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Mayer Steel Pipe Corp. vs.

CA Case Digest
Mayer Steel Pipe Corp. vs. Court of Apeals G.R. No. 124050. June 19, 1997 Facts: Hongkong Government Supplies Department henceforth, Hong Kong contracted petitioner Mayer Steel Pipe Corp to manufacture and supply various steel pipes and fittings from August to October 1983, Mayer shipped the said items to Hong Kong. Prior to shipment the items were insured against all risks with respondent South Sea Surety and Insurance Co. and Charter Insurance Corp for $212,772.09 with South Sea and $149,470 with Charter. Petitioners jointly appointed Industrial Inspection Inc as 3rd party inspector to examine the items to see if they were in accordance with the contract. They certified it as such prior to shipment. However, when they reached Hong Kong it was revealed that a substantial portion was damaged. Petitioners now claim for damages against the respondents for indemnity under the insurance contract. Respondents paid part of the petitioners demand but declined the rest claiming that the insurance surveyors report allegedly showed that the damage was a factory defect and hence not covered by the insurance policies. The lower court ruled in favor of the petitioner finding the damage not caused by manufacturing defects. It also noted that the insurance contract insured against all risks or all causes of conceivable loss or damage save those caused by fraud or intentional misconduct. At the court of appeals the CA found the all risks provision covered the damage endured but set aside the decision because the complaint had been bared by prescription. Sec 3(6) of the COGSA specifically bared it because it had been more than 1 year since the damage had been done before the demand was made. Held: The cause of action had not yet prescribed. Ratio: Sec 3(6) of the COGSA covers only the liability of the carrier which is extinguished if no suit is brought within a period of one year. However, the liability of the insurer is not extinguished because the COGSA governs the relationship between carrier and shipper, and consignee and insurer. It defines a contract of carriage. The relationship at bar is properly governed by the Insurance code. Thus the CAs finding of prescription as per the COGSA is overturned.