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Digested by: Jamee S. Singco Subject: Insurance Title: Eagle Star Ins. vs. Chia Yu Topic: Insurance olicy ! "imitation to Commence #ction

$acts: #t%in& 'roll ( Co.& loaded on the S. S. )oeph Silverlight o*ned and operated by "eigh +oegh ( Co.& #,S& o- San $rancisco Cali-ornia& ./ bales o- assorted under*ear valued at 0&102.34 consigned to Chia Yu in the City o- 5anila. The shipment *as insured against all ris%s by Eagle Star Ins. Co. o- San $rancisco& Cali-ornia& under a policy issued to the shipper and by the latter assigned to the consignee. 6hen the vessel started discharging its cargo into the custody o- the 5anila Terminal Co.& Inc.& *hich *as then operating the arrastre service -or the 7ureau o- Customs the ./ bales consigned to Chia Yu& only .1 *ere delivered to him as the remaining 4 could not be -ound. Three o- those delivered *ere also -ound damaged to the e8tent o- 21 per cent. Chia Yu claimed indemnity -or the missing and damaged bales. 7ut the claim *as declined& -irst& by the carrier and a-ter*ard by the insurer& *hereupon Chia Yu brought the present action against both& including their respective agents in the hilippines. 5ore than t*o years a-ter delivery o- the damaged bales and the date *hen the missing bales should have been delivered& the action *as resisted by the de-endants principally on the ground o- prescription. The trial court -ound -or plainti-- and rendered judgment in his -avor -or the sum claimed plus legal interest and costs. The judgment *as a--irmed by the Court o- #ppeals. Issue: *hether plainti--9s action has prescribed )uling: :n the part o- the carrier the de-ense o- prescription is made to rest on the -ollo*ing stipulation o- the bill o- lading: In any event the carrier and the ship shall be discharged -rom all liability in respect o- loss or damage unless suit is brought *ithin one year a-ter the delivery o- the goods or the date *hen the goods should have been delivered. The stipulation is but a repetition o- a provision contained in section 4 ;<= o- the >nited States Carriage o- ?oods by Sea& #ct o- .@4<& *hich *as adopted and made applicable to the hilippines by Common*ealth #ct <2 and by e8press agreement incorporated by re-erence in the bill o- lading. The case -or the insurer stands on a di--erent -ooting& -or its claim o- prescription is -ounded upon the terms o- the policy and not upon the bill o- lading. >nder our la* the time limit -or bringing a civil action upon a *ritten contract is ten years a-ter the right o- action accrues. ;Sec. /4& #ct .@1A #rt. ..//& Be* Civil Code.= 7ut counsel -or the insurer claim that this statutory in the policy: Bo suit action on this olicy& -or the recovery o- any claim& shall be sustainable in any Court o- la* or eCuity unless the insured shall have -ully complied *ith all the terms and conditions o- this olicy nor unless commenced *ith t*elve ;.3= months ne8t a-ter the happening o- the loss . . .

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To this the court cannot agree. E8amining the policy sued upon in the present case& *e -ind that its prescriptive clause& igiven e--ect in accordance *ith the terms o- the policy& *ould reduce the period allo*ed the insured -or bringing his action to less than one year. This is so because the said clause ma%es the prescriptive period begin -rom the happening o- the loss and at the same time provides that the no suit on the policy shall be sustainable in any court unless the insured shall have -irst -ully complied *ith all the terms and conditions o- the policy& among them that *hich reCuires that& as so as the loss is determined& *ritten claim there-or be -iled *ith the carrier and that the letter to the carrier and the latter9s reply should be attached to the claim papers to be sent to the insurer. It is obvious that compliance *ith this condition precedent *ill necessarily consume time and thus shorten the period -or bringing suit to less than one year i- the period is to begin& as stated in the policy& -rom Dthe happening of the loss.D 7eing contrary to the la* o- the -orum& such stipulation cannot be given e--ect. 6hen did the cause o- action accrueE :n that Cuestion *e agree *ith the court belo* that plainti--9s cause o- action did not accrue until his claim *as -inally rejected by the insurance company. This is because& be-ore such -inal rejection& there *as no real necessity -or bringing suit. #s the policy provides that the insured should -ile his claim& -irst& *ith the carrier and then *ith the insurer& he had a right to *ait -or his claim to be -inally decided be-ore going to court. The la* does not encourages unnecessary litigation. In concluding& *e may state that contractual limitations contained in insurance policies are regarded *ith e8treme jealousy by courts and *ill be strictly construed against the insurer and should not be permitted to prevent a recovery *hen their just and honest application *ould not produce that result. 6here-ore& the judgment appealed -rom is reversed *ith respect to the carrier and its agents but a--irmed *ith respect to the insurance company and its agents& *ith costs against the latter.