligence, and/or lack of skill
of carrier and/or carrier's representatives on barge Mable 10."
In the case of Go Tiaoco y Hermanos v. Union Ins. Society of Canton, it was ruled
that a loss which, in the ordinary course of events, results from the natural and inevitable
action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure
of the ship's owner to provide the vessel with proper equipment to convey the cargo under
ordinary conditions, is not a peril of the sea. Such a loss is rather due to what has been
aptly called the "peril of the ship."
Suffice it to say that upon the authority of those cases there is no room to doubt the
liability of the shipowner for such a loss as occurred in this case. By parity of reasoning the
insurer is not liable; for generally speaking, the shipowner excepts the perils of the sea
from his engagement under the bill of lading, while this is the very perils against which the
insurer intends to give protection. As applied to the present case it results that the owners
of the damaged rice must look to the shipowner for redress and not to the insurer.

G.R. No. L-43706 November 14, 1986

NATIONAL POWER CORPORATION, petitioner, vs. COURT OF APPEALS and PHILIPPINE
AMERICAN GENERAL INSURANCE CO., INC., respondents.
Facts: The National Power Corporation (NPC) entered into a contract with the Far Eastern
Electric, Inc. (FFEI) for the erection of the Angat Balintawak transmission lines for the Angat
Hydroelectric Project. FEEI agreed to complete the work within 120 days from the signing of the
contract, otherwise it would pay NPC P200.00 per calendar day as liquidated damages, while NPC
agreed to pay the sum of P97,829.00 as consideration. On the other hand, Philippine American
General Insurance Co., Inc. (Philamgen) issued a surety bond in the amount of P30,672.00 for the
faithful performance of the undertaking by FEEI. The condition of the bond reads:The liability of
the PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC. under this bond will expire One
(1) year from final Completion and Acceptance and said bond will be cancelled 30 days after its
expiration, unless surety is notified of any existing obligation thereunder.
FEEI started construction but due unavailability of equipment of FEEI, FEEI and Philamgen wrote
NPC requesting its assistance. The work was abandoned, leaving the construction unfinished.
Philamgen and FEEI informed NPC that FEEI was giving up the construction due to financial
difficulties. On the same date, NPC wrote Philamgen informing it of the withdrawal of FEEI from
the work and formally holding both FEEI and Philamgen liable for the cost of the work to be
completed.
The work was completed by NPC on September 30, 1963. NPC notified Philamgen that FEEI had
an outstanding obligation in the amount of P75,019.85 and demanded the remittance of the
amount of the surety bond the answer for the cost of completion of the work. Philamgen did not
pay as demanded but contended instead that its liability under the bond has expired on
September 20, 1964 and claimed that no notice of any obligation of the surety was made within
30 days after its expiration.
Issue: WON RESPONDENT COURT OF APPEALS ERRED IN ABSOLVING PRIVATE RESPONDENT
PHILAMGEN FROM ITS LIABILITY UNDER THE BOND.
Held: Philamgen is liable to pay. It is well settled that contracts of insurance are to be construed
liberally in favor of the insured and strictly against the insurer. Thus ambiguity in the words of an
insurance contract should be interpreted in favor of its beneficiary.
It cannot be denied that the breach of contract in this case, that is, the abandonment of the
unfinished work of the transmission line of the NPC by the contractor Far Eastern Electric, Inc.
was within the effective date of the contract and the surety bond. Such abandonment gave rise
to the continuing liability of the bond as provided for in the contract which is deemed
incorporated in the surety bond executed for its completion. To rule therefore that Philamgen was
not properly notified would be gross error.