MARINE INSURANCE

[G.R. No. 181300. September 18, 2009.]

MALAYAN INSURANCE CO., INC., petitioner, vs. JARDINE

DAVIES TRANSPORT SERVICES, INC. and ASIAN TERMINALS,
INC., respondents.

On July 23, 1994, Petrosul International (Petrosul) shipped on board the

vessel "MV Hoegh Merchant" (MV Hoegh) from Vancouver, Canada
yellow crude sulphur "said to weigh 6,599.23 metric tons as per draft
survey" for transportation to Manila, consigned to LMG Chemicals
Corporation (LMG). 

Upon arrival of the MV Hoegh in Manila, the stevedores of respondent

Asian Terminals, Inc. (ATI) undertook discharging operations of the
shipment or cargo from the vessel.

During the discharge of the cargo "ex vessel", differences in shipment

quantity at various stages of transit was recorded.

The cargo having been insured, LMG filed a claim for the value of shortage
of cargo with its insurer Malayan Insurance Co., Inc., (petitioner) which
paid LMG the sum of P1,144,108.43 and was accordingly subrogated to
the rights of LMG.

ATI denied any liability for the value of the loss of part of the cargo,
claiming that it had exercised due care and diligence while Jardine
Davies claimed that it was not the shipagent of the MV Hoegh but a mere
commercial agent.

Petitioner points out, however, that the shipment was covered not only by
the Marine Risk Note but also by Open Marine Insurance Policy which, it
explains, means that the value of the thing insured has not been
agreed upon but left to be ascertained in the event of loss and,
therefore, covered by a continuing insurance long before the cargo
even loaded on board; and that Jardine Davies cannot set up any
defect in the insurance policy as a defense since it is not privy to the
contract of insurance between it (petitioner) and LMG.
Issue: WON respondents have the right to scrutinize the contents of the
policy for the purpose of determining the terms of its validity or effectivity
 
 Ruling: yes
Given that it is respondents who stand to be prejudiced by any claims for
restitution arising from petitioner's right of subrogation under the open
policy, it is, at best specious to insist that they are barred from invoking
any contractual defect as a defense under the pretext that they were not
privy to the insurance contract.
Recall that petitioner's main cause of action under the complaint was
based on both the Marine Risk Note and the Open Policy. The Marine
Risk Note, however, is not the insurance policy. It merely constitutes an
acknowledgment or declaration of the shipper about the specific
shipment covered by the marine insurance policy, the evaluation of the
cargo and the chargeable premium. The marine open policy is the
blanket insurance to be undertaken by the insurer on all goods to be
shipped by the consignee during the existence of the contract.
Apart from not being a legal source of subrogation, the Marine Risk Note
is invalid for, as earlier stated, it was issued only on July 20, 1994 or after
the main insurance contract had already lapsed (by the end of December
1993), and the insurance premium on this risk note was paid only on
October 6, 1994 or a month after the shipment had already arrived in
Manila, a peculiarity that none of petitioner's witnesses has endeavored
to explain.
  
Note:
In the absence of clear, convincing and competent evidence to prove that
the cargo indeed weighed, albeit the Bill of Lading qualified it by the
phrase "said to weigh", 6,599.23 MT at the port of origin when it was
loaded onto the MV Hoegh, the fact of loss or shortage in the cargo upon
its arrival in Manila cannot be definitively established. The legal basis for
attributing liability to either of the respondents is thus sorely wanting.DCcSHE

 
 

2. 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. 
FACTS:

·            Petitioner imported some lactose crystalsfrom Holland. The importation involved 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. 
·            The goods were insuredby the respondent Filipino Merchants' Insurance Co., Inc.
for the sum of P98,882.35 plus 50% mark-up 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. 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.

·            Petitioner filed a claim for said loss against respondent insurance company in the
amount of P33,117.63 as the insured value of the loss. 

·            Respondent insurance company rejected the claimalleging that:

            A. 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 
            B. 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. 
·            The survey reportsof the Worldwide Marine Survey Corporation (vessel surveyor)
and the Adjustment Corporation of the Philippines (protective survey caused by
respondent) for which the insurance company was bound states that during the turn-over
of the contents delivery from the cargo sea van, 403 bags were bursted and/or torn,
opened on one end, contents partly spilled.
·            In its letter to petitioner, respondent insurance company admitted in no uncertain
terms the aforesaid survey report which is in itself is sufficient proof of loss or damage to
the cargo.
·            The Tally sheet is undoubtedly important and binding to 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 bad order certificate issued by the arrastre
operator, indicating that there was no damage to the cargo van. However, the clean tally
sheet is no evidence of the condition of the cargo therein contained.
CA: Insurance company not liable because appellant failed to prove that the alleged
damage was due to risks connected with navigation or such “perils of the sea” that
renders insurer liable. There must, in order to make the insurer liable be “some
casualty”, something w/c could not be foreseen as one of the necessary incidents of the
adventure. Moreover, that under an “all risk” marine policy, there must as a general rule
be a fortuitous event in order to impose liability to the insurer; losses occasioned by
ordinary circumstances or wear and tear are not covered.
 
ISSUE: WON the appellee insurance company can be held liable for the cargo in
question insured in an “against all risk policy” 
 
HELD: YES
·            In Gloren Inc. vs. Filipinas Cia. de Seguros,it was held that an all risk
insurancepolicy 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. 

3. [G.R. No. 119599. March 20, 1997]

MALAYAN INSURANCE CORPORATION, Petitioner, v. THE HON. COURT OF APPEALS and
TKC MARKETING CORPORATION, Respondents.

Facts:
TKC Marketing imported 3,189.171  metric tons of soya from Brazil to Manila. It was insured
by Malayan at the value of almost 20 million pesos. 

The vessel, however, was stranded on South Africa because of a lawsuit regarding the
possession of the soya. TKC consulted Malayan on recovery of the amount, but the latter
claimed that it wasn’t covered by the policy.

 The soya was sold in Africa for Php 10 million, but TKC wanted Malayan to shoulder the
remaining value of 10 million as well.
Petitioner filed suit due to Malayan’s reticence to pay. Malayan claimed that arrest by civil
authorities wasn’t covered by the policy. 

The trial court ruled in TKC’s favor with damages to boot. The appellate court affirmed the
decision under the reason that clause 12 of the policy regarding an excepted risk due to arrest
by civil authorities was deleted by Section 1.1 of the Institute War Clauses which covered
ordinary arrests by civil authorities. Failure of the cargo to arrive was also covered by the Theft,
Pilferage, and Non-delivery Clause of the contract. Hence this petition.

Issue:
WON the arrest of the vessel was a risk covered under the subject insurance policies

Held:

The resolution of this controversy hinges on the interpretation of the "Perils" clause
of the subject policies in relation to the excluded risks or warranty specifically
stated therein.
By way of a historical background, marine insurance developed as an all-risk
coverage, using the phrase "perils of the sea" to encompass the wide and varied
range of risks that were covered. The subject policies contain the "Perils" clause
3

which is a standard form in any marine insurance policy. Said clause reads:
"Touching the adventures which the said MALAYAN INSURANCE CO., are content to
bear, and to take upon them in this voyage; they are of the Seas; Men-of-War,
Fire, Enemies, Pirates, Rovers, Thieves, Jettisons, Letters of Mart and Counter Mart,
Suprisals, Takings of the Sea, Arrests, Restraints and Detainments of all Kings,
Princess and Peoples, of what Nation, condition, or quality soever, Barratry of the
Master and Mariners, and of all other Perils, Losses, and Misfortunes, that have
come to hurt, detriment, or damage of the said goods and merchandise or any part
thereof. 
Section 12 or the "Free from Capture & Seizure Clause" states:  "Warranted free of capture, seizure,
arrest, restraint or detainment, and the consequences thereof or of any attempt thereat… Should
Clause 12 be deleted, the relevant current institute war clauses shall be deemed to form part of this
insurance.”
 
This was really replaced by the subsection 1.1 of section 1 of Institute War Clauses (Cargo) which
included “the risks excluded from the standard form of English Marine Policy by the clause
warranted free of capture, seizure, arrest, restraint or detainment, and the consequences thereof of
hostilities or warlike operations, whether there be a declaration of war or not.”
 
The petitioner’s claim that the Institute War Clauses can be operative in case of hostilities or warlike
operations on account of its heading "Institute War Clauses" is not tenable.
 
Petitioner cannot adopt the argument that the "arrest" caused by ordinary judicial
process is not included in the covered risk simply because the F.C. & S. Clause
under the Institute War Clauses can only be operative in case of hostilities or
warlike operations on account of its heading "Institute War Clauses."
 
This Court cannot agree with petitioner's assertions, particularly when it alleges
that in the "Perils" Clause, it assumed the risk of arrest caused solely by executive
or political acts of the government of the seizing state and thereby excludes
"arrests" caused by ordinary legal processes, such as in the instant case.
 
If a marine insurance company desires to limit or restrict the operation of
the general provisions of its contract by special proviso, exception, or
exemption, it should express such limitation in clear and unmistakable
language. Obviously, the deletion of the F.C. & S. Clause and the
13

consequent incorporation of subsection 1.1 of Section 1 of the Institute War

Clauses (Cargo) gave rise to ambiguity. If the risk of arrest occasioned by
ordinary judicial process was expressly indicated as an exception in the
subject policies, there would have been no controversy with respect to the
interpretation of the subject clauses. MARINE INSURANCE

[G.R. No. 181300. September 18, 2009.]

MALAYAN INSURANCE CO., INC., petitioner, vs. JARDINE

DAVIES TRANSPORT SERVICES, INC. and ASIAN TERMINALS,
INC., respondents.

On July 23, 1994, Petrosul International (Petrosul) shipped on board the

vessel "MV Hoegh Merchant" (MV Hoegh) from Vancouver, Canada
yellow crude sulphur "said to weigh 6,599.23 metric tons as per draft
survey" for transportation to Manila, consigned to LMG Chemicals
Corporation (LMG). 

Upon arrival of the MV Hoegh in Manila, the stevedores of respondent

Asian Terminals, Inc. (ATI) undertook discharging operations of the
shipment or cargo from the vessel.

During the discharge of the cargo "ex vessel", differences in shipment

quantity at various stages of transit was recorded.

The cargo having been insured, LMG filed a claim for the value of shortage
of cargo with its insurer Malayan Insurance Co., Inc., (petitioner) which
paid LMG the sum of P1,144,108.43 and was accordingly subrogated to
the rights of LMG.

ATI denied any liability for the value of the loss of part of the cargo,
claiming that it had exercised due care and diligence while Jardine
Davies claimed that it was not the shipagent of the MV Hoegh but a mere
commercial agent.
Petitioner points out, however, that the shipment was covered not only by
the Marine Risk Note but also by Open Marine Insurance Policy which, it
explains, means that the value of the thing insured has not been
agreed upon but left to be ascertained in the event of loss and,
therefore, covered by a continuing insurance long before the cargo
even loaded on board; and that Jardine Davies cannot set up any
defect in the insurance policy as a defense since it is not privy to the
contract of insurance between it (petitioner) and LMG.
Issue: WON respondents have the right to scrutinize the contents of the
policy for the purpose of determining the terms of its validity or effectivity
 
Ruling: yes
Given that it is respondents who stand to be prejudiced by any claims for
restitution arising from petitioner's right of subrogation under the open
policy, it is, at best specious to insist that they are barred from invoking
any contractual defect as a defense under the pretext that they were not
privy to the insurance contract.
Recall that petitioner's main cause of action under the complaint was
based on both the Marine Risk Note and the Open Policy. The Marine
Risk Note, however, is not the insurance policy. It merely constitutes an
acknowledgment or declaration of the shipper about the specific
shipment covered by the marine insurance policy, the evaluation of the
cargo and the chargeable premium. The marine open policy is the
blanket insurance to be undertaken by the insurer on all goods to be
shipped by the consignee during the existence of the contract.
Apart from not being a legal source of subrogation, the Marine Risk Note
is invalid for, as earlier stated, it was issued only on July 20, 1994 or after
the main insurance contract had already lapsed (by the end of December
1993), and the insurance premium on this risk note was paid only on
October 6, 1994 or a month after the shipment had already arrived in
Manila, a peculiarity that none of petitioner's witnesses has endeavored
to explain.
  
Note:
In the absence of clear, convincing and competent evidence to prove that
the cargo indeed weighed, albeit the Bill of Lading qualified it by the
phrase "said to weigh", 6,599.23 MT at the port of origin when it was
loaded onto the MV Hoegh, the fact of loss or shortage in the cargo upon
 its arrival in Manila cannot be definitively established. The legal basis for
attributing liability to either of the respondents is thus sorely wanting. DCcSHE

 
 

2. 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. 
FACTS:

·            Petitioner imported some lactose crystalsfrom Holland. The importation involved 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. 
·            The goods were insuredby the respondent Filipino Merchants' Insurance Co., Inc.
for the sum of P98,882.35 plus 50% mark-up 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. 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.

·            Petitioner filed a claim for said loss against respondent insurance company in the
amount of P33,117.63 as the insured value of the loss. 

·            Respondent insurance company rejected the claimalleging that:

            A. 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 
            B. 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. 
·            The survey reportsof the Worldwide Marine Survey Corporation (vessel surveyor)
and the Adjustment Corporation of the Philippines (protective survey caused by
respondent) for which the insurance company was bound states that during the turn-over
of the contents delivery from the cargo sea van, 403 bags were bursted and/or torn,
opened on one end, contents partly spilled.
 ·            In its letter to petitioner, respondent insurance company admitted in no uncertain
terms the aforesaid survey report which is in itself is sufficient proof of loss or damage to
the cargo.
·            The Tally sheet is undoubtedly important and binding to 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 bad order certificate issued by the arrastre
operator, indicating that there was no damage to the cargo van. However, the clean tally
sheet is no evidence of the condition of the cargo therein contained.
CA: Insurance company not liable because appellant failed to prove that the alleged
damage was due to risks connected with navigation or such “perils of the sea” that
renders insurer liable. There must, in order to make the insurer liable be “some
casualty”, something w/c could not be foreseen as one of the necessary incidents of the
adventure. Moreover, that under an “all risk” marine policy, there must as a general rule
be a fortuitous event in order to impose liability to the insurer; losses occasioned by
ordinary circumstances or wear and tear are not covered.
 
ISSUE: WON the appellee insurance company can be held liable for the cargo in
question insured in an “against all risk policy” 
 
HELD: YES
·            In Gloren Inc. vs. Filipinas Cia. de Seguros,it was held that an all risk
insurancepolicy 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. 
3. [G.R. No. 119599. March 20, 1997]
MALAYAN INSURANCE CORPORATION, Petitioner, v. THE HON. COURT OF APPEALS and
TKC MARKETING CORPORATION, Respondents.

Facts:
TKC Marketing imported 3,189.171  metric tons of soya from Brazil to Manila. It was insured
by Malayan at the value of almost 20 million pesos. 

The vessel, however, was stranded on South Africa because of a lawsuit regarding the
possession of the soya. TKC consulted Malayan on recovery of the amount, but the latter
claimed that it wasn’t covered by the policy.

 The soya was sold in Africa for Php 10 million, but TKC wanted Malayan to shoulder the
remaining value of 10 million as well.

Petitioner filed suit due to Malayan’s reticence to pay. Malayan claimed that arrest by civil
authorities wasn’t covered by the policy. 

The trial court ruled in TKC’s favor with damages to boot. The appellate court affirmed the
decision under the reason that clause 12 of the policy regarding an excepted risk due to arrest
by civil authorities was deleted by Section 1.1 of the Institute War Clauses which covered
ordinary arrests by civil authorities. Failure of the cargo to arrive was also covered by the Theft,
Pilferage, and Non-delivery Clause of the contract. Hence this petition.

Issue:
WON the arrest of the vessel was a risk covered under the subject insurance policies

Held:

The resolution of this controversy hinges on the interpretation of the "Perils" clause
of the subject policies in relation to the excluded risks or warranty specifically
stated therein.
By way of a historical background, marine insurance developed as an all-risk
coverage, using the phrase "perils of the sea" to encompass the wide and varied
range of risks that were covered. The subject policies contain the "Perils" clause
3

which is a standard form in any marine insurance policy. Said clause reads:
"Touching the adventures which the said MALAYAN INSURANCE CO., are content to
bear, and to take upon them in this voyage; they are of the Seas; Men-of-War,
Fire, Enemies, Pirates, Rovers, Thieves, Jettisons, Letters of Mart and Counter Mart,
Suprisals, Takings of the Sea, Arrests, Restraints and Detainments of all Kings,
Princess and Peoples, of what Nation, condition, or quality soever, Barratry of the
Master and Mariners, and of all other Perils, Losses, and Misfortunes, that have
come to hurt, detriment, or damage of the said goods and merchandise or any part
thereof. 
Section 12 or the "Free from Capture & Seizure Clause" states:  "Warranted free of capture, seizure,
arrest, restraint or detainment, and the consequences thereof or of any attempt thereat… Should
Clause 12 be deleted, the relevant current institute war clauses shall be deemed to form part of this
insurance.”
 
This was really replaced by the subsection 1.1 of section 1 of Institute War Clauses (Cargo) which
included “the risks excluded from the standard form of English Marine Policy by the clause
warranted free of capture, seizure, arrest, restraint or detainment, and the consequences thereof of
hostilities or warlike operations, whether there be a declaration of war or not.”
 
The petitioner’s claim that the Institute War Clauses can be operative in case of hostilities or warlike
operations on account of its heading "Institute War Clauses" is not tenable.
 
Petitioner cannot adopt the argument that the "arrest" caused by ordinary judicial
process is not included in the covered risk simply because the F.C. & S. Clause
under the Institute War Clauses can only be operative in case of hostilities or
warlike operations on account of its heading "Institute War Clauses."
 
This Court cannot agree with petitioner's assertions, particularly when it alleges
that in the "Perils" Clause, it assumed the risk of arrest caused solely by executive
or political acts of the government of the seizing state and thereby excludes
"arrests" caused by ordinary legal processes, such as in the instant case.
 
If a marine insurance company desires to limit or restrict the operation of the
general provisions of its contract by special proviso, exception, or exemption, it
should express such limitation in clear and unmistakable language. Obviously, the 13

deletion of the F.C. & S. Clause and the consequent incorporation of subsection 1.1
of Section 1 of the Institute War Clauses (Cargo) gave rise to ambiguity. If the risk
of arrest occasioned by ordinary judicial process was expressly indicated as an
exception in the subject policies, there would have been no controversy with
respect to the interpretation of the subject clauses.

4. G.R. No. 171468

NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC. vs. NYK-FILJAPAN SHIPPING

CORP., et. al.

G.R. No. 174241

NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC. vs. SEABOARD-EASTERN

INSURANCE CO., INC.

FACTS:

Petitioner New World bought from DMT through its agent, Advatech three emergency generator
sets worth US$721,500.00.
These generator sets were shipped first by truck by DMT to LEP Profit in and then shipped by train and
loaded on a vessel owned and operated by NYK for delivery to petitioner New World in Manila.
NYK unloaded the shipment in Hong Kong and transshipped it to ACX Ruby that it also owned and
operated. On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang whose captain
filed a sea protest on arrival at the Manila South Harbor respecting the loss and damage that the goods
on board his vessel suffered.
Marina, the Manila South Harbor arrastre or cargo-handling operator, received the shipment on October
7, 1993. Upon inspection of the three container vans separately carrying the generator sets, two vans
bore signs of external damage while the third van appeared unscathed.
An examination of the three generator sets in the presence of petitioner New World's representatives,
Federal Builders (the project contractor) and surveyors of petitioner New World's insurer, Seaboard,
revealed that all three sets suffered extensive damage and could no longer be repaired. For these
reasons, New World demanded recompense for its loss from respondents NYK, DMT, Advatech, LEP
Profit, LEP, Marina, and Serbros. While LEP and NYK acknowledged receipt of the demand, both
denied liability for the loss.
Since Seaboard covered the goods with a marine insurance policy, petitioner New World sent it a
formal claim. Replying, Seaboard required petitioner New World to submit to it an itemized list of the
damaged units, parts, and accessories, with corresponding values, for the processing of the claim. But
petitioner New World did not submit what was required of it, insisting that the insurance policy did not
include the submission of such a list in connection with an insurance claim. Reacting to this, Seaboard
refused to process the claim.
Petitioner New World filed an action for specific performance and damages against all the respondents
before the RTC.
 
RULINGS:
RTC rendered a decision absolving the various respondents from liability with the exception of NYK as
it found that the generator sets were damaged during transit while in the care of NYK's vessel and that
the latter failed to exercise the degree of diligence required of it in the face of a foretold raging typhoon
in its path.
RTC ruled that petitioner filed its claim against the vessel owner NYK beyond the one year provided
under the Carriage of Goods by Sea Act (COGSA).
As regards petitioner New World's claim against Seaboard, its insurer, the RTC held that the latter
cannot be faulted for denying the claim against it since New World refused to submit the itemized list
that Seaboard needed for assessing the damage to the shipment.
CA rendered judgment affirming the RTC's rulings except with respect to Seaboard's liability. The CA
held that petitioner New World can still recoup its loss from Seaboard's marine insurance policy.
CA rendered an amended decision, reversing itself as regards the claim against Seaboard. The CA
held that the submission of the itemized listing was a reasonable requirement that Seaboard asked of
New World. Further, the CA held that the one-year prescriptive period for maritime claims applied to
Seaboard, as insurer and subrogee of New World's right against the vessel owner. New World's failure
to comply promptly with what was required of it prejudiced such right.
 
ISSUES:
1.      Whether or not the CA erred in affirming the RTC's release from liability of respondents
DMT, Advatech, LEP, LEP Profit, Marina, and Serbros who were at one time or another
involved in handling the shipment?
Yes, for although the loss was occasioned by a typhoon, an exempting cause under Article
1734 of the Civil Code, it does not automatically relieve the common carrier of liability.
The latter had the burden of proving that the typhoon was the proximate and only cause of
loss and that it exercised due diligence to prevent or minimize such loss before, during, and after the
disastrous typhoon. As found by the RTC and the CA, NYK failed to discharge this burden.
 
 2.      Whether or not the CA erred in ruling that Seaboard's request from petitioner New World
for an itemized list is a reasonable imposition and did not violate the insurance contract
between them?
Yes, the CA erred as there is no substantial reason for Seaboard's additional requirement of
an itemized listing of the damage that the generator sets suffered.
The marine open policy that Seaboard issued to New World was an all-risk policy. Such a
policy insured against all causes of conceivable loss or damage except when otherwise
excluded or when the loss or damage was due to fraud or intentional misconduct committed by
the insured. The policy covered all losses during the voyage whether or not arising from a
marine peril. 
Here, the policy enumerated certain exceptions like unsuitable packaging, inherent vice,
delay in voyage, or vessels unseaworthiness, among others.  But Seaboard had been unable to
show that petitioner New World's loss or damage fell within some or one of the enumerated
exceptions.
Therefore, Seaboard cannot pretend that the above documents are inadequate since they
were precisely the documents listed in its insurance policy.  Being a contract of adhesion, an
insurance policy is construed strongly against the insurer who prepared it. The Court cannot
read a requirement in the policy that was not there.
 
3.  Whether or not the CA erred in failing to rule that the one-year COGSA prescriptive
   
period for marine claims does not apply to petitioner New World's prosecution of its
claim against Seaboard, its insurer?
 
Yes, as it was Seaboard who had made an unreasonable demand of an itemized list
which its insurance policy did not require the production of such list.
Section 241 of the Insurance Code provides that no insurance company doing business
in the Philippines shall refuse without just cause to pay or settle claims arising under coverages
provided by its policies. And, under Section 243, the insurer has 30 days after proof of loss is
received and ascertainment of the loss or damage within which to pay the claim. If such
ascertainment is not had within 60 days from receipt of evidence of loss, the insurer has 90
days to pay or settle the claim. And, in case the insurer refuses or fails to pay within the
prescribed time, the insured shall be entitled to interest on the proceeds of the policy for the
duration of delay at the rate of twice the ceiling prescribed by the Monetary Board.
In the ordinary course, if Seaboard had processed that claim and paid the same,
Seaboard would have been subrogated to petitioner New World's right to recover from NYK.
And it could have then filed the suit as a subrogee however as it was Seaboard that made an
unreasonable demand of an itemized list not stated in its policy thus it was liable to pay New
World its insurance policy as well as interest for its delay in payment.

5. [G.R. No. 76145. June 30, 1987.]

CATHAY INSURANCE CO., petitioner, vs. HON. COURT OF APPEALS, and REMINGTON
INDUSTRIAL SALES CORPORATION, respondents.

Facts: 
Remington originally filed a complaint against Cathay, seeking collection of the sum of
P868,339.15 which allegedly represents the losses and damages it sustained in a shipment of
seamless steel pipes under an insurance contract in its favor. The damage was allegedly
acquired while in transit from Japan to Philippines on board SS Eastern Mariner. According to
respondent Remington, its loss is covered by the insurance issued by petitioner Cathay, that
rust is not an inherent vice of the seamless steel pipes without interference of external factors
and that the placing of notation "rusty" in the way bills is not only its right but a natural and
spontaneous reaction of whoever received the seamless steel pipes in a rusty condition at its
bodega. It also claimed that insurance policies are regarded with extreme caution by courts and
are to be strictly construed against the insurer; obscure phrases and exceptions should not be
allowed to defeat the very purpose for which the policy was procured.

On the other hand, petitioner contends that Remington admitted that the questioned shipment is
not covered by a "square provision of the contract," but private respondent claims implied
coverage from the phrase "perils of the sea" mentioned in the opening sentence of the policy.
Cathay also claimed that rusting is not considered peril in the sea nor and that Remington
inaccurately invokes the rule of strict construction against insurer under the guise of
construction in order to impart a non-existing ambiguity or doubt into the
policy so as to resolve it against the insurer. Ultimately, Cathay claimed that Rusting is not a risk
insured against, since a risk to be insured against should be a casualty or some casualty,
something which could not be foreseen as one of the necessary incidents of adventure and that
the rusting is an inherent vice or in the nature of steel pipes.

RTC: 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: W/N the insurer Cathay is liable.

Yes. The SC held 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. Moreover, 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. 

Be it noted that any attack of the 15-day clause in the policy was foreclosed right in the pre-trial
conference.

6. 6- CEBU SHIPYARD AND ENGINEERING WORKS, INC., petitioner, vs.

WILLIAM LINES, INC. and PRUDENTIAL GUARANTEE and ASSURANCE
COMPANY, INC., respondents.

Facts:

William Lines was insured with Prudential for P45M for hull and machinery. The Hull
Policy included an “Additional Perils” clause covering loss or damage to the vessel
through negligence of, among others, ship repairmen.

Petitioner was also insured by Prudential for third party liability under a
Shiprepairer’s Legal Liability limiting the insurance to P10M.
William Lines brought M/V Manila City to Cebu Shipyard for annual dry-docking and
repair, covered by a Work Order contract between CSEW and William

After vessel was transferred to docking quay, it caught fire and sank, resulting to
eventual total loss.

William Lines filed a complaint for damages against CSEW alleging that the fire was
caused by CSEW’s negligence and lack of care. Thereafter William impleaded
Prudential after latter paid William.

Prudential was subrogated to the claim of P45M representing value of insurance

paid.

Court rendered judgment in favor of Prudential P45 and William damages and
losses.

CSEW appealed. CSEW and Williams presented a Joint Motion for Partial Dismissal
on the basis of amicable settlement between CSEW and William Lines only. Court
granted partial dismissal and denied appeal in relation to Prudential.

Issue: WON the shiprepairer (CSWE), having benefited from the contract,
automatically make it as a co-assured of the Respondent.

Held: No, the intention of the parties to make each other a co-assured under an
insurance policy is to be gleaned principally from the insurance contract or policy
itself and not from any other contract or agreement because the insurance policy
itself denominates the assured and beneficiaries of the insurance.

Clause 20 of the Work Order in question is clear in the sense that it requires William
Lines to maintain insurance on the vessel during the period of dry-docking or
repair. Concededly, such a stipulation works to the benefit of CSEW as the
shiprepairer.

However, the fact that CSEW benefits from the said stipulation does not
automatically make it as a co-assured of William Lines. The intention of the parties
to make each other a co-assured under an insurance policy is to be gleaned
principally from the insurance contract or policy itself and not from any other
contract or agreement because the insurance policy denominates the assured and
the beneficiaries of the insurance.

The hull and machinery insurance procured by William Lines, Inc. from Prudential
named only "William Lines, Inc." as the assured. There was no manifestation of any
intention of William Lines, Inc. to constitute CSEW as a co-assured under subject
policy. It is axiomatic that when the terms of a contract are clear its stipulations
control.

Thus, when the insurance policy involved named only William Lines, Inc. as the
assured thereunder, the claim of CSEW that it is a co-assured is unfounded.
7. G.R. No. 13983           September 1, 1919
LA RAZON SOCIAL "GO TIAOCO Y HERMANOS," plaintiff-appellant,
vs.
UNION INSURANCE SOCIETY OF CANTON, LTD., defendant-appellee.
FACTS:
A marine insurance policy was issued by defendant to the plaintiffs upon a cargo of rice, transported
on the steamship Hondagua, from Saigon to Cebu.
On discharging the rice from one of the compartments, upon arrival at Cebu, it was discovered that
1,473 sacks and been damages by sea water resulting to a loss of P3,875.25.
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. The joint or elbow where the pipe changed its direction had become
corroded, due to ordinary wear and tear, an opening had appeared, which was of existence before
the voyage has begun.
That though cement-filling was done as a repair, it was slovenly and defective, and the rising of the
sea water in the pipes resulted to the washing out of the cement-filling, permitting the continuous
flow of salt water into the compartment of rice.
The court held that the ship was unseaworthy and not equipped to receive the rice at the time the
voyage was begun, it concluded that the loss was not covered by the policy of insurance. Judgment
was accordingly entered in favor of the defendant and the plaintiffs appealed.
ISSUE: WON the insurer is liable under the marine insurance policy for the loss caused in
the manner stated in this case.
RULING:     NO, the insurer is not liable.
Maritime insurance 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."
"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.
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."
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.
By parity of reasoning the insurer is not liable; The shipowner excepts the perils of the sea from his
engagement under the bill of lading, while this is the very peril against which the insurer intends to
give protection. As applied to the present case it results that the owners of the damages rice must
look to the shipowner for redress and not to the insurer.

8. ISABELA ROQUE, doing business under the name and style of Isabela Roque Timber
Enterprises and ONG CHIONG
vs. HON. INTERMEDIATE APPELATE COURT and PIONEER INSURANCE AND SURETY
CORPORATION.
G.R. No. L-66935 November 11, 1985
 
FACTS: Manila Bay Lighterage Corporation, 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. The
petitioners loaded on the barge, 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.
 
The petitioners wrote a letter to Manila Bay demanding payment of P150,000.00 for the loss of the
shipment plus P100,000.00 as unrealized profits but the latter ignored the demand. Another letter was sent
to respondent Pioneer claiming the full amount of P100,000.00 under the insurance policy but respondent
refused to pay. Hence, petitioners commenced Civil Case No. 86599 against Manila Bay and respondent
Pioneer.
 
The Trial Court ruled in favor of the petitioners. Respondent Pioneer appealed, Manila Bay did not; for as
according to the petitioners, the transportation company is no longer doing business and is without funds.
The appellate court modified the trial court's decision and 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". It ruled
that the loss is not covered by the marine insurance policy.
 
ISSUE: Whether or not the loss is covered by the marine insurance policy.
 
RULING: The court ruled in the negative.
 
The petitioners state that a mere shipper of cargo, having no control over the ship, has nothing to do with
its seaworthiness. This argument has no merit.
 
The liability of the insurance company is governed by law. Section 113 of the Insurance Code provides:
In every marine insurance upon a ship or freight, or freightage, or upon 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. 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. 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.
9. [G.R. No. 127897. November 15, 2001.]
 DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON.
COURT OF APPEALS and AMERICAN HOME ASSURANCE
CORPORATION, respondents.

Caltex Philippines entered into a contract of affreightment with the

petitioner, Delsan Transport Lines, Inc., for a period of one year whereby the said
common carrier agreed to transport Caltex's industrial fuel oil from the Batangas-
Bataan Refinery to different parts of the country. The shipment was insured with
the private respondent, American Home Assurance Corporation.

On August 14, 1986, petitioner's vessel, the MT Maysun, set sail from
Batangas for Zamboanga City. Unfortunately, the vessel sank. Private
respondent paid Caltex the insured value of the lost cargo. Exercising its
right of subrogation, the private respondent demanded of the petitioner the
same amount it paid to Caltex. Due to its failure to collect from the petitioner
despite prior demand, private respondent filed a complaint for collection of a sum
of money.

The trial court rendered a decision dismissing the complaint and found that
the vessel, MT Maysun, was seaworthy to undertake the voyage and that the
incident was caused by unexpected inclement weather condition or force
majeure, thus exempting petitioner from liability for the loss of its cargo.
The decision of the trial court, however, was reversed by the CA,  stating that in
the absence of any explanation as to what may have caused the sinking of the
vessel coupled with the finding that the same was improperly manned, the
petitioner is liable on its obligation as common carrier  to private respondent
insurance company as subrogee of Caltex.

Petitioner invokes the provision of Section 113 of the Insurance Code of

the Philippines, which states that in every marine insurance upon a ship or
freight, or freightage, or upon any thing which is the subject of marine insurance
there is an implied warranty by the shipper that the ship is seaworthy which
extends to the vessel's complement and theorized 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 latter's
breach of implied warranty under the marine insurance policy that the vessel was
seaworthy.

Issue: WON the payment of the insured value of the lost cargo is an automatic
admission of the vessel’s seaworthiness

Ruling: NO
 The payment made by the private respondent for the insured value of
the lost cargo operates as a waiver of private respondent's right to enforce
the term of the implied warranty against Caltex under the marine insurance
policy. However, the same cannot be validly interpreted as an automatic
admission of the vessel's seaworthiness by the private respondent as to
foreclose recourse against the petitioner for any liability under its contractual
obligation as a common carrier. The fact of payment grants the private
respondent subrogatory right which enables it to exercise legal remedies
that would otherwise be available to Caltex as owner of the lost cargo
against the petitioner common carrier.

Note:

The right of subrogation is not dependent upon, nor does it grow out of,
any privity of contract or upon written assignment of claim. It accrues
simply upon payment by the insurance company of the insurance claim.
Consequently, the payment made by the private respondent (insurer) to Caltex
(assured) operates as an equitable assignment to the former of all the remedies
which the latter may have against the petitioner.

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.