MARINE INSURANCE The liability of the insurance company is governed by law.
Section 113 of the
Roque v. IAC
G.R. No. L-66935
November 11, 1985
FACTS:
The Manila Bay Lighterage Corporation (Manila Bay), a common carrier, entered
into a contract with the petitioners
The petitioners insured the logs against loss with respondent Pioneer Insurance
and Surety Corporation (Pioneer)
The petitioners loaded on the barge, 811 pieces of logs at Malampaya Sound,
Palawan for carriage and delivery to North Harbor, Port of Manila,
HOWEVER, the shipment never reached its destination because Mable 10 sank
with the 811 pieces of logs somewhere off Cabuli Point in Palawan on its way to
Manila.
ALLEGATION MADE BY PETITIONERS:
o The barge where the logs were loaded was not seaworthy such that it
developed a leak
CA found that 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.
The petitioners wrote a letter to Manila Bay demanding payment for the loss of
the shipment plus unrealized profits
o Respondent refused to pay on the ground that its hability depended
upon the "Total loss by Total Loss of Vessel only"
Hence, petitioners commenced a civil case against Manila Bay and respondent
Pioneer.
CA:
o Absolved Pioneer from liability after finding that there was a breach of
implied warranty of seaworthiness on the part of the petitioners and
that the loss of the insured cargo was caused by the "perils of the ship"
and not by the "perils of the sea".
o It ruled that the loss is not covered by the marine insurance policy.
PETITIONERS CONTENTIONS:
o The implied warranty of seaworthiness provided for in the Insurance
Code refers only to the responsibility of the shipowner who must see to
it that his ship is reasonably fit to make in safety the contemplated
voyage.
o A mere shipper of cargo, having no control over the ship, has nothing to
do with its seaworthiness
o A cargo owner has no control over the structure of the ship, its cables,
anchors, fuel and provisions, the manner of loading his cargo and the
cargo of other shippers, and the hiring of a sufficient number of
competent officers and seamen
o The loss of the cargo was caused by the perils of the sea, not by the
perils of the ship
ISSUE: Whether Pioneer shall be absolved from liability on the grounds that the vessel
carrying the insured cargo was unseaworthy and the loss of said cargo was caused not by
the perils of the sea but by the perils of the ship
HELD:
Yes
Insurance Code provides:
In every marine insurance upon a ship or freight, or freightage, or upon
any thing which is the subject of marine insurance, a warranty is
implied that the ship is seaworthy.
Section 99 of the same Code also provides in part.
o Marine insurance includes:
(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes,
merchandise
From the above-quoted provisions, there can be no mistaking 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
The fact that the unseaworthiness of the ship was unknown to the
insured is immaterial in ordinary marine insurance and may not be
used by him as a defense in order to recover on the marine insurance
policy
o 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.
o 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.
In marine cases, the risks insured against are "perils of the sea"
o The purpose of such insurance is protection against contingencies and
against possible damages and such a policy does not cover a loss or
injury which must inevitably take place in the ordinary course of things.
The term 'perils of the sea' extends only to losses caused by sea damage, or by
the violence of the elements, and does not embrace all losses happening at sea.
o They insure against losses from extraordinary occurrences only, such
as stress of weather, winds and waves, lightning, tempests, rocks and
the like.
Damage done to a vessel by perils of the sea includes every species of damages
done to a vessel at sea, as distinguished from the ordinary wear and tear of the
voyage, and distinct from injuries suffered by the vessel in consequence of her
not being seaworthy at the outset of her voyage (as in this case).
On the contention of the petitioners that the loss was occasioned by the perils of
the sea characterized by the "storm and waves" which buffeted the vessel, the
records show that the court ruled otherwise.
o It stated: the supposed loss of the logs was occasioned by force
majeure was not supported by the evidence
o At the time Mable 10 sank, there was no typhoon but ordinary
strong wind and waves, a condition which is natural and
normal in the open sea
o The evidence shows that the sinking of Mable 10 was due to improper
loading of the logs on one side so that the barge was tilting on one side
and for that it did not navigate on even keel; that it was no longer
seaworthy that was why it developed leak
In fact, in the petitioners' 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 defendant
carrier and/or defendant carrier's representatives on barge Mable 10."
Neither can petitioners allege barratry on the basis of the findings showing
negligence on the part of the vessel's crew.
o Barratry as defined in American Insurance Law is any willful
misconduct on the part of master or crew in pursuance of some
unlawful or fraudulent purpose without the consent of the owners, and
to the prejudice of the owner's interest
o Barratry necessarily requires a willful and intentional act in its
commission. No honest error of judgment or mere negligence, unless
criminally gross, can be barratry
In the case at bar, there is no finding that the loss was occasioned by
the willful or fraudulent acts of the vessel's crew. There was only simple
negligence or lack of skill.
LA RAZON SOCIAL "GO TIAOCO Y HERMANOS," vs. UNION INSURANCE
SOCIETY OF CANTON, LTD.,
FACTS:
The drain pipe which served as a discharge from the water closet passed down
through the compartment where the rice in question was stowed and thence out
to sea through the wall of the compartment, which was a part of the wall of the
ship.
The joint or elbow where the pipe changed its direction was of cast iron; and in
course of time it had become corroded and abraded until a longitudinal opening
had appeared in the pipe about one inch in length.
This hole had been in existence before the voyage was begun, and an
attempt had been made to repair it by filling with cement and bolting
over it a strip of iron.
The effect of loading the boat was to submerge the vent, or orifice, of the pipe
until it was about 18 inches or 2 feet below the level of the sea.
As a consequence the sea water rose in the pipe.
Navigation under these conditions resulted in the washing out of the cement-
filling from the action of the sea water, thus permitting the continued flow of the
salt water into the compartment of rice.
Court findings:
o that the opening above described had resulted in course of time
from ordinary wear and tear and not from the straining of the
ship in rough weather on that voyage.
o that the repairs that had been made on the pipe were slovenly and
defective and that, by reason of the condition of this pipe, the ship was
not properly equipped to receive the rice at the time the voyage was
begun.
o For this reason the court held that the ship was unseaworthy.
The policy of insurance was signed upon a form long in use among companies
engaged in maritime insurance. I
o It purports to insure the cargo from the following among other risks:
"Perils . . . of the seas, men of war, fire, enemies, pirates, rovers, thieves,
jettisons, . . . barratry of the master and mariners, and of all other
perils, losses, and misfortunes that have or shall come to the hurt,
detriment, or damage of the said goods and merchandise or any part
thereof."
ISSUE: Whether the insurer is liable on this policy for the loss caused in the manner
stated
HELD: No.
RATIO:
The meaning of the expression "perils . . . of the seas . . . and all other perils, losses, and
misfortunes," used in describing the risks covered by policies of marine insurance, has
been the subject of frequent discussion; and certain propositions relative thereto are now
so generally accepted as to be considered definitely settled.
o are to be interpreted as covering risks which are of like kind (ejusdem generis)
with the particular risks which are enumerated in the preceding part of the same
clause of the contract.
o "these words must be interpreted with reference to the words which immediately
precede them. For example, if the expression 'perils of the seas' is given its widest
sense the general words have little or no effect as applied to that case. If no the
other hand that expression is to receive a limited construction, as apparently it
did in Cullen vs. Butler (5 M. & S., 461), and loss by perils of the seas is to be
confined to loss ex marinae tempestatis discrimine, the general words become
most important.
o it must be considered to be settled, furthermore, 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." The insurer undertakes to insure against
perils of the sea and similar perils, not against perils of the ship.
o there must, in order to make the insurer liable, be "some casualty, something
which could not be foreseen as one of the necessary incidents of the adventure.
The purpose of the policy is to secure an indemnity against accidents which may
happen, not against events which must happen."
In the present case the entrance of the sea water into the ship's hold through the
defective pipe already described was not due to any accident which
happened during the voyage, but to the failure of the ship's owner properly
to repair a defect of the existence of which he was apprised.
The loss was therefore more analogous to that which directly results from simple
unseaworthiness than to that which results from perils of the sea.
JUST IN CASE
Decisions of the House of Lords
First case:
Those in charge of the ship did not take the precaution of making sure that the
valve of the aperture leading into one of the boilers was open. This valve
happened to be closed.
The result was that the water being unable to make its way into the boiler was
forced back and split the air-chamber and so disabled the pump.
HELD: Whether the injury occurred through negligence or accidentally without
negligence, it was not covered by the policy, since the loss did not fall either
under the words "perils of the seas" or under the more general words "all other
perils, losses, and misfortunes
o In a sea-worthy ship damage to goods caused by the action
of the sea during transit not attributable to the fault of
anybody, is a damage from a peril of the sea.
 policy; assuming that spillage did not occur while the cargo was in transit, the 400 bags
Second Case: were loaded in bad order since the van did not carry any evidence of spillage"
Two ships collided. - Insurance company filed a third-party complaint against respondents Ben Lines and
It was held that if the collision occurred without fault on the part of the carrying broker
ship, the owners were not liable for the value of the cargo lost by such collision. - Petitioner filed this petition for review on certiorari with the following allegations: (1)
Court erred in holding that the insured shipment did not sustain any damage despite
Third case: admission of the part of respondent insurance company and the finding of the latter's
Where it appeared that rice was shipped under a charter party and bills of lading surveyor; (2) court erred in holding that "all risks" covers only losses resulted from "extra
which expected "dangers and accident of the sea." and fortuitous events" despite the clear definition of the term made in the policy
During the voyage rats gnawed a hole in a pipe on board the ship, whereby sea
water effected an entrance into the ship's hold and damaged the rice. ISSUE:
It appeared that there was no neglect or default on the part of the shipowners or WoN the Filipino merchant's Insurance Co. is liable to indemnify the petitioner for the loss
their servants in the matter of attending to the cargo. he encountered due to the spillage of the goods?
HELD: this loss resulted from an accident or peril of the sea and that the
RULING: (YES)
shipowners were not responsible.
- Authenticity of the survey reports of the Worldwide Marine Cargo Survey Corporation
and the Adjustment Corporation of the Philippines were being questioned
Upon the authority of these cases there is no room to doubt the liability of the shipowner
** It was respondent insurance company which undertook the protective
for such a loss as occurred in this case. By parity of reasoning the insurer is not liable; for,
survey relationg to the goods at the time of discharge until the time of
generally speaking, the shipowner excepts the perils of the sea from his engagement under
delivery to consignee's warehouse. It is bound by the report of its surveyor
the bill of lading, while this is the very peril against which the insurer intends to give
(Adjustment Corp). Worldwide Marine was the vessel's surveyor
protection. As applied to the present case it results that the owners of the damages rice
** During the turn-over of the contents delivery from the cargo sea van by
must look to the shipowner for redress and not to the insurer.
the representative of the shipping agent to consignee's representative/
The same conclusion must be reached if the question be discussed with reference to the
Broker (Saint Rose Forwarders), 403 bags were bursted and/or torn, opened
seaworthiness of the ship. It is universally accepted that in every contract of insurance
on one end contents partly spilled
upon anything which is the subject of marine insurance, a warranty is implied that
**The authenticity of the said survey report need not be established in
the ship shall be seaworthy at the time of the inception of the voyage. This rule
evidence as it is binding on respondent insurance company who caused said
is accepted in our own Insurance Law (Act No. 2427, sec. 106).
protective survey.
- Jose See, witness, is competent since he was present when the cargo was unloaded and
It is also well settled that a ship which is seaworthy for the purpose of insurance upon the
received in the warehouse of consignee and saw 403 bags in bad order
ship may yet be unseaworthy for the purpose of insurance upon the cargo (Act No. 2427,
- Respondent Insurance Company admitted the damages indicated in the survey report
sec. 106).
which is a sufficient proof of loss or damage to the cargo
** tally sheet is no evidence of the condition of the cargo therein contained.
Even the witness of the respondent insurance company, Sergio Icasiano,
Choa Tiek Seng vs CA
stated that the clean gate passes do not reflect the actual condition of the
TOPIC: Marine Insurance
cargo when released by the broker as it was not physically examined by the
_________________________________________________________
broker
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FACTS:
- "All risk" insurance policy insures against all causes of conceivable loss or damage, except
- Petitioner imported some lactose crystals from Holland which involved 15 metric tons
when excluded in the policy due to fraud or intentional misconduct on the part of the
packed in 600 6-ply paper bags
insured. It covers all losses during voyage whether arising from a marine peril or not,
- Goods were loaded at the port at Rotterdam in sea vans on board the vessel "MS
including pilferage losses during the war
Benalder" as the mother vessel and aboard the feeder vessel "wesser Broker V-25" of
- the "all risks" clause of the policy sued in this case upon reads as follows:
respondent Ben Lines Container
5. This insurance is against all risks of loss or damage to the subject
- Goods were insured by the respondent Filipino Merchants' Insurance Co. (P98,882.35
matter insured but shall in no case be deemed to extend to cover loss,
plus 50% mark-up) against all risks under the terms of the insurance cargo policy
damage, or expense proximately caused by delay or inherent vice or
- Upon arrival in the Manila port, the cargo was discharged into the custody of the arrastre
nature of the subject matter insured. Claims recoverable hereunder
operator respondent E.Razon, Inc. (broker) prior to the delivery to petitioner through his
shall be payable irrespective of percentage
broker
- The terms of the policy are so clear and require no interpretation. The insurance policy
- Out of 600 bags delivered, 403 were in bad order which suffered spillage and loss valued
covers all loss or damage to the cargo except those caused by delay or inherent vice or
at P33,117.63
nature of the cargo insured.
- Petitioner filed a claim for the loss against respondent insurance company
- It is the duty of the respondent insurance company to establish that said loss or damage
- Insurance company rejected such claim alleging that "assuming that spillage took place
falls within the exceptions provided for by law, otherwise it is liable therefor.
while the goods were in transit, petitioner and his agent failed to minimize the loss by
failing to recover spillage from the sea van which violates the terms of the insurance
- An "all risks" provision of a marine policy creates a special type of insurance which
extends coverage to risks not usually contemplated and avoids putting upon the insured
the burden of establishing that the loss was due to peril falling within the policy's coverage.
- The insurer can avoid coverage upon demonstrating that a specific provision expressly
excludes the loss from coverage
SO ORDERED.
(NOTE)
Evidence of the petitioner:
**The 600 bags which the original carrier received in apparent good order condition and
certified to by the vessel's agent to be weighing 15,300 kg. gross, were unloaded from the
transhipment vessel "Wesser Broker" stuffed in one container and turned over to the
arrastre operator, third party defendant-appellee E. Razon, Inc. A shipboard surveyor, the
Worldwide Marine Cargo Surveyor, as well as a representative of the vessel "Wesser
Broker" and a representative of the arrastre operator attended the devanning of the
shipment and the said shipboard surveyor certified that 403 bags were in bad order
condition with estimated spillage
*** Defendant and third-party plaintiff-appellee's protective surveyor determined the exact
spillage from the bad order bags as found by the shipboard surveyor at the consignee's
warehouse by weighing the bad order bags. Said protective surveyor found after weighing
the 403 bags in bad order condition that an aggregate of 5,173 kilos were missing
therefrom (Exh. F).
FILIPINO MERCHANTS V. CA
Facts:
The Chao Tiek Seng a consignee of the shipment of fishmeal loaded on board the
vessel SS Bougainville and unloaded at the Port of Manila on or about December
11, 1976 and seeks to recover from Filipino the amount of P51,568.62
representing damages to said shipment which has been insured by Filipino.
Filipino brought a third party complaint against Compagnie Maritime Des
Chargeurs Reunis and/or E. Razon, Inc. seeking judgment against the third party
defendants in case judgment is rendered against it.
It appears from the evidence presented that Chao insured said shipment with
Filipino for the sum of P267,653.59 for the goods described as 600 metric tons of
fishmeal in gunny bags of 90 kilos each from Bangkok, Thailand to Manila
against all risks under warehouse to warehouse terms.
Actually, what was imported was 59.940 metric tons not 600 tons at $395.42 a
ton.
The fishmeal in 666 gunny bags were unloaded from the ship on December 11,
1976 at Manila unto the arrastre contractor E. Razon, Inc. and Filipinos surveyor
ascertained and certified that in such discharge 105 bags were in bad order
condition as jointly surveyed by the ship's agent and the arrastre contractor.
Based on said computation the Chao made a formal claim against the Filipino for
P51,568.62. A formal claim statement was also presented by the plaintiff against
the vessel, but the Filipino refused to pay the claim.
Issues & Resolutions:
Filipino contends that an "all risks" marine policy has a technical meaning in insurance in
that before a claim can be compensable it is essential that there must be "some fortuity,"
"casualty" or "accidental cause" to which the alleged loss is attributable and the failure of
herein private respondent, upon whom lay the burden, to adduce evidence showing that
the alleged loss to the cargo in question was due to a fortuitous event precludes his right to
recover from the insurance policy.
SC did not uphold this contention. An "all risks policy" should be read literally as
meaning all risks whatsoever and covering all losses by an accidental cause of any
kind. The terms "accident" and "accidental", as used in insurance contracts, have
not acquired any technical meaning. They are construed by the courts in their
ordinary and common acceptance. Thus, the terms have been taken to mean that
which happens by chance or fortuitously, without intention and design, and
which is unexpected, unusual and unforeseen. An accident is an event that takes
place without one's foresight or expectation; an event that proceeds from an
unknown cause, or is an unusual effect of a known cause and, therefore, not
expected.
Coverage under an "all risks" provision of a marine insurance policy creates a
special type of insurance which extends coverage to risks not usually
contemplated and avoids putting upon the insured the burden of establishing
that the loss was due to the peril falling within the policy's coverage; the insurer
can avoid coverage upon demonstrating that a specific provision expressly
excludes the loss from coverage. A marine insurance policy providing that the
insurance was to be "against all risks" must be construed as creating a special
insurance and extending to other risks than are usually contemplated, and covers
all losses except such as arise from the fraud of the insured. The burden of the
insured, therefore, is to prove merely that the goods he transported have been
lost, destroyed or deteriorated. Thereafter, the burden is shifted to the insurer to
prove that the loss was due to excepted perils. To impose on the insured the
burden of proving the precise cause of the loss or damage would be inconsistent
with the broad protective purpose of "all risks" insurance.
In the present case, there being no showing that the loss was caused by any of the
excepted perils, the insurer is liable under the policy
Filipino contends that Chao does not have insurable interest, being only a consignee of the
goods.
Anent the issue of insurable interest, SC upheld the ruling of the CA that Chao, as
consignee of the goods in transit under an invoice containing the terms under "C
& F Manila," has insurable interest in said goods.
Section 13 of the Insurance Code defines insurable interest in property as every
interest in property, whether real or personal, or any relation thereto, or liability
in respect thereof, of such nature that a contemplated peril might directly
damnify the insured. In principle, anyone has an insurable interest in property
who derives a benefit from its existence or would suffer loss from its destruction
whether he has or has not any title in, or lien upon or possession of the property.
Insurable interest in property may consist in (a) an existing interest; (b) an
inchoate interest founded on an existing interest; or (c) an expectancy, coupled
with an existing interest in that out of which the expectancy arises.
Chao, as vendee/consignee of the goods in transit has such existing interest
therein as may be the subject of a valid contract of insurance. His interest over
the goods is based on the perfected contract of sale. The perfected contract of
sale between him and the shipper of the goods operates to vest in him an
equitable title even before delivery or before he performed the conditions of the
sale. The contract of shipment, whether under F.O.B., C.I.F., or C. & F. as in this
case, is immaterial in the determination of whether the vendee has an insurable
interest or not in the goods in transit. The perfected contract of sale even without
 delivery vests in the vendee an equitable title, an existing interest over the goods
sufficient to be the subject of insurance
Puromines, Inc. v CA (1993)
Note: This case has nothing to do with insurance contract. It just provides
for explanation on the liability of parties under Charter party.
FACTS
Puromines and Makati Agro Trading entered into a contract of sale of prilled Urea in bulk
with Philipp Brothers Oceanic, Inc. The sales contract provides for an arbitration clause.
The vessel M/V "Liliana Dimitrova" loaded on board at Yuzhny, USSR a shipment of
15,500 metric tons prilled Urea in bulk complete and in good order and condition for
transport to Iloilo and Manila, to be delivered to petitioner. Three bills of lading were
issued by the ship-agent in the Philippines, Maritime Factors Inc.
The shipment covered by Bill of Lading No. 2 was discharged in Iloilo City complete and in
good order and condition. However, the shipments covered by Bill of Lading Nos. 1 and 3
were discharged in Manila in bad order and condition, caked, hardened and lumpy,
discolored and contaminated with rust and dirt.
Petitioner filed a complaint with the trial court for breach of contract of carriage against
Maritime Factors, Inc. (which was not included as respondent in this petition) as ship-
agent in the Philippines for the owners of the vessel MV "Liliana Dimitrova". Private
respondent Philipp Brothers Oceanic, Inc. was impleaded as charterer of the said vessel
and proper party to accord petitioner complete relief.
Philipp Brothers filed a motion to dismiss for failure to state cause of action; that
it was prematurely filed; and that petitioner should comply with the arbitration
clause in the sales contract.
ISSUE
Whether Philipp Brothers Oceanic, Inc, as charterer, may be held liable for
the loss.
Whether the phrase "any dispute arising under this contract" in the arbitration clause of
the sales contract covers a cargo claim against the vessel (owners and/or charterers) for
breach of contract of carriage.
HELD
The sales contract is comprehensive enough to include claims for damages arising from
carriage and delivery of the goods. As a general rule, the seller has the obligation to
transmit the goods to the buyer, and concomitant thereto, the contracting of a carrier to
deliver the same (Art. 1523 of the Civil Code).
As argued by respondent on its motion to dismiss, "the (petitioner) derives his right to the
cargo from the bill of lading which is the contract of affreightment together with the sales
contract. Consequently, the (petitioner) is bound by the provisions and terms of said bill of
lading and of the arbitration clause incorporated in the sales contract."c
Assuming arguendo that the liability of respondent is not based on the sales
contract, but rather on the contract of carriage, being the charterer of the vessel
MV "Liliana Dimitrova," it would, therefore, be material to show what kind of
charter party the respondent had with the shipowner to determine respondent's
liability.
American jurisprudence defines:
charter party
a contract by which an entire ship or some principal part thereof is let by the
owner to another person for a specified time or use. Charter or charter parties are
of two kinds. Charter of demise or bareboat and contracts of affreightment.
2 kinds of Charter party
1. Charter of demise or bareboat
Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service stipulated. The
charterer mans the vessel with his own people and becomes, in
effect, the owner pro hac vice, subject to liability to others for
damages caused by negligence.
To create a demise the owner of a vessel must completely and exclusively
relinquish possession, command and navigation thereof to the charterer;
anything short of such a complete transfer is a contract of affreightment
(time or voyage charter party) or not a charter party at all.
2. Contracts of affreightment
The owner of the vessel leases part or all of its space to haul goods for others.
It is a contract for a special service to be rendered by the owner of the vessel
and under such contract the general owner retains the possession, command
and navigation of the ship, the charterer or freighter merely having
use of the space in the vessel in return for his payment of the
charter hire.
If the charter is a contract of affreightment, which leaves the general owner
in possession of the ship as owner for the voyage, the rights, responsibilities
of ownership rest on the owner and the charterer is usually free from liability
to third persons in respect of the ship.
Responsibility to third persons for goods shipped on board a vessel follows
the vessel's possession and employment; and if possession is transferred to the
charterer by virtue of a demise, the charterer, and not the owner, is liable as carrier on the
contract of affreightment made by himself or by the master with third persons, and is
answerable for loss, damage or nondelivery of goods received for transportation.
An owner who retains possession of the ship, though the hold is the property of
the charterer, remains liable as carrier and must answer for any breach of duty as
to the care, loading or unloading of the cargo.
Assuming that in the present case, the charter party is a demise or bareboat
charter, then Philipp Brothers is liable to Puromines, Inc., subject to the
terms and conditions of the sales contract. On the other hand, if the contract
between respondent and the owner of the vessel MV "Liliana Dimitrova" was
merely that of affreightment, then it cannot be held liable for the damages
caused by the breach of contract of carriage, the evidence of which is the
bills of lading.
In any case, whether the liability of respondent should be based on the sales
contract or that of the bill of lading, the parties are nevertheless obligated
to respect the arbitration provisions on the sales contract and/or the bill of
lading. Petitioner being a signatory and party to the sales contract cannot escape
from his obligation under the arbitration clause as stated therein.
Caltex vs. Sulpicio Lines, Inc.
Facts:
On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex,
collided in the open sea with passenger ship MV Doa Paz, causing the death of all but 25
of the latters passengers. Among those who died were Sebastian Canezal and his daughter
Corazon Canezal.
On March 22, 1988, the board of marine inquiry found that Vector Shipping Corporation
was at fault.
On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife
and mother respectively, filed with the Regional Trial Court of Manila a complaint for
damages arising from breach of contract of carriage against Sulpicio Lines. Sulpicio filed a
third-party complaint against Vector and Caltex.
The trial court dismissed the complaint against Caltex, but the Court of Appeals included
the same in the liability. Hence, Caltex filed this petition.
Issue:
Is the charterer of a sea vessel liable for damages resulting from a collision between the
chartered vessel and a passenger ship?
Held:
First: The charterer has no liability for damages under Philippine Maritime
laws.
Petitioner and Vector entered into a contract of affreightment, also known as
a voyage charter.
A charter party is a contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time or use; a contract of affreightment is
one by which the owner of a ship or other vessel lets the whole or part of her to a merchant
or other person for the conveyance of goods, on a particular voyage, in consideration of the
payment of freight.
A contract of affreightment may be either time charter, wherein the leased vessel
is leased to the charterer for a fixed period of time, or voyage charter, wherein the
ship is leased for a single voyage. In both cases, the charter-party provides for the
hire of the vessel only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ships store, pay for the wages of
the master of the crew, and defray the expenses for the maintenance of the ship.
If the charter is a contract of affreightment, which leaves the general owner in possession
of the ship as owner for the voyage, the rights and the responsibilities of ownership
rest on the owner.
The charterer is free from liability to third persons in respect of the ship.
Second: MT Vector is a common carrier
The charter party agreement did not convert the common carrier into a private carrier. The
parties entered into a voyage charter, which retains the character of the vessel as a
common carrier. It is imperative that a public carrier shall remain as such, notwithstanding
the charter of the whole or portion of a vessel by one or more persons, provided the charter
is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when
the charter includes both the vessel and its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the particular voyage covering the charter-party
is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of the
charterer. A common carrier is a person or corporation whose regular business is to carry
passengers or property for all persons who may choose to employ and to remunerate him.
16 MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code.
The public must of necessity rely on the care and skill of common carriers in the vigilance
over the goods and safety of the passengers, especially because with the modern
development of science and invention, transportation has become more rapid, more
complicated and somehow more hazardous. For these reasons, a passenger or a shipper of
goods is under no obligation to conduct an inspection of the ship and its crew, the carrier
being obliged by law to impliedly warrant its seaworthiness.
SAN MIGUEL CORP. v. HEIRS OF INGUITO
Facts:
San Miguel Corporation entered into a Time Charter Party Agreement with Julius Ouano,
doing business under the name and style J. Ouano Marine Services. Under the terms of the
agreement, SMC chartered the M/V Doa Roberta owned by Julius Ouano for a period of
two years, from June 1, 1989 to May 31, 1991, for the purpose of transporting SMCs
beverage products from its Mandaue City plant to various points in Visayas and Mindanao.
Pertinent portion of the Time Charter Party Agreement state:
9. There shall be no employer-employee relations
between the OWNER and/or its vessels crew on one
hand and the CHARTERER on the other. The crew of the
vessel shall continue to be under the employ, control and
supervision of the OWNER. Consequently, damage or
loss that may be attributable to the crew, including loss of
the vessel used shall continue to be the responsibility of,
and shall be borne, by the OWNER; the OWNER further
covenants to hold the CHARTERER free from all claims
and liabilities arising out of the acts of the crew and the
condition of the vessel;
On November 11, 1990, during the term of the charter, SMC issued sailing orders to the
Master of the MN Doa Roberta, Captain Inguito. Meanwhile, typhoon Ruping was spotted
570 kilometers east-southeast of Borongan, Samar.
At 7am, 2pm, and 8pm, after the M/V Doa Roberta departed from Mandaue City and
while it was abeam Cawit Island off Cebu, SMC Radio Operator Moreno contacted Captain
Inguito over and over through the radio and advised him to take shelter. Captain Inguito
refused to take shelter and replied that they will proceed since the typhoon was far away
from them, and that the winds were in their favor.
At 1:15 am Captain Inguito called Moreno over the radio and requested him to contact Rico
Ouano, son of Julius Ouano, because they needed a helicopter to rescue them. Upon being
told by SMCs radio operator, Rico Ouano turned on his radio and read the distress signal
from Captain Ingiuto. When he talked to the captain, the latter requested for a helicopter to
rescue them. Rico Ouano talked to the Chief Engineer who informed him that they can no
longer stop the water.
At 2:30 am of November 13, 1990, the M/V Doa Roberta sank. Out of the 25 officers and
crew on board the vessel, only five survived. A marine protest was filed.
The heirs of the deceased captain and crew, as well as the survivors, of the ill-fated M/V
Doa Roberta filed a complaint for tort against San Miguel Corporation and Julius Ouano.
Julius Ouano filed an answer with cross-claim, alleging that the proximate cause of the loss
of the vessel and its officers and crew was the fault and negligence of SMC, which had
complete control and disposal of the vessel as charterer and which issued the sailing order
for its departure despite being forewarned of the impending typhoon.
Issue: Whether or not SMC as the charterer should be held liable to the owner of the
vessel and the heirs of the deceased captain and crew members.
Held: NO. Ouano should answer for the loss of lives and damages suffered by the heirs of
the officers and crew members who perished on board the M/V Doa Roberta, except
Captain Sabiniano Inguito. The award of damages granted by the Court of Appeals is
affirmed only against Ouano, who should also indemnify SMC for the cost of the lost cargo,
in the total amount of P10,278,542.40.
A charter party is a contract by virtue of which the owner or the agent of a vessel binds
himself to transport merchandise or persons for a fixed price. It has also been defined as a
contract by virtue of which the owner or the agent of the vessel leases for a certain price the
whole or a portion of the vessel for the transportation of goods or persons from one port to
another. A charter party may either be a (1) bareboat or demise charter or (2) contract of
affreightment. Under a demise or bareboat charter, the charterer mans the vessel with
his own people and becomes, in effect, the owner of the ship for the voyage or service
stipulated, subject to liability for damages caused by negligence.
In a contract of affreightment, on the other hand, the owner of the vessel leases part or
all of its space to haul goods for others. It is a contract for special service to be rendered by
the owner of the vessel. Under such contract the ship owner retains the possession,
command and navigation of the ship, the charterer or freighter merely having use of the
space in the vessel in return for his payment of the charter hire. Otherwise put, a
contract of affreightment is one by which the owner of a ship or other vessel
lets the whole or part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the
payment of freight.
If the charter is a contract of affreightment, which leaves the general owner
in possession of the ship as owner for the voyage, the rights and the
responsibilities of ownership rest on the owner. The charterer is free from
liability to third persons in respect of the ship.
The charter party in this case was a contract of affreightment, contrary to petitioner
Ouanos protestation that it was a demise charter, as shown by the following stipulations in
the Time Charter Party Agreement:
9. There shall be no employer-employee relations
between the OWNER and/or its vessels crew on one
hand and the CHARTERER on the other. The crew of the
vessel shall continue to be under the employ, control and
supervision of the OWNER. Consequently, damage or
loss that may be attributable to the crew, including loss of
the vessel used shall continue to be the responsibility of,
and shall be borne, by the OWNER; the OWNER further
covenants to hold the CHARTERER free from all claims
and liabilities arising out of the acts of the crew and the
condition of the vessel;
It appearing that Ouano was the employer of the captain and crew of the M/V Doa
Roberta during the term of the charter, he therefore had command and control over the
vessel. His son, Rico Ouano, even testified that during the period that the vessel was under
charter to SMC, the Captain thereof had control of the navigation of all voyages.
Under the foregoing, as well as the clear terms of the Charter Party Agreement between the
parties, the charterer, SMC, should be free from liability for any loss or damage sustained
during the voyage, unless it be shown that the same was due to its fault or negligence.
The evidence does not show that SMC or its employees were amiss in their duties. The facts
indubitably establish that SMCs Radio Operator, Rogelio P. Moreno, who was tasked to
monitor every shipment of its cargo, contacted Captain Inguito as early as 7:00 am, one
hour after the M/V Doa Roberta departed from Mandaue, and advised him to take shelter
from typhoon Ruping. This advice was reiterated at 2:00 pm. At that point, Moreno
thought of calling Ouanos son, Rico, but failed to find him. At 4:00 pm, Moreno again
advised Captain Inguito to take shelter and stressed the danger of venturing into the open
sea. The Captain insisted that he can handle the situation. That evening, Moreno tried in
vain to contact the captain. Later at 1:15 am., Captain Inguito himself radioed a distress
signal and asked that the same be relayed to Rico Ouano.
It appears that the proximate cause of the sinking of the vessel was the gross
failure of the captain of the vessel to observe due care and to heed SMCs
advices to take shelter. Due diligence dictates that at any time before the
vessel was in distress, he should have taken shelter in order to safeguard the
vessel and its crew. It is very clear that Captain Sabiniano Inguito had sufficient time
within which to secure his men and the vessel. But he waited until the vessel was already in
distress at 1:15 in the early morning to seek help in saving his men and the vessel. In any
event, Capt. Inguito had full control and responsibility, whether to follow a sailing order or
to take shelter when already at sea.
Ouano is also vicariously liable for the negligent acts of his employee, Captain Inguito.
Under Articles 2176 and 2180 of the Civil Code, owners and managers are responsible for
damages caused by the negligence of a servant or an employee, the master or employer is
presumed to be negligent either in the selection or in the supervision of that employee.
This presumption may be overcome only by satisfactorily showing that the employer
exercised the care and the diligence of a good father of a family in the selection and the
supervision of its employee.
Ouano miserably failed to overcome the presumption of his negligence. He failed to
present proof that he exercised the due diligence of a bonus paterfamilias in the selection
and supervision of the captain of the M/V Doa Roberta. Hence, he is vicariously liable for
the loss of lives and property occasioned by the lack of care and negligence of his employee.
THE PHILIPPINE AMERICAN GENERAL INSURANCE CO vs CA & FELMAN
LINES
FACTS:
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV
Asilda," a vessel owned and operated by respondent Felman Shipping Lines,
7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from
Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc.,
Cebu.
The shipment was insured with petitioner PHILAMGEN under a Marine Open
Policy
"MV Asilda" left the port of Zamboanga in fine weather at 8pm. At 8:45am the
following morning, the vessel sank in the waters of Zamboanga del Norte
bringing down her entire cargo
On 15 July 1983 the consignee Coca-Cola Bottlers Cebu plant, filed a claim with
respondent FELMAN for recovery of damages it sustained as a result of the loss
of its softdrink bottles that sank with "MV Asilda."
Respondent denied the claim thus prompting the consignee to file an insurance
claim with PHILAMGEN which paid its claim of P755,250.00.
Claiming its right of subrogation PHILAMGEN sought recourse against
respondent FELMAN which disclaimed any liability for the loss.
PHILAMGEN sued the shipowner for sum of money and damages.
PHILAMGEN contentions
o that the sinking and total loss of "MV Asilda" and its cargo were due to the
vessel's unseaworthiness as she was put to sea in an unstable condition.
o that the vessel was improperly manned and that its officers were grossly
negligent in failing to take appropriate measures to proceed to a nearby port
or beach after the vessel started to list.
FELMAN filed a motion to dismiss
o
that no right of subrogation in favor of PHILAMGEN was transmitted by the
shipper
o
that, in any event, FELMAN had abandoned all its rights, interests and
ownership over "MV Asilda" together with her freight and appurtenances for
the purpose of limiting and extinguishing its liability under Art. 587 of the
Code of Commerce. 2
TC rendered judgment in favor of FELMAN.
o That "MV Asilda" was seaworthy when it left the port of Zamboanga
o Thus the loss of the vessel and its entire shipment could only be
attributed to either a fortuitous event, in which case, no liability should
attach unless there was a stipulation to the contrary, or to the
negligence of the captain and his crew, in which case, Art. 587 of the
Code of Commerce should apply.
o that assuming "MV Asilda" was unseaworthy, still PHILAMGEN could
not recover from FELMAN since the assured (Coca-Cola Bottlers ) had
breached its implied warranty on the vessel's seaworthiness.
Resultantly, the payment made by PHILAMGEN to the assured was an
undue, wrong and mistaken payment. Since it was not legally owing, it
did not give PHILAMGEN the right of subrogation so as to permit it to
bring an action in court as a subrogee.
CA found "MV Asilda" unseaworthy for being top-heavy as 2,500 cases of Coca-
Cola softdrink bottles were improperly stowed on deck.
o While the vessel possessed the necessary Coast Guard certification
indicating its seaworthiness with respect to the structure of the ship
itself, it was not seaworthy with respect to the cargo.
o It also denied the claim of PHILAMGEN on the ground that the
assured's implied warranty of seaworthiness was not complied with.
o PHILAMGEN was not properly subrogated to the rights and interests of
the shipper. Furthermore, respondent court held that the filing of notice
of abandonment had absolved the shipowner/agent from liability under
the limited liability rule.
ISSUE: Whether "MV Asilda" was seaworthy when it left the port of Zamboanga
HELD: Yes. "MV Asilda" was unseaworthy when it left the port of Zamboanga.
RATIO: The ship captain stated that around 4amin the morning of 7 July 1983 he was
awakened by the officer on duty to inform him that the vessel had hit a floating log.
At that time he noticed that the weather had deteriorated with strong southeast winds
inducing big waves. After thirty minutes he observed that the vessel was listing slightly to
starboard and would not correct itself despite the heavy rolling and pitching. He then
ordered his crew to shift the cargo from starboard to portside until the vessel was balanced.
At about 7am, the master of the vessel stopped the engine because the vessel was listing
dangerously to portside. He ordered his crew to shift the cargo back to starboard. The
shifting of cargo took about an hour afterwhich he rang the engine room to resume full
speed.
At around eight forty-five, the vessel suddenly listed to portside and before the captain
could decide on his next move, some of the cargo on deck were thrown overboard and
seawater entered the engine room and cargo holds of the vessel. At that instance, the
master of the vessel ordered his crew to abandon ship. Shortly thereafter, "MV Asilda"
capsized and sank. He ascribed the sinking to the entry of seawater through a hole in the
hull caused by the vessel's collision with a partially submerged log. 5
The Elite Adjusters, Inc., submitted a report regarding the sinking of "MV Asilda." The
report, which was adopted by the Court of Appeals, reads
We believe, therefore, and so hold that the proximate
cause of the sinking of the M/V "Asilda" was her condition of
unseaworthiness arising from her having been top-heavy
when she departed from the Port of Zamboanga. Her having
capsized and eventually sunk was bound to happen and was
therefore in the category of an inevitable occurrence.
We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that the
proximate cause of the sinking of "MV Asilda" was its being top-heavy.
Contrary to the ship captain's allegations, evidence shows that approximately 2,500 cases
of softdrink bottles were stowed on deck. Several days after "MV Asilda" sank, an
estimated 2,500 empty Coca-Cola plastic cases were recovered near the vicinity of the
sinking.
Considering that the ship's hatches were properly secured, the empty Coca-Cola cases
recovered could have come only from the vessel's deck cargo. It is settled that carrying a
deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck
cargo will not interfere with the proper management of the ship.
However, in this case it was established that "MV Asilda" was not designed to carry
substantial amount of cargo on deck. The inordinate loading of cargo deck
resulted in the decrease of the vessel's metacentric height 7 thus making it
unstable. The strong winds and waves encountered by the vessel are but the
ordinary vicissitudes of a sea voyage and as such merely contributed to its
already unstable and unseaworthy condition.
Delsan Transport vs CA
TOPIC: Marine Insurance
FACTS:
- Caltex Philippines entered into a contract of affreightment with the petitioner Delsan
Transport for a period of 1 year. Delsan agreed to transport Caltex's industrial fuel oil from
the Batangas-Bataan Refinery to different parts of the country
-- Petitioner took board on its vessel (MT Maysun) 2,277 kiloliters of fuel to be delivered in
Zamboanga
- Shipment was insured with American Home Assurance Corp (Private Respondent)
- Aug 14, 1986, MT Maysun set sail from Batangas to Zamboanga
- August 16, 1986, MT Maysun sank near Panay Gulf with the entire cargo of fuel oil
- Private respondent paid Caltex (P5,096,635.57) representing the value of lost cargo
- Private respondent demanded petitioner to pay them the same amount under the rights
of subrogation but petitioner refused to comply
- RTC dismissed petition of American Home Assurance since incident was caused by
unexpected inclement weather condition or force majeure thus exempting petitioner from
liability for the loss
- CA reversed the decision of RTC since it gave credence to the weather report issued by
PAGASA (Philippine, Atmospheric, Geophysical, and Astronomical Services
Administration) which showed that there are big waves in the vicinity of Panay Gulf where
the vessel sank (.7 to 2 meters high) and made petitioner liable in the absence of
explanation as to what may have caused the sinking
FOR ISSUE A:
- Petitioner invoked Sec 113 of Insurance Code which states that " every marine insurance
upon a ship or freight, or freightage, or upon anything which is the subject of marine
insurance there is an implied warranty by the shipper that the ship is seaworthy.
Consequently, the insurer will not be liable to the assured for any loss under the policy in
case the vessel would later on be found as not seaworthy at the inception of the
insurance."
- It was also alleged that when private respondent paid Caltex the value of its lost cargo,
the act of the private respondent is equivalent to a tacit recognition that the ill-fated vessel
was seaworthy; otherwise, private respondent was not legally liable to Caltex due to the
latters breach of implied warranty under the marine insurance policy that the vessel was
seaworthy.
- The petitioner also alleges that the Court of Appeals erred in ruling that MT Maysun was
not seaworthy on the ground that the marine officer who served as the chief mate of the
vessel, Francisco Berina, was allegedly not qualified
- Under Section 116 of the Insurance Code of the Philippines, the implied warranty of
seaworthiness of the vessel, which the private respondent admitted as having been fulfilled
by its payment of the insurance proceeds to Caltex of its lost cargo, extends to the vessels
complement.
- petitioner avers that although Berina had merely a 2nd officers license, he was qualified to
act as the vessels chief officer under the Philippine Merchant Marine Rules and
Regulations
ISSUE:
A. Whether or not the payment made by the private respondent to Caltex for the insured
value of the lost cargo amounted to an admission that the vessel was seaworthy, thus
precluding any action for recovery against the petitioner?
B. Whether or not the non-presentation of the marine insurance policy bars the complaint
for recovery of sum of money for lack of cause of action?
RULING:
A. (NO)
- Payment made by private respondent to Caltex operates as waiver of its right to enforce
the term of the implied warranty against Caltex but it cannot be interpreted as an
automatic admission of the vessel's seaworthiness
- Right of subrogation applies in this case
- common carriers are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of passengers transported by them, according to all the
circumstances of each case.
- In the event of loss, destruction or deterioration of the insured goods, common carriers
shall be responsible unless the same is brought about, among others, by flood, storm,
earthquake, lightning or other natural disaster or calamity.
- In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence.
- Based on the testimonies of the captain and chiefmate, there were big waves
averaging 18 to 20 feet high during the incident on Aug 16, 1986 3:15am. But
PAGASA said, during the incident, the height of the waves were only .7 to 2
meters. There was no bad weather or extremely poor sea condition in the
vicinity when the vessel sank
- employees of the petitioner cannot be expected to testify against the interest of their
employer (Delsan)
- Even though during the inspection, the ship may have appeared fit, the
certificates issued do not negate the presumption of unseaworthiness
triggered by an unexplained sinking
- Diligence in securing certificates of seaworthiness does not satisfy the vessel's owner
obligation. Securing the approval of the shipper of the cargo is unnecessary since cargo
owner has no obligation in relation to seaworthiness
- petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging to
Caltex for its failure to rebut the presumption of fault or negligence as common
carrier occasioned by the unexplained sinking of its vessel, MT Maysun, while in transit.
B. (NO)
- the presentation in evidence of the marine insurance policy is not indispensable in this
case before the insurer may recover from the common carrier the insured value of the lost
cargo in the exercise of its subrogatory right
- The subrogation receipt, by itself, is sufficient to establish not only the relationship of
herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo of
industrial fuel oil, but also the amount paid to settle the insurance claim. The right of
subrogation accrues simply upon payment by the insurance company of the insurance
claim.
- there is no doubt that the cargo of industrial fuel oil belonging to Caltex, in the case at
bar, was lost while on board petitioners vessel, MT Maysun, which sank while in transit in
the vicinity of Panay Gulf and Cuyo East Pass in the early morning of August 16, 1986.
**ADD:
The presentation of the insurance policy was necessary in the case of Home
Insurance Corporation v. CA (a case cited by petitioner) because the shipment therein
(hydraulic engines) passed through several stages with different parties involved in each
stage. First, from the shipper to the port of departure; second, from the port of departure
to the M/S Oriental Statesman; third, from the M/S Oriental Statesman to the M/S Pacific
Conveyor; fourth, from the M/S Pacific Conveyor to the port of arrival; fifth, from the port
of arrival to the arrastre operator; sixth, from the arrastre operator to the hauler, Mabuhay
Brokerage Co., Inc. (private respondent therein); and lastly, from the hauler to the
consignee. We emphasized in that case that in the absence of proof of stipulations to the
contrary, the hauler can be liable only for any damage that occurred from the time it
received the cargo until it finally delivered it to the consignee. Ordinarily, it cannot be held
responsible for the handling of the cargo before it actually received it. The insurance
contract, which was not presented in evidence in that case would have indicated the scope
of the insurers liability, if any, since no evidence was adduced indicating at what stage in
the handling process the damage to the cargo was sustained.
Hence, our ruling on the presentation of the insurance policy in the said case of
Home Insurance Corporation is not applicable to the case at bar.
Oriental Assurance v. Court of Appeals
Facts:
Panama bought, in Palawan, 1,208 pieces of apitong logs, with a total volume of
2,000 cubic meters. It hired Transpacific Towage, Inc., to transport said logs by
sea to Manila and insured it against loss for P1-M with Oriental Assurance.
The policy was issued. It is stipulated there, among others, that the subject
matter insured is 2,000 cubic meters of apitong logs and thatthe vessels to be
utilized are the following: MT. 'Seminole', BargePCT-7000 for the 1,000 cubic
meter of apitong logs and BargeTranspac-1000 for the other 1,000 cubic meter of
apitong logs. It is also stipulated in the policy that the insurance is against
TOTAL LOSS only, and it is subject to the following clauses, to wit: Civil Code
Article 1250 Waiver clause, Typhoon warranty clause, and Omnibus clause.
The logs were loaded on the 2 barges: (1) on barge PCT-7000, 610 pieces of logs
with a volume of 1,000 cubicmeters; and (2) on BargeTPAC-1000, 598 pieces of
logs, also with a volume of 1,000 cubic meters. On 28 January 1986, the 2 barges
were towed by MT 'Seminole'(tugboat), during the voyage, rough seas and strong
winds caused damage to Barge TPAC-1000 resulting in the loss of 497 pieces of
logs out of the 598 pieces loaded thereon.
Panama demanded payment for the loss but Oriental Assurance refused on the
ground that its contracted liability was for "TOTAL LOSS ONLY." Consequently,
Panama filed a Complaint for Damages against Ever Insurance Agency (allegedly,
also liable), Benito Sy Lee Yong and Oriental Assurance, before the RTC-
Kalookan.
RTC rendered a decision ordering Oriental Assurance to pay Panama
P415,000.00 as insurance indemnity. Both parties appealed. The appellate court
affirmed the RTC decision. Both RTC and CA shared the view that the insurance
contract should be liberally construed in order to avoid a denial of substantial
justice; that the logs loaded in the two barges should be treated separately such
that the loss sustained by the shipment in one of them may be considered as
"constructive total loss" and correspondingly compensable.
Oriental Assurance filed a petition for review on certiorari challenging the
aforesaid dispositions.
Issue: Is Oriental Assurance liable?
Held:
No. The SC held that the terms of the contract constitute the measure of the
insurers liability and compliance therewith is a condition precedent to the
insured's right to recovery from the insurer. That whether a contract is entire or
severable is a question of intention to be determined by the language employed
by the parties. The policy in question shows that the subject matter insured was
the entire shipment of 2,000 cubic meters of apitong logs. The fact that the logs
were loaded on two different barges did not make the contract several and
divisible as to the items insured. The logs on the two barges were not separately
valued or separately insured. Only one premium was paid for the entire
shipment, making for only one cause or consideration. The insurance
contract must, therefore, be considered indivisible.
The law provides that a constructive total loss, is one which gives to a person
insured by a contract of marine insurance a right to abandon thing insured, or
 any particular portion thereof separately valued by the policy, or otherwise
separately insured, and recover for a total loss thereof, when the cause of the
loss is a peril injured against: (a) If more than three-fourths thereof in value is
actually lost, or would have to be expended to recover it from the peril; (b) If it is
injured to such an extent as to reduce its value more than three-fourths. The
logs involved, although placed in two barges, were not separately valued by the
policy, nor separately insured. Resultantly, the logs lost in barge TPAC-1000 in
relation to the total number of logs loaded on the same barge cannot be made
the basis for determining constructive total loss. The logs having been insured
as one inseparable unit, the correct basis for determining the existence
of constructive total loss is the totality of the shipment of logs. Of the entirety of
1,208, pieces of logs, only 497 pieces thereof were lost or 41.45% of the entire
shipment. Since the cost of those 497 pieces does not exceed 75% of the value of
all 1,208 pieces of logs, the shipment cannot be said to have sustained
a constructive total loss. Hence, no recovery can be had against Oriental
Assurance. The latter has no liability under the policy.
Philippine Home Assurance Corporation v. CA (1996)
FACTS
Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan,
the shipment for carriage to Manila and Cebu, freight pre-paid and in good order and
condition
While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene
cylinder located in the accommodation area near the engine room on the main deck level.
As the crew was trying to extinguish the fire, the acetylene cylinder suddenly exploded
sending a flash of flame throughout the accommodation area, thus causing death and
severe injuries to the crew and instantly setting fire to the whole superstructure of the
vessel. The incident forced the master and the crew to abandon the ship.
Thereafter, SS Eastern Explorer was found to be a constructive total loss and its voyage was
declared abandoned.
Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near the
vessel and commenced to tow the vessel for the port of Naha, Japan.
Fire fighting operations were again conducted at the said port. After the fire was
extinguished, the cargoes which were saved were loaded to another vessel for
delivery to their original ports of destination. ESLI changed port. After the fire
was extinguished, the cargoes which were saved were loaded to another vessel for delivery
to their original ports of destination.
ESLI charged the consignees several amounts corresponding to
additional freight and salvage charges.
The charges were all paid by Philippine Home Assurance Corporation (PHAC)
under protest for and in behalf of the consignees.
PHAC, as subrogee of the consignees, thereafter filed a complaint against ESLI to
recover the sum paid under protest on the ground that the same were actually
damages directly brought about by the fault, negligence, illegal act and/or breach
of contract of ESLI.
ESLI contended that it exercised the diligence required by law in the
handling, custody and carriage of the shipment; that the fire was caused
by an unforeseen event; that the additional freight charges are due and
demandable pursuant to the Bill of Lading; and that salvage charges are
properly collectible under Act No. 2616, known as the Salvage Law.
ISSUE
Who, among the carrier, consignee or insurer of the goods, is liable for the additional
charges or expenses incurred by the owner of the ship in the salvage operations and in the
transshipment of the goods via a different carrier.
HELD
It is worthy to note at the outset that the goods subject of the present controversy were
neither lost nor damaged in transit by the fire that razed the carrier. In fact, the said goods
were all delivered to the consignees, even if the transshipment took longer than necessary.
In absolving respondent carrier of any liability, respondent Court of Appeals
sustained the trial court's finding that the fire that gutted the ship was a natural
disaster or calamity. Petitioner takes exception to this conclusion and we agree.
In our jurisprudence, fire may not be considered a natural disaster or calamity
since it almost always arises from some act of man or by human means. It cannot
be an act of God unless caused by lightning or a natural disaster or casualty not
attributable to human agency.
In the case at bar, it is not disputed that a small flame was detected on the
acetylene cylinder and that by reason thereof, the same exploded despite efforts
to extinguish the fire. Neither is there any doubt that the acetylene cylinder,
obviously fully loaded, was stored in the accommodation area near the engine
room and not in a storage area considerably far, and in a safe distance, from the
engine room. Moreover, there was no showing, and none was alleged by the
parties, that the fire was caused by a natural disaster or calamity not attributable
to human agency. On the contrary, there is strong evidence indicating
that the acetylene cylinder caught fire because of the fault and
negligence of respondent ESLI, its captain and its crew.
On the issue of whether or not respondent court committed an error in
concluding that the expenses incurred in saving the cargo are considered
general average, we rule in the affirmative.
As a rule, general or gross averages include all damages and expenses which are
deliberately caused in order to save the vessel, its cargo, or both at the same time,
from a real and known risk.
While the instant case may technically fall within the purview of the said
provision, the formalities prescribed under Article 813 and 814 of the
Code of Commerce in order to incur the expenses and cause the
damage corresponding to gross average were not complied with.
Consequently, respondent ESLI's claim for contribution from the consignees of
the cargo at the time of the occurrence of the average turns to naught.
Prescinding from the foregoing premises, it indubitably follows that the cargo
consignees cannot be made liable to respondent carrier for additional freight and
salvage charges. Consequently, respondent carrier must refund to
herein petitioner the amount it paid under protest for additional
freight and salvage charges in behalf of the consignee.
FIRE INSURANCE
Philippine Home Assurance Corporation v. CA (1996)
FACTS
Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan,
the shipment for carriage to Manila and Cebu, freight pre-paid and in good order and
condition
While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene
cylinder located in the accommodation area near the engine room on the main deck level.
As the crew was trying to extinguish the fire, the acetylene cylinder suddenly exploded
sending a flash of flame throughout the accommodation area, thus causing death and
severe injuries to the crew and instantly setting fire to the whole superstructure of the
vessel. The incident forced the master and the crew to abandon the ship.
Thereafter, SS Eastern Explorer was found to be a constructive total loss and its voyage was
declared abandoned.
Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near the
vessel and commenced to tow the vessel for the port of Naha, Japan.
Fire fighting operations were again conducted at the said port. After the fire was
extinguished, the cargoes which were saved were loaded to another vessel for
delivery to their original ports of destination. ESLI changed port. After the fire
was extinguished, the cargoes which were saved were loaded to another vessel for delivery
to their original ports of destination.
ESLI charged the consignees several amounts corresponding to
additional freight and salvage charges.
The charges were all paid by Philippine Home Assurance Corporation (PHAC)
under protest for and in behalf of the consignees.
PHAC, as subrogee of the consignees, thereafter filed a complaint against ESLI to
recover the sum paid under protest on the ground that the same were actually
damages directly brought about by the fault, negligence, illegal act and/or breach
of contract of ESLI.
ESLI contended that it exercised the diligence required by law in the
handling, custody and carriage of the shipment; that the fire was caused
by an unforeseen event; that the additional freight charges are due and
demandable pursuant to the Bill of Lading; and that salvage charges are
properly collectible under Act No. 2616, known as the Salvage Law.
ISSUE
Who, among the carrier, consignee or insurer of the goods, is liable for the additional
charges or expenses incurred by the owner of the ship in the salvage operations and in the
transshipment of the goods via a different carrier.
HELD
It is worthy to note at the outset that the goods subject of the present controversy were
neither lost nor damaged in transit by the fire that razed the carrier. In fact, the said goods
were all delivered to the consignees, even if the transshipment took longer than necessary.
In absolving respondent carrier of any liability, respondent Court of Appeals
sustained the trial court's finding that the fire that gutted the ship was a natural
disaster or calamity. Petitioner takes exception to this conclusion and we agree.
In our jurisprudence, fire may not be considered a natural disaster or calamity
since it almost always arises from some act of man or by human means. It cannot
be an act of God unless caused by lightning or a natural disaster or casualty not
attributable to human agency.
In the case at bar, it is not disputed that a small flame was detected on the
acetylene cylinder and that by reason thereof, the same exploded despite efforts
to extinguish the fire. Neither is there any doubt that the acetylene cylinder,
obviously fully loaded, was stored in the accommodation area near the engine
room and not in a storage area considerably far, and in a safe distance, from the
engine room. Moreover, there was no showing, and none was alleged by the
parties, that the fire was caused by a natural disaster or calamity not attributable
to human agency. On the contrary, there is strong evidence indicating
that the acetylene cylinder caught fire because of the fault and
negligence of respondent ESLI, its captain and its crew.
On the issue of whether or not respondent court committed an error in
concluding that the expenses incurred in saving the cargo are considered
general average, we rule in the affirmative.
As a rule, general or gross averages include all damages and expenses which are
deliberately caused in order to save the vessel, its cargo, or both at the same time,
from a real and known risk.
While the instant case may technically fall within the purview of the said
provision, the formalities prescribed under Article 813 and 814 of the
Code of Commerce in order to incur the expenses and cause the
damage corresponding to gross average were not complied with.
Consequently, respondent ESLI's claim for contribution from the consignees of
the cargo at the time of the occurrence of the average turns to naught.
Prescinding from the foregoing premises, it indubitably follows that the cargo
consignees cannot be made liable to respondent carrier for additional freight and
salvage charges. Consequently, respondent carrier must refund to
herein petitioner the amount it paid under protest for additional
freight and salvage charges in behalf of the consignee.
BACHRACH v. BRITISH AMERICAN ASSURANCE
Facts:
Bachrach insured properties of its general furniture shop with British. The properties were
subsequently destroyed by fire. Bachrach claims from the insurance company. The claim
was denied on the ff grounds:
The policy was allegedly forfeited because the insured stored varnishes and
paints within the premises;
Insured stored gasoline in the building; and
Bachrach executed a chattel mortgage on the properties insured without the
consent of the insured.
Issue: Whether or not Bachrach can claim the proceeds of the policy.
Held: Yes.
The policy was NOT forfeited due to the strong paints and varnishes. There was no express
provision pertaining to it and these paints and varnishes are incidental to the business of
the insured to keep the furniture in a saleable condition. The gasoline stored within the
premises was in the reservoir of the car and thus does not violate any provision in the
policy. There is no express prohibition against the execution of a chattel mortgage on the
property insured.
Keeping of inflammable oils on the premises, though prohibited by the policy, does not
void it if such keeping is incidental to the business. It may be added that there was no
provision in the policy prohibiting the keeping of paints and varnishes upon the premises
where the insured property was stored. If the company intended to rely upon a condition of
that character, it ought to have been plainly expressed in the policy.
*alienation clause - forfeiture if the interest in the property pass from the insured (chattel
mortgage)
There is no alienation within the meaning of the insurance law until the mortgage acquires
a right to take possession by default under the terms of the mortgage. No such right is
claimed to have accrued in the case at bar, and the alienation clause is therefore
inapplicable.
The Court can not find that there is a preponderance of evidence showing that the plaintiff
did actually set fire or cause fire to be set to the goods in question. It does not positively
appear of record that the automobile in question was not included in the other policies. It
does appear that the automobile was saved and was considered as a part of the salvaged. It
is alleged that the salvage amounted to P4,000, including the automobile. This amount
(P4,000) was distributed among the different insurers and the amount of their
responsibility was proportionately reduced. The defendant and appellant in the present
case made no objection at any time in the lower court to that distribution of the salvage.
The claim is now made for the first time.
Tan Chuco v. Yorkshire and Life Insurance
Malayan Insurance vs. Cruz-Arnaldo, 154 SCRA 672 (1987)
FACTS:
June 7, 1981: Malayan insurance co., inc. (MICO) issued to Coronacion
Pinca, Fire Insurance Policy for her property effective July 22, 1981, until July 22,
1982
October 15,1981: MICO allegedly cancelled the policy for non-payment, of the
premium and sent the corresponding notice to Pinca
December 24, 1981: payment of the premium for Pinca was received by Domingo
Adora, agent of MICO
January 15, 1982: Adora remitted this payment to MICO,together with other
payments
January 18, 1982: Pinca's property was completely burned
February 5, 1982: Pinca's payment was returned by MICO to Adora on the
ground that her policy had been cancelled earlier but Adora refused to accept it and
instead demanded for payment
Under Section 416 of the Insurance Code, the period for appeal is thirty days
from notice of the decision of the Insurance Commission. The petitioner filed its
motion for reconsideration on April 25, 1981, or fifteen days such notice, and the
reglementary period began to run again after June 13, 1981, date of its receipt of
notice of the denial of the said motion for reconsideration. As the herein petition was
filed on July 2, 1981, or nineteen days later, there is no question that it is tardy by four
days.
Insurance Commission: favored Pinca
MICO appealed
ISSUE: W/N MICO should be liable because its agent Adora was authorized to receive it
HELD: YES. petition is DENIED
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing
is exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been paid, except in the case of
a life or an industrial life policy whenever the grace period provision applies.
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an insurance agent or insurance broker a policy
or contract of insurance shall be deemed to have authorized such agent or broker to receive
on its behalf payment of any premium which is due on such policy or contract of insurance
at the time of its issuance or delivery or which becomes due thereon.
Payment to an agent having authority to receive or collect payment is equivalent
to payment to the principal himself; such payment is complete when the money
delivered is into the agent's hands and is a discharge of the indebtedness owing to the
principal.
SEC. 64. No policy of insurance other than life shall be cancelled by the insurer
except upon prior notice thereof to the insured, and no notice of cancellation shall be
effective unless it is based on the occurrence, after the effective date of the policy, of
one or more of the following:
o non-payment of premium;
o conviction of a crime arising out of acts increasing the hazard insured
against;
o discovery of fraud or material misrepresentation;
o discovery of willful, or reckless acts or commissions increasing the
hazard insured against;
o physical changes in the property insured which result in the property
becoming uninsurable;or
o a determination by the Commissioner that the continuation of the
policy would violate or would place the insurer in violation of this Code.
As for the method of cancellation, Section 65 provides as follows:
SEC. 65. All notices of cancellation mentioned in the preceding section shall be
in writing, mailed or delivered to the named insured at the address shown in the
policy, and shall state (a) which of the grounds set forth in section sixty-four is relied
upon and (b) that, upon written request of the named insured, the insurer will furnish
the facts on which the cancellation is based.
A valid cancellation must, therefore, require concurrence of the following
conditions:
o There must be prior notice of cancellation to the insured;
o The notice must be based on the occurrence, after the effective date of
the policy, of one or more of the grounds mentioned;
o The notice must be (a) in writing, (b) mailed, or delivered to the named
insured, (c) at the address shown in the policy;
 o It must state (a) which of the grounds mentioned in Section 64 is relied
upon and (b) that upon written request of the insured, the insurer will
furnish the facts on which the cancellation is based.
All MICO's offers to show that the cancellation was communicated to the insured
is its employee's testimony that the said cancellation was sent "by mail through our
mailing section." without more
It stands to reason that if Pinca had really received the said notice, she would not
have made payment on the original policy on December 24, 1981. Instead, she would
have asked for a new insurance, effective on that date and until one year later, and so
taken advantage of the extended period.
Incidentally, Adora had not been informed of the cancellation either and saw no
reason not to accept the said payment
Although Pinca's payment was remitted to MICO's by its agent on January 15,
1982, MICO sought to return it to Adora only on February 5, 1982, after it presumably
had learned of the occurrence of the loss insured against on January 18, 1982 make
the motives of MICO highly suspicious