CHOA TIEK SENG, doing business under the name and

style of SENG'S COMMERCIAL

ENTERPRISES, petitioner, vs. HON. COURT OF APPEALS,
FILIPINO MERCHANTS' INSURANCE COMPANY, INC., BEN
LINES CONTAINER, LTD. AND E. RAZON,
INC., respondents.

SYLLABUS

COMMERCIAL LAW; MARINE INSURANCE; LIABILITY OF

INSURER; "ALL RISK" INSURANCE POLICY; COVERAGE; CASE AT
BAR. — In Gloren Inc. vs. Filipinas Cia. de Seguros,it was held
that an all risk insurance policy insures against all causes of
conceivable loss or damage, except as otherwise excluded in the
policy or due to fraud or intentional misconduct on the part of the
insured. It covers all losses during the voyage whether arising
from a marine peril or not, including pilferage losses during the
war. In the present case, the "all risks" clause of the policy sued
upon reads as follows: "5. This insurance is against all risks of
loss or damage to the subject matter insured but shall in no case
be deemed to extend to cover loss, damage, or expense
proximately caused by delay or inherent vice or nature of the
subject matter insured. Claims recoverable hereunder shall be
payable irrespective of percentage." The terms of the policy are
so clear and require no interpretation. The insurance policy
covers all loss or damage to the cargo except those caused by
delay or inherent vice or nature of the cargo insured. It is the
duty of the respondent insurance company to establish that said
loss or damage falls within the exceptions provided for by law,
otherwise it is liable therefor. 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. In this case, the damage
caused to the cargo has not been attributed to any of the
exceptions provided for nor is there any pretension to this effect.
Thus, the liability of respondent insurance company is clear.

DECISION

GANCAYCO, J : p

This is an appeal from a decision of the Court of Appeals dated

February 18, 1988 in CA-G.R. CV No. 09627 which affirmed the
decision of the Regional Trial Court (RTC) of Manila which in turn
dismissed the complaint. 1

On November 4, 1976 petitioner imported some lactose crystals

from Holland. The importation involved fifteen (15) metric tons
packed in 600 6-ply paper bags with polyethylene inner bags,
each bag at 25 kilos net. The goods were loaded at the port at
Rotterdam in sea vans on board the vessel "MS Benalder' as the
mother vessel, and thereafter aboard the feeder vessel "Wesser
Broker V-25" of respondent Ben Lines Container, Ltd. (Ben Lines
for short). The goods were insured by the respondent Filipino
Merchants' Insurance Co., Inc. (insurance company for short) for
the sum of P98,882.35, the equivalent of US$8,765.00 plus 50%
mark-up or US $13,147.50, against all risks under the terms of the
insurance cargo policy. Upon arrival at the port of Manila, the
cargo was discharged into the custody of the arrastre operator
respondent E. Razon, Inc. (broker for short), prior to the delivery
to petitioner through his broker. Of the 600 bags delivered to
petitioner, 403 were in bad order. The surveys showed that the
bad order bags suffered spillage and loss later valued at
P33,117.63.prLL

Petitioner filed a claim for said loss dated February 16, 1977
against respondent insurance company in the amount of
P33,117.63 as the insured value of the loss.
Respondent insurance company rejected the claim alleging that
assuming that spillage took place while the goods were in
transit, petitioner and his agent failed to avert or minimize the
loss by failing to recover spillage from the sea van, thus violating
the terms of the insurance policy sued upon; and that assuming
that the spillage did not occur while the cargo was in transit, the
said 400 bags were loaded in bad order, and that in any case, the
van did not carry any evidence of spillage.

Hence, petitioner filed the complaint dated August 2, 1977 in the

Regional Trial Court of Manila against respondent insurance
company seeking payment of the sum of P33,117.63 as damages
plus attorney's fees and expenses of litigation. In its answer,
respondent insurance company denied all the material
allegations of the complaint and raised several special defenses
as well as a compulsory counterclaim. On February 24, 1978,
respondent insurance company filed a third-party complaint
against respondents Ben Lines and broker. Respondent broker
filed its answer to the third-party complaint denying liability and
arguing, among others, that the petitioner has no valid cause of
action against it. Similarly, Ben Lines filed its answer denying any
liability and a special defense arguing that respondent insurance
company was not the proper party in interest and has no
connection whatsoever with Ben Lines Containers, Ltd. and that
the third-party complaint has prescribed under the applicable
provisions of the Carriage of Goods by Sea Act.

On November 6, 1979, respondent Ben Lines filed a motion for

preliminary hearing on the affirmative defense of prescription. In
an order dated February 28, 1980, the trial court deferred
resolution of the aforesaid motion after trial on the ground that
the defense of prescription did not appear to be indubitable.

After the pre-trial conference and trial on the merits, on March

31, 1986, the court a quo rendered a judgment dismissing the
complaint, the counterclaim and the third-party complaint with
costs against the petitioner.
Hence, the appeal to the Court of Appeals by petitioner which, in
due course, as aforestated, affirmed the judgment of the trial
court.

A motion for reconsideration of said judgment was denied by the

appellate court in a resolution dated August 1, 1988.

Petitioner now filed this petition for review on certiorari in this

Court predicated on the following grounds:
"I
RESPONDENT COURT ERRED IN HOLDING THAT THE
INSURED SHIPMENT DID NOT SUSTAIN ANY
DAMAGE/LOSS DESPITE ADMISSION THEREOF ON THE
PART OF RESPONDENT INSURANCE COMPANY AND
THE FINDING OF THE LATTER'S SURVEYORS.
II
RESPONDENT COURT ERRED IN HOLDING THAT AN
"ALL RISKS" COVERAGE COVERS ONLY LOSSES
OCCASIONED BY OR RESULTING FROM "EXTRA AND
FORTUITOUS EVENTS" DESPITE THE CLEAR AND
UNEQUIVOCAL DEFINITION OF THE TERM MADE AND
CONTAINED IN THE POLICY SUED UPON.
III
THE HOLDING OF RESPONDENT COURT THAT AN "ALL
RISKS" COVERAGE COVERS LOSSES OCCASIONED BY
AND RESULTING FROM "EXTRA AND FORTUITOUS
EVENTS" CONTRADICTS THE RULING OF THE SAME
COURT IN ANOTHER CASE WHERE THE DEFINITION
OF THE TERM "ALL RISKS"/ STATED IN THE POLICY
WAS MADE TO CONTROL HENCE THE NEED FOR
REVIEW." 2
The petition is impressed with merit.

The appellate court, in arriving at the conclusion that there was

no damage suffered by the cargo at the time of the devanning
thereof, held as follows:Cdpr

"Appellant argued that the cargo in question sustained

damages while still in the possession of the carrying
vessel, because as his appointed surveyor reported,
Worldwide Marine Survey Corporation, at the time of
devanning at the pier, 403 bags were already in bad order
and condition. Appellant found support to this contention
on the basis of the survey report of Worldwide Marine
Survey Corporation of the Philippines and of the
Adjustment Corporation of the Philippines which were
identified by his sole witness, Jose See. It must be pointed
out, however, that witness Jose See was incompetent to
identify the two survey reports because he was not
actually present during the actual devanning of the cargo,
which fact was admitted by him, hence, he failed to prove
the authenticity of the aforesaid survey reports.

On the other hand, the evidence submitted by the appellee

would conclusively establish the fact that there was no
damage suffered by the subject cargo at the time of the
devanning thereof. The cargo, upon discharge from the
vessel, was delivered to the custody of the arrastre
operator (E. Razon) under clean tally sheet (Exh. 6-FMIC).
Moreover, the container van containing the cargo was
found with both its seal and lock intact. Article IV,
paragraph 4 of the Management Contract (Exh. 5) signed
between the Bureau of Customs and the Arrastre operator
provides:

"4. Tally Sheets for Cargo Vans or

Containers — The contractor shall give a clean
tally sheet for cargo vans received by it in good
order and condition with locks, and seals intact."
The same cargo was in turn delivered into the
possession of the appellant by the arrastre operator
at the pier in good order and condition as shown by
the clean gate passes (Exhs. 2 and 3) and the delivery
permit (Exh. 4). The clean gate passes were issued by
appellee arrastre operator covering the shipment in
question, with the conformity of the appellant's
representative. The clean gate passes provide in part:
". . . issuance of this Gate Pass constitutes
delivery to and receipt by consignee of the goods as
 described above, in good order and condition, unless
an accompanying B.O. (Bad Order) Certificate duly
issued and noted on the face of this Gate Pass
appears."

These clean gate passes are undoubtedly important

and vital pieces of evidence. They are noted in the
dorsal side of another important piece of document
which is the permit to deliver (Exh. 4) issued by the
Bureau of Customs to effect delivery of the cargo to
the consignee. The significance and value of these
documents is that they bind the shipping company and
the arrastre operator whenever a cargo sustains
damage while in their respective custody. It is worthy
of note that there was no turnover survey executed
between the vessel and the arrastre operator,
indicating any damage to the cargo upon discharge
from the custody of the vessel. There was no bad
order certificate issued by the appellee arrastre
operator, indicating likewise that there was no
damage to the cargo while in its custody. llcd

It is surprising to the point that one could not believe that

if indeed there was really damage affecting the 403 bags
out of the 600, with an alleged estimated spillage of 240%,
this purportedly big quantity of spillage was never
recovered which could have been easily done considering
that the shipment was in a container van which was found
to be sealed and intact." 3

However, in the same decision of the appellate court, the

following evidence of the petitioner on this aspect was
summarized as follows:
"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 as follows:

65 P/bags each of 20%

78 P/bags each of 35%

79 P/bags each of 45%

87 P/bags each of 65%

94 P/bags each of 75%

(Exh. F-1)

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)." 4

The assertion of the appellate court that the authenticity of the

survey reports of the Worldwide Marine Cargo Survey Corporation
and the Adjustment Corporation of the Philippines were not
established as Jose See who identified the same was
incompetent as he was not actually present during the actual
devanning of the cargo is not well taken. LexLib

In the first place it was respondent insurance company which

undertook the protective survey aforestated relating to the goods
from the time of discharge up to the time of delivery thereof to
the consignee's warehouse, so that it is bound by the report of its
surveyor which is the Adjustment Corporation of the
Philippines. 5 The Worldwide Marine Cargo Survey Corporation of
the Philippines was the vessel's surveyor. The survey report of
the said Adjustment Corporation of the Philippines reads as
follows:
 "During the turn-over of the contents delivery from the
cargo sea van by the representative of the shipping agent
to consignee's representative/Broker (Saint Rose
Forwarders), 403 bags were bursted and/or torn, opened
on one end contents partly spilled. The same were
inspected by the vessel's surveyor (Worldwide Marine &
Cargo Survey Corporation), findings as follows:

One (1) Container No. 2987789

Property locked and secured with Seal No.
18880.
FOUND:
197-Paper Bags (6-Ply each with One inner Plastic Lining
Machine Stitched with cotton Twine on Both ends.
Containing Lactose Crystal 25 mesh Sep 061-09-03 in good
order.

403-Bags, 6-ply torn/and or opened on one end, contents

partly spilled, estimated spillages as follows:

65 P/bags each of 20%

78 P/bags each of 35%

79 P/bags each of 45%

87 P/bags each of 65%

94 P/bags each of 75%

(Emphasis supplied for emphasis)" 6

The authenticity of the said survey report need not be

established in evidence as it is binding on respondent insurance
company who caused said protective survey.

Secondly, contrary to the findings of the appellate court that

petitioner's witness Jose See was not present at the time of the
actual devanning of the cargo, what the record shows is that he
was present when the cargo was unloaded and received in the
warehouse of the consignee. He saw 403 bags to be in bad order.
Present then was the surveyor, Adjustment Corporation of the
Philippines, who surveyed the cargo by segregating the bad order
cargo from the good order and determined the amount of
loss. 7 Thus, said witness was indeed competent to identify the
survey report aforestated. LexLib

Thirdly, in its letter dated May 26, 1977 to petitioner, respondent

insurance company admitted in no uncertain terms, the damages
as indicated in the survey report in this manner:
"We do not question the fact that out of the 600 bags
shipment 403 bags appeared to be in bad order or in
damaged condition as indicated in the survey report of the
vessel surveyor . . .." 8

This admission even standing alone is sufficient proof of loss or

damage to the cargo.

The appellate court observed that the cargo was discharged from
the vessel and delivered to the custody of the broker under the
clean tally sheet, that the container van containing the cargo
was found with both its seal and lock intact; and that the cargo
was delivered to the possession of the petitioner by the broker in
good order and condition as shown by the clean gate passes and
delivery permit.

The clean tally sheet referred to by the appellate court covers

the van container and not the cargo stuffed therein. 9 The
appellate court clearly stated that the clean tally sheet issued by
the broker covers the cargo vans received by it in good order and
condition with lock and seal intact. Said tally sheet is no
evidence of the condition of the cargo therein contained. Even
the witness of the respondent insurance company, Sergio
Icasiano, stated that the clean gate passes do not reflect the
actual condition of the cargo when released by the broker as it
was not physically examined by the broker. 10

There is no question, therefore, that there were 403 bags in

damaged condition delivered and received by petitioner.

Nevertheless, on the assumption that the cargo suffered

damages, the appellate court ruled:
"Even assuming that the cargo indeed sustained damage,
still the appellant cannot hold the appellee insurance
company liable on the insurance policy. In the case at bar,
appellant failed to prove that the alleged damage was due
to risks connected with navigation. A distinction should be
made between "perils of the sea" which render the insurer
liable on account of the loss and/or damage brought about
thereof and "perils of the ship" which do not render the
insurer liable for any loss or damage. Perils of the sea or
perils of navigation embrace all kinds of marine
casualties, such as shipwreck, foundering, stranding,
collision and every specie of damage done to the ship or
goods at sea by the violent action of the winds or waves.
They do not embrace all loses happening on the sea. A
peril whose only connection with the sea is that it arises
aboard ship is not necessarily a peril of the sea; the peril
must be of the sea and not merely one accruing on the sea
(The Phil. Insurance Law, by Guevarra, 4th ed., 1961, p.
143). In Wilson, Sons and Co. vs. Owners of Cargo per the
Xantho (1887) A.C. 503, 508, it was held: cdphil

"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."

Moreover, the cargo in question was insured in an "against

all risk policy." Insurance "against all risk" has a technical
meaning in marine insurance. "Under an "all risk" marine
policy, there must as a general rule be a fortuitous
event in order to impose liability on the insurer; losses
occasioned by ordinary circumstances or wear and tear
are not covered, thus, while an "all risk" marine policy
purports to cover losses from casualties at sea, it does
not cover losses occasioned by the ordinary
circumstances of a voyage, but only those resulting from
extra and fortuitous events."
 "It has been held that damage to a cargo by high seas and
other weather is not covered by an "all risk" marine policy,
since it is not fortuitous, particularly where the bad
weather occurs at a place where it could be expected at
the time in question." (44 Am. Jur. 2d. 216) In Go Tiaoco y
Hermanas vs. Union Insurance Society of Canto, 40 Phil.
40, it was held:

"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
whose results, from perils of the sea." 11

The Court disagrees.

In Gloren Inc. vs. Filipinas Cia. de Seguros, 12 it was held that

an all risk insurance policy insures against all causes of
conceivable loss or damage, except as otherwise excluded in the
policy or due to fraud or intentional misconduct on the part of the
insured. It covers all losses during the voyage whether arising
from a marine peril or not, including pilferage losses during the
war.cdrep

In the present case, the "all risks" clause of the policy sued upon
reads as follows:
"5. This insurance is against all risks of loss or damage to
the subject matter insured but shall in no case be deemed
to extend to cover loss, damage, or expense proximately
caused by delay or inherent vice or nature of the subject
matter insured. Claims recoverable hereunder shall be
payable irrespective of percentage." 13

The terms of the policy are so clear and require no

interpretation. The insurance policy covers all loss or damage
to the cargo except those caused by delay or inherent vice or
nature of the cargo insured. It is the duty of the respondent
 insurance company to establish that said loss or damage falls
within the exceptions provided for by law, otherwise it is liable
therefor.
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. 14

In this case, the damage caused to the cargo has not been
attributed to any of the exceptions provided for nor is there any
pretension to this effect. Thus, the liability of respondent
insurance company is clear.

WHEREFORE, the decision appealed from is hereby REVERSED

AND SET ASIDE and another judgment is hereby rendered
ordering the respondent Filipinas Merchants Insurance Company,
Inc. to pay the sum of P33,117.63 as damages to petitioner with
legal interest from the filing of the complaint, plus attorney's fees
and expenses of litigation in the amount of P10,000.00 as well as
the costs of the suit. prLL

SO ORDERED.

Malayan Insurance Co., Inc vs Philippines First Insurance Co., Inc

G.R. No. 184300 July 11, 2012

Facts: Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Forwarder
Services, Inc. (Reputable) had been annually executing a contract of carriage, whereby the latter
undertook to transport and deliver the former’s products to its customers, dealers or salesmen.
On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 (Marine Policy) from
respondent Philippines First Insurance Co., Inc. (Philippines First) to secure its interest over its
own products. Philippines First thereby insured Wyeth’s nutritional, pharmaceutical and other
products usual or incidental to the insured’s business while the same were being transported or
shipped in the Philippines. The policy covers all risks of direct physical loss or damage from any
external cause, if by land, and provides a limit of P6,000,000.00 per any one land vehicle. On
December 1, 1993, Wyeth executed its annual contract of carriage with Reputable. It turned out,
however, that the contract was not signed by Wyeth’s representative/s. Nevertheless, it was
admittedly signed by Reputable’s representatives, the terms thereof faithfully observed by the
parties and, as previously stated, the same contract of carriage had been annually executed by the
parties every year since 1989. Under the contract, Reputable undertook to answer for “all risks
with respect to the goods and shall be liable to the COMPANY (Wyeth), for the loss, destruction,
or damage of the goods/products due to any and all causes whatsoever, including theft, robbery,
flood, storm, earthquakes, lightning, and other force majeure while the goods/products are in
transit and until actual delivery to the customers, salesmen, and dealers of the COMPANY”. The
contract also required Reputable to secure an insurance policy on Wyeth’s goods. Thus, on
February 11, 1994, Reputable signed a Special Risk Insurance Policy (SR Policy) with petitioner
Malayan for the amount of P1,000,000.00. On October 6, 1994, during the effectivity of the
Marine Policy and SR Policy, Reputable received from Wyeth 1,000 boxes of Promil infant
formula worth P2,357,582.70 to be delivered by Reputable to Mercury Drug Corporation in
Libis, Quezon City. Unfortunately, on the same date, the truck carrying Wyeth’s products was
hijacked by about 10 armed men. They threatened to kill the truck driver and two of his helpers
should they refuse to turn over the truck and its contents to the said highway robbers. The
hijacked truck was recovered two weeks later without its cargo. Malayan questions its liability
based on sections 5 and 12 of the SR Policy.

Issue: Whether or not there is double insurance in this case such that either Section 5 or Section
12 of the SR Policy may be applied.

Held: No. By the express provision of Section 93 of the Insurance Code, double insurance exists
where the same person is insured by several insurers separately in respect to the same subject and
interest. The requisites in order for double insurance to arise are as follows:

1. The person insured is the same;

2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.

In the present case, while it is true that the Marine Policy and the SR Policy were both issued
over the same subject matter, i.e. goods belonging to Wyeth, and both covered the same peril
insured against, it is, however, beyond cavil that the said policies were issued to two different
persons or entities. It is undisputed that Wyeth is the recognized insured of Philippines First
under its Marine Policy, while Reputable is the recognized insured of Malayan under the SR
Policy. The fact that Reputable procured Malayan’s SR Policy over the goods of Wyeth pursuant
merely to the stipulated requirement under its contract of carriage with the latter does not make
Reputable a mere agent of Wyeth in obtaining the said SR Policy.
The interest of Wyeth over the property subject matter of both insurance contracts is also
different and distinct from that of Reputable’s. The policy issued by Philippines First was in
consideration of the legal and/or equitable interest of Wyeth over its own goods. On the other
hand, what was issued by Malayan to Reputable was over the latter’s insurable interest over the
safety of the goods, which may become the basis of the latter’s liability in case of loss or damage
to the property and falls within the contemplation of Section 15 of the Insurance Code.

Therefore, even though the two concerned insurance policies were issued over the same goods
and cover the same risk, there arises no double insurance since they were issued to two different
persons/entities having distinct insurable interests. Necessarily, over insurance by double
insurance cannot likewise exist. Hence, as correctly ruled by the RTC and CA, neither Section 5
nor Section 12 of the SR Policy can be applied.

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,
a constructive total loss.

Held: No. Petition granted.

Ratio:
Perla v CA- The terms of the contract constitute the measure of the insurer
liability and compliance therewith is a condition precedent to the insured's right to
recovery from the insurer.
“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.”
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 was more than ¾ of the amount lost, showing a
constructive total loss.
The SC, however, said that although the logs were placed in two barges, they
were not separately valued by the policy, nor separately insured. 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 can not be said to have sustained a
constructive total loss under Section 139(a) of the Insurance Code.

Roque v. Intermediate Appellate Court

G.R. No. L-66935 Nov. 11, 1985Justice Gutierrez, Jr.
Facts:
Isabela Roque (Roque of Isabela Roque Timber Enterprises) hired the Manila Bay
Lighterage Corp. (ManilaBay) to load and carry its logs from Palawan to North
Harbor, Manila. The logs were insured with Pioneer Insuranceand Surety Corp.
(Pioneer). The logs never reached Manila due to certain circumstances (as alleged
by Roque andfound by the appellate court), such as the fact that the barge was not
seaworthy that it developed a leak, that oneof the hatches were left open causing
water to enter, and the absence of the necessary cover of tarpaulin causingmore
water to enter the barge. When Roque demanded payment from Pioneer, but the
latter refused on the
ground that its liability depended upon the “Total Loss by Total Loss of Vessel
Only.” The trial court ruled in favor
of Roque in the civil complaint filed by the latter against Pioneer, but the decision
was reversed by the appellatecourt.
Issue:
WON in cases of marine insurance, there is a warranty of seaworthiness by the
cargo owner; WON theloss of the cargo was due to perils of the sea, not perils of
the ship.
Held:
Yes, there is. The liability of the insurance company is governed by law. Section 113
of the Insurance Code
provides that “
In every marine insurance upon a ship or freight, or freightage, or upon anything
which is thesubject of marine insurance, a warranty is implied that the ship is
seaworthy.
” Hence,
there can be no mistakingthe fact that the term "cargo" can be the subject of
marine insurance and that once it is so made, the impliedwarranty of seaworthiness
immediately attaches to whoever is insuring the cargo whether he be the
shipowner ornot. Moreover, the fact that the unseaworthiness of the ship was
unknown to the insured is immaterial in ordinarymarine insurance and may not be
used by him as a defense in order to recover on the marine insurance policy.As to
the second issue, by applying Sec. 113 of the Insurance Code, there is no doubt
that the term 'perilsof the sea' extends only to losses caused by sea damage,
or by the violence of the elements, and does not embraceall losses happening at
sea; it is said to include only such losses as are of
extraordinary
nature, or
arise from someoverwhelming power
, which cannot be guarded against by the ordinary exertion of human skill and
prudence. t isalso the general rule that everything which happens thru the inherent
vice of the thing, or by the act of theowners, master or shipper, shall not be
reputed a peril, if not otherwise borne in the policy. It must be consideredto be
settled, furthermore, that a loss which, in the ordinary course of events, results
from the natural andinevitable action of the sea, from the ordinary wear and tear
of the ship, or from the negligent failure of the ship'sowner to provide the vessel
with proper equipment to convey the cargo under ordinary conditions, is not a peril
ofthe sea. Such a loss is rather due to what has been aptly called the "peril of
the ship." The insurer undertakes toinsure against perils of the sea and similar
perils, not against perils of the ship. Neither barratry can be used as aground by
Roque. Barratry as defined in American Insurance Law is "any willful misconduct on
the part of masteror crew in pursuance of some unlawful or fraudulent purpose
without the consent of the owners, and to theprejudice of the owner's interest."
Barratry necessarily requires a willful and intentional act in its commission.
Nohonest error of judgment or mere negligence, unless criminally gross, can
be barratry. In the case at bar, there isno finding that the loss was occasioned by
the willful or fraudulent acts of the vessel's crew. There was only simplenegligence
or lack of skill.

Filipino Merchants v.
CA- Insurable
Interest
179 SCRA 638
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 Filipino’s 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