Marine Insurance
Claims recoverable hereunder
CHOA TIEK SENG vs. HON. COURT OF APPEALS, FILIPINO MERCHANTS' INSURANCE
COMPANY, INC., BEN LINES CONTAINER, LTD. AND E. RAZON, INC.
Facts: Petitioner imported some lactose crystals from Holland. The goods were loaded at the
port at Rotterdam in sea vans on board the vessel "MS Benalder' and thereafter another
vessel "Wesser Broker V-25" of respondent Ben Lines Container, Ltd.
The goods were insured by the respondent Filipino Merchants' Insurance Co., Inc., against all
risks under the terms of the insurance cargo policy. Upon arrival at the port of Manila, the
cargo was discharged only to find out that of the 600 bags delivered to petitioner, 403 were in
bad order. The surveys showed that the bad order bags suffered spillage. (take not of the
cause of damage)
Petitioner filed a claim for the loss against respondent insurance company.
Both RTC and CA favor the respondent insurance on the following ground:
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. (so since the spillage is not cause by perils
of sea, then respondent Insurance is not liable)
Issue: Respondent Court erred in holding That An "All Risks" Coverage covers only losses
occasioned by or Resulting From "Extra And Fortuitous Events".
(meaning only perils by the sea are covered, which spillage is not one)
Ruling:
(Take note that the policy here is “all risk policy)
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.
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.
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.
G.R. No. 94052 August 9, 1991
ORIENTAL ASSURANCE CORPORATION, petitioner, vs.COURT OF APPEALS AND PANAMA
SAW MILL CO., INC., respondents.
FACTS:
An action to recover on a marine insurance policy, issued by petitioner in favor of
private respondent, arising from the loss of a shipment of apitong logs from Palawan to
Manila.
Sometime in January 1986, private respondent Panama Sawmill Co., Inc. (Panama)
bought, in Palawan, 1,208 pieces of apitong logs, with a total volume of 2,000 cubic meters. It
hired Transpacific Towage, Inc., to transport the logs by sea to Manila and insured it against
loss for P1-M with petitioner Oriental Assurance Corporation (Oriental Assurance). There is a
claim by Panama, however, that the insurance coverage should have been for P3-M were it
not for the fraudulent act of one Benito Sy Yee Long to whom it had entrusted the amount of
P6,000.00 for the payment of the premium for a P3-M policy.
The logs were loaded on two (2) barges: (1) on barge PCT-7000,610 pieces of logs
with a volume of 1,000 cubicmeters; and (2) on Barge TPAC-1000, 598 pieces of logs, also
with a volume of 1,000 cubic meters.
On 28 January 1986, the two barges were towed by one tug-boat. During the
voyage, rough seas and strong winds caused damage to Barge TPAC-1000 resulting in the loss
of 497 pieces of logs out of the 598 pieces loaded. Panama demanded payment for the loss
but Oriental Assurance refuse on the ground that its contracted liability was for "TOTAL LOSS
ONLY." RTC and CA rendered a decision ordering petitioner to pay Panama.
Both Courts shared the view that the insurance contract should be liberally
construed in order to avoid a denial of substantial justice; and that the logs loaded in the two
barges should be treated separately such that the loss sustained by the shipment in one of
them may be considered as "constructive total loss" and correspondingly compensable.
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 liability attaches.
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.
More importantly, the insurer's liability was for "total loss only." A total loss may be
either actual or constructive (Sec. 129, Insurance Code). An actual total loss 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. (Section 130, Insurance Code).
A constructive total loss is one which gives to a person insured a right to abandon, under
Section 139 of the Insurance Code. This provision reads:
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;
CA treated the loss a constructive loss. The requirements for the application of
Section 139 of the Insurance Code, quoted above, have not been met. The logs involved,
although placed in two barges, were not separately valued by the policy, nor separately
insured. The logs having been insured as one inseparable unit, the correct basis for
determining the existence of constructive total loss is the totality of the shipment of logs. In
the absence of either actual or constructive total loss, there can be no recovery by the
insured Panama against the insurer, Oriental Assurance. The judgment under review is hereby
SET ASIDE and petitioner, Oriental Assurance Corporation, is hereby ABSOLVED from liability
under its marine insurance policy
G.R. No. L-66935 November 11, 1985
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.
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 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 cannot
be guarded against by the ordinary exertion of 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.
Filipino Merchants Insurance Co. V. CA (1989)
G.R. No. 85141 November 28, 1989
FACTS:
 Choa Tiek Seng, consignee of the shipment of fishmeal loaded, insured in "all risks
policy" 600 metric tons of fishmeal in new gunny bags of 90 kilos each from Bangkok,
Thailand to Manila against all risks under warehouse to warehouse terms but
only 59.940 metric tons was imported
 When it was unloaded unto the arrastre contractor E. Razon, Inc. and Filipino
Merchants's surveyor ascertained and certified that in such discharge 105 bags were in
bad order condition which was reflected in the survey report of Bad Order cargoes
 Before delivery to Choa, E. Razon's Bad Order Certificate showed that a total of 227
bags in bad order condition
 Choa brought an action against Filipino Merchants Insurance Co. who brought a
third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E.
Razon, Inc.
 RTC: Ordered Filipino Merchants to pay Choa and reimbursefrom Compagnie
Maritime Des Chargeurs Reunis and third party defendant E. Razon, Inc.
 CA: Affirmed but modified by adjudicating the third party complaint
 Filipino Merchants contended that Chao has no insurable interest and
therefore the policy should be void and that it was fraud that it did not disclose of such
fact
ISSUE: W/N Choa Tiek Seng as consignee of the shipment has insurable interest
HELD: YES. CA affirmed.
 GR: the burden of proof is upon the insured to show that a loss arose from a
covered peril, but under an "all risks" policy the burden is not on the insured to prove
the precise cause of loss or damage for which it seeks compensation. The insured under
an "all risks insurance policy" has the initial burden of proving that the cargo was in good
condition when the policy attached and that the cargo was damaged when unloaded
from the vessel; thereafter, the burden then shifts to the insurer to show the exception
to the coverage. - none was shown = liable
 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.
 As vendee/consignee of the goods in transit has such existing interest. 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 be 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.
 Article 1523 of the Civil Code provides that where, in pursuance of a contract of
sale, the seller is authorized or required to send the goods to the buyer, delivery of the
goods to a carrier, whether named by the buyer or not, for, the purpose of transmission
to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said
rule not obtaining in the present case. The Court has heretofore ruled that the delivery
of the goods on board the carrying vessels partake of the nature of actual delivery since,
from that time, the foreign buyers assumed the risks of loss of the goods and paid the
insurance premium covering them
 C & F contracts are shipment contracts. The term means that the price fixed
includes in a lump sum the cost of the goods and freight to the named destination. It
simply means that the seller must pay the costs and freight necessary to bring the goods
to the named destination but the risk of loss or damage to the goods is transferred from
the seller to the buyer when the goods pass the ship's rail in the port of shipment.
 Moreover, the issue of lack of insurable interest was not among the defenses
averred in petitioners answer.
G.R. No. 81026 April 3, 1990
PAN MALAYAN INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, ERLINDA
FABIE AND
HER UNKNOWN DRIVER, respondents.
FACTS:
On December 10, 1985, PANMALAY filed a complaint for damages with the RTC of Makati
against private respondents Erlinda Fabie and her driver. PANMALAY averred the following:
that it insured a Mitsubishi Colt Lancer car with plate No. DDZ-431 and registered in the name
of Canlubang Automotive Resources Corporation [CANLUBANG]; that on May 26, 1985, due
to the "carelessness, recklessness, and imprudence" of the unknown driver of a pick-up with
plate no. PCR-220, the insured car was hit and suffered damages in the amount of
P42,052.00; that PANMALAY defrayed the cost of repair of the insured car and, therefore, was
subrogated to the rights of CANLUBANG against the driver of the pick-up and his employer,
Erlinda Fabie; and that, despite repeated demands, defendants, failed and refused to pay the
claim of PANMALAY. private respondents filed a Motion to Dismiss alleging that PANMALAY
had no cause of action against them. They argued that payment under the "own damage"
clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code, complaint for damages against private respondents is hereby REINSTATED. Let the case be
since indemnification thereunder was made on the assumption that there was no wrongdoer remanded to the lower court for trial on the merits.
or no third party at fault.

DECISION OF LOWER COURTS:

(1) Trial Court: dismissed for no cause of action PANMALAY's complaint for damages against
private respondents Erlinda Fabie and her driver
(2) CA: affirmed trial court.

ISSUE:
Whether or not the insurer PANMALAY may institute an action to recover the amount it had
paid its assured in settlement of an insurance claim against private respondents as the parties
allegedly responsible for the damage caused to the insured vehicle.

RULING:
PANMALAY is correct.
Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the
insured property is destroyed or damaged through the fault or negligence of a party other
than the assured, then the insurer, upon payment to the assured, will be subrogated to the
rights of the assured to recover from the wrongdoer to the extent that the insurer has been
obligated to pay. Payment by the insurer to the assured operates as an equitable that the
insurer has been obligated to pay. Payment by the insurer to the assured operates as an
equitable or negligence of a third party. CANLUBANG is apparently of the same
understanding. Based on a police report assignment to the former of all remedies that the
latter may have against the third party whose negligence or wrongful act caused the loss. 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 of the insurance claim by
the insurer.
The exceptions are:
(1) if the assured by his own act releases the wrongdoer or third party liable for the loss or
damage, from liability, the insurer's right of subrogation is defeated
(2) where the insurer pays the assured the value of the lost goods without notifying the
carrier who has in good faith settled the assured's claim for loss, the settlement is binding on
both the assured and the insurer, and the latter cannot bring an action against the carrier on
his right of subrogation
(3) where the insurer pays the assured for a loss which is not a risk covered by the policy,
thereby effecting "voluntary payment", the former has no right of subrogation against the
third party liable for the loss
None of the exceptions are availing in the present case.
Also, even if under the above circumstances PANMALAY could not be deemed subrogated to
the rights of its assured under Article 2207 of the Civil Code, PANMALAY would still have a
cause of action against private respondents. In the pertinent case of Sveriges Angfartygs
Assurans Forening v. Qua Chee Gan, supra., the Court ruled that the insurer who may have no
rights of subrogation due to "voluntary" payment may nevertheless recover from the third
party responsible for the damage to the insured property under Article 1236 of the Civil
Code.
WHEREFORE, in view of the foregoing, the present petition is GRANTED. Petitioner's