Philippine American General Insurance Co. v.
CA and Felman Shipping Ruling: As a general rule, in every marine insurance policy, the assured
Lines
G.R. No. 116940 June 11, 1997 Bellosillo, J.
Facts: Felman Shipping Lines transported 7,500 cases of Coca-Cola bottles
for Coca-Cola Bottlers Philippines on its vessel, MV Asilda, from Zamboanga
to Cebu. The shipment was for consignee, Coca-Cola Bottlers Philippines,
Cebu, and was insured by PhilAmGen under a Marine Open Policy. The ship
sank around the morning after it left Zamboanga. The entire cargo was lost.
Coca-Cola Bottlers Philippines, Cebu, filed a claim for recovery against
Felman, which refused. PhilAmGen paid its claim of Php 755,250. Claiming
its right of subrogation, PhilAmGen sued Felman for sum of money and
damages.
It claimed that the sinking and loss of the ship and its cargo were due to the
vessel’s unseaworthiness, and that she was put to sea in an unstable
condition. It also alleged that she was improperly manned by grossly
negligent officers who failed to proceed to a nearby port or beach when she
started to list (tilt to one side). Felman averred that there was no right of
subrogation in favor of PhilAmGen. Trial Court (after much procedural back
and forth between TC-CA-SC) ruled that Felman’s vessel was seaworthy
based on certificates issued by the Philippine Coast Guard and the
shipowners surveyor attesting to its seaworthiness. The loss of the vessel
and its shipment could only be attributed to a fortuitous event, or to the
negligence of the captain and his crew, in which case Art. 587 of the Code of
Commerce would apply and Felman would not be liable. Assuming the
vessel was unseaworthy, PhilAmGen could not recover since the assured
(Coca-Cola) had breached the implied warranty on the vessel’s
seaworthiness. Payment made by PhilAmGen to the assured was an undue,
wrong, and mistaken payment that was not legally owing and did not give
PhilAmGen a right of subrogation. CA likewise held that the assured’s
implied warranty of seaworthiness was not complied with and PhilAmGen
was not properly subrogated to Coca-Cola’s rights.
Issue: W/N PhilAmGen was properly subrogated to the rights of the assured
against Felman. YES
impliedly warrants to the assurer that the vessel is seaworthy and such
warranty is as much a term of the contract as if expressly written on the face
of the policy (Sec. 113 of the Insurance Code). Under Sec. 114 a ship is
seaworthy when reasonably fit to perform service and to encounter the
ordinary perils of the voyage, contemplated by the parties to the policy.
Hence, the cargo owner has the obligation to look for a reliable common
carrier with seaworthy vessels. While the assured has no control over such
vessels, the selection of the common carrier and the choice of assurer are
left to his discretion.
In policies where the law will generally imply a warranty of seaworthiness,
it can only be excluded by terms in writing in the policy in the clearest
language. Where the policy stipulates that the seaworthiness between the
assured and the assurer is admitted, the question of seaworthiness cannot
be raised by the assurer without showing concealment or misrepresentation
by the assured. The marine policy in this case has two provisions dispensing
with the usual warranty of worthiness and stating that the seaworthiness as
between the assured and the assurer is admitted. The result can either
mean that a) the warranty of the seaworthiness is to be taken as fulfilled; or
b) the risk of unseaworthiness is assumed by the insurance company. The
insertion of waiver clauses in cargo policies is in recognition of the fact that
the cargo owners cannot control the state of the vessel. With such waiver,
PhilAmGen has accepted the risk of unseaworthiness, so that if the ship
should sink by unseaworthiness, PhilAmGen is liable.
Under Art. 2207 of the Civil Code, since Coca-Cola’s property has been
insured, and it has received indemnity from PhilAmGen for the loss arising
out of its contract with Felman, PhilAmGen shall be subrogated to the rights
of the insured against Felman. The right of subrogation is not dependent
upon, nor does it grow out of any privity of contract or upon payment by
the insurance company of the insurance claim. It accrues simply upon
payment of the insurance company of the insurance claim. The doctrine of
subrogation is rooted in equity.