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CATHAY INSURANCE COMPANY vs CA and Remington Industrial Sales Corp


FACTS: Petitioner seeks the review of the decision of CA affirming the RTC in its
decision awarding damages to Private Respondent in the amount of P 866,000.00
representing the loss it sustained due to the rusting of the seamless steel pipes it insured
with Petitioner while being transported from Japan to the Philippines on board the vessel
SS Eastern Mariner. Petitioner averred that it could not have been liable for the loss
because, according to it, “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.” Private respondent on the other hand,
contends that “rust is not an inherent vice of the seamless steel pipes without interference
of external factors,” that is, the external factors are the elements contemplated during sea
voyage which would constitute Perils of the Sea.

ISSUE: Whether or not the rusting of the steel pipes while on sea voyage under ordinary
condition would constitute Perils of the Sea and for which loss, the insurer is liable.

HELD: Yes. The Supreme Court. It said: “There is no question 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.” It added further saying: “At any rate if the insurer
cannot be held accountable therefor, [the Court] would fail to observe 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. Besides the precise purpose
of insuring cargo during a voyage would be rendered fruitless.

WHEREFORE, this petition is hereby DENIED