G.R. No.
L-66935 November 11, 1985 The liability of the insurance company is governed by
ISABELA ROQUE, doing business under the name
and style of Isabela Roque Timber Enterprises
and ONG CHIONG, petitioners, vs. HON.
INTERMEDIATE APPELATE COURT and PIONEER
INSURANCE AND SURETY
CORPORATION, respondent.
FACTS:
On February 19, 1972, the Manila Bay Lighterage
Corporation (Manila Bay), a common carrier, entered
into a contract with the petitioners 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. The
petitioners insured the logs against loss for
P100,000.00 with respondent Pioneer Insurance and
Surety Corporation (Pioneer).
On February 29, 1972, the petitioners loaded on the
barge, 811 pieces of logs at Malampaya Sound,
Palawan for carriage and delivery to North Harbor,
Port of Manila, but 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.
Hence, petitioners commenced Civil Case No. 86599
against Manila Bay and respondent Pioneer.
DECISION OF LOWER COURTS:
(1) Trial Court: found in favor of petitioners.
(2) Intermediate Appellate Court: absolved the
respondent insurance company 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
ISSUES:
I. THE INTERMEDIATE APPELLATE COURT
ERRED IN HOLDING THAT IN CASES OF MARINE
CARGO INSURANCE, THERE IS A WARRANTY OF
SEAWORTHINESS BY THE CARGO OWNER.
II. THE INTERMEDIATE APPELLATE COURT
ERRED IN HOLDING THAT THE LOSS OF THE
CARGO IN THIS CASE WAS CAUSED BY "PERILS
OF THE SHIP" AND NOT BY "PERILS OF THE
SEA.”
RULING:
I. No. The IAC is correct.
cannot be guarded against by the ordinary exertion of
law. Section 113 of the Insurance Code provides:
In every marine insurance upon a ship or freight, or
freightage, or upon any thing that 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.
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.
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.
II. No, the IAC is correct.
In marine cases, the risks insured against are "perils
of the sea"
A policy does not cover a loss or injury that must
inevitably take place in the ordinary course of things.
There is no doubt that 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. They insure against
losses from extraordinary occurrences only, such as
stress of weather, winds and waves, lightning,
tempests, rocks and the like. These are understood to
be the "perils of the sea" referred in the policy, and
not those ordinary perils which every vessel must
encounter. "Perils of the sea" has been said to include
only such losses as are of extraordinary nature,
encounter. "Perils of the sea" has been said to include
only such losses as are of extraordinary nature,
or arise from some overwhelming power, which
human skill and prudence. 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). It is also the general
rule that everything which happens thru the inherent
vice of the thing, or by the act of the owners, master
or shipper, shall not be reputed a peril, if not
otherwise borne in the policy.
It is quite unmistakable that the loss of the cargo was
due to the perils of the ship rather than the perils of
the sea. The facts clearly negate the petitioners' claim
under the insurance policy.
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 result
from the perils of the sea.
GO TIACO VS UNION INSURANCE
Facts: A cargo of rice belonging to the Go Tiaoco
Brothers, was transported in the early days of May,
1915, on the steamship Hondagua from the port of
Saigon to Cebu. On discharging the rice from one of
the compartments in the after hold, upon arrival at
Cebu, it was discovered that 1,473 sacks had been
damaged by sea water. The loss so resulting to the
owners of rice, after proper deduction had been made
for the portion saved, was P3,875. The policy of
insurance, covering the shipment, was signed upon a
form long in use among companies engaged in
maritime insurance. 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." It was found out
that 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. An action on a
policy of marine insurance issued by the Union
Insurance Society of Canton, Ltd., upon the cargo of
rice belonging to the Go Tiaoco Brothers was filed.
The trial court found that the inflow of the sea water
during the voyage was due to a defect in one of the
drain pipes of the ship and concluded that the loss
was not covered by the policy of insurance. Judgment
was accordingly entered in favor of Union Insurance
and Go Tiaoco Brothers appealed.
Issue [1]: Whether perils of the sea includes “entrance
of water into the ship’s hold through a defective pipe.”
Held [1]: NO. It is determined that the words "all other
perils, losses, and misfortunes" 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. According to the ordinary rules of
construction these words must be interpreted with
reference to the words which immediately precede
them. They were no doubt inserted in order to prevent
disputes founded on nice distinctions. Their office is to
cover in terms whatever may be within the spirit of the
cases previously enumerated, and so they have a
greater or less effect as a narrower or broader view is
taken of those cases. 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 on the other hand that expression is to receive
a limited construction and loss by perils of the seas is
to be confined to loss ex marine tempestatis
discrimine, the general words become most important.
But still, when they first became the subject of judicial
construction, they have always been held or assumed
to be restricted to cases "akin to" or "resembling" or
"of the same kind as" those specially mentioned. I see
no reason for departing from this settled rule. In
marine insurance it is above all things necessary to
abide by settled rules and to avoid anything like novel
refinements or a new departure. 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. 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." Herein, 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.
Issue [2]: Whether there is an implied warranty on the
seaworthy of the vessel in every marine insurance
contract.
Held [2]: YES. It is universally accepted that in every
contract of insurance upon anything which is the
subject of marine insurance, a warranty is implied that
the ship shall be seaworthy at the time of the
inception of the voyage. This rule is accepted in our
own Insurance Law (Act No. 2427, sec. 106). It is also
well settled that a ship which is seaworthy for the
purpose of insurance upon the ship may yet be
unseaworthy for the purpose of insurance upon the
cargo (Act No. 2427, sec. 106).
G.R. No. 76145 June 30, 1987 CATHAY
INSURANCE CO., petitioner, vs. HON. COURT OF
APPEALS, and REMINGTON INDUSTRIAL SALES
CORPORATION, respondents.
FACTS:
A complaint was filed by private respondent
corporation against petitioner (then defendant)
company seeking collection of the sum of
P868,339.15 representing private respondent's losses
and damages incurred in a shipment of seamless
steel pipes under an insurance contract in favor of the
said private respondent as the insured, consignee or
importer of aforesaid merchandise while in transit
from Japan to the Philippines on board vessel SS
"Eastern Mariner." The total value of the shipment
was P2,894,463.83 at the prevailing rate of P7.95 to a
dollar in June and July 1984, when the shipment was
made. The trial court decided in favor of private
respondent corporation by ordering petitioner to pay it
the sum of P866,339.15 as its recoverable insured
loss equivalent to 30% of the value of the seamless
steel pipes; ordering petitioner to pay private
respondent interest on the aforecited amount at the
rate of 34% or double the ceiling prescribed by the
Monetary Board per annum from February 3, 1982 or
90 days from private respondent's submission of proof
of loss to petitioner until paid as provided in the
settlement of claim provision of the policy; and
ordering petitioner to pay private respondent certain
amounts for marine surveyor's fee, attorney's fees
and costs of the suit.

ISSUE: WON the rusting of steel pipes in the course
of a voyage is a "peril of the sea" in view of the toll on
the cargo of wind, water, and salt conditions.
RULING:
There is no question that the rusting of steel pipes in
the course of a voyage is a "peril of the sea" in view of
the toll on the cargo of wind, water, and salt
conditions. At any rate if the insurer cannot be held
accountable therefor, We would fail to observe a
cardinal rule in the interpretation of contracts, namely,
that any ambiguity therein should be construed
against the maker/issuer/drafter thereof, namely, the
insurer. Besides the precise purpose of insuring cargo
during a voyage would be rendered fruitless. Be it
noted that any attack of the 15-day clause in the
policy was foreclosed right in the pre-trial conference.
Oriental v CA G.R. No. 94052 August 9, 1991
J. Melencio-Herrera
Facts:
Panama Sawmill shipped 1208 pieces of apitog logs
to Manila and insured the logs with Oriental for the
value of Php 1 million. Two barges were loaded with
610 and 598 logs. At sea, typhoons ravaged one of
the barges, resulting in the loss of 497 of 598 of the
logs.
The Insurance contract provided for indemnity under
the following conditions:
Warranted that this Insurance is against TOTAL
LOSS ONLY. Subject to the following clauses:
— Civil Code Article 1250 Waiver clause
— Typhoon warranty clause
— Omnibus clause.
Oriental didn’t give an indemnity because there wasn’t
total loss of the shipment.
The sawmill filed a civil case against Oriental and the
court ordered it to pay 410,000 as value for the
missing logs. The CA affirmed the lower court
judgment but reduced the legal interest. Hence this
appeal by Oriental.
Issue:
Whether or not Oriental Assurance can be held liable
under its marine insurance policy based on the theory
of a divisible contract of insurance and, consequently, was more than ¾ of the amount lost, showing a
a constructive total loss. constructive total loss.
The SC, however, said that although the logs were
Held: No. Petition granted. placed in two barges, they were not separately valued
by the policy, nor separately insured. Of the entirety of
Ratio: 1,208, pieces of logs, only 497 pieces thereof were
Perla v CA- The terms of the contract constitute the lost or 41.45% of the entire shipment. Since the cost
measure of the insurer liability and compliance of those 497 pieces does not exceed 75% of the value
therewith is a condition precedent to the insured's of all 1,208 pieces of logs, the shipment can not be
right to recovery from the insurer. said to have sustained a constructive total loss under
“Whether a contract is entire or severable is a Section 139(a) of the Insurance Code.
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.”
Also, the insurer's liability was for "total loss only" as
stipulated. A total loss may be either actual or
constructive. An actual total loss under Sec 130 of the
Insurance Code is caused by:
(a) A total destruction of the thing insured;
(b) The irretrievable loss of the thing by sinking, or by
being broken up;
(c) Any damage to the thing which renders it valueless
to the owner for the purpose for which he held it; or
(d) Any other event which effectively deprives the
owner of the possession, at the port of destination, of
the thing insured.
A constructive total loss, gives to a person insured a
right to abandon and it means:
SECTION 139. A person insured by a contract of
marine insurance may abandon the 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 appellate court considered the cargo in one barge
as separate from the other and ruled that 497 of 598