Roque vs.

Intermediate Appellate Court

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, ...

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.

II. No, the IAC is correct.

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.
DOCTRINES:

MARINE INSURANCE

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.
 Moreover, 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.

In the absence of stipulation that insurer answers for perils of the ship, insurance
cannot be recovered on losses from perils of the ship.—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.

PERILS OF THE SEA," DEFINED.

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, 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.
Loss of cargo is not due to perils of the sea where there was no typhoon, but
ordinary strong wind and waves and where cargo was negligently handled by
ship's crew.
On the contention of the petitioners that the trial court found that the loss was
occasioned by the perils of the sea characterized by the "storm and waves" which buffeted
the vessel, the records show that the court ruled otherwise. It stated: "x x x The other
affirmative defense of defendant Lighterage, That the supposed loss of the logs was
occasioned by force majeure was not supported by the evidence. At the time Mable 10 sank,
there was no typhoon but ordinary strong wind and waves, a condition which is natural and
normal in the open sea. The evidence shows that the sinking of Mable 10 was due to
improper loading of the logs on one side so that the barge was tilting on one side and for
that it did not navigate on even keel; that it was no longer seaworthy that was why it
developed leak; that the personnel of the tugboat and the barge committed a mistake when
it turned loose the barge from the tugboat east of Cabuli point where it was buffeted by
storm and waves, while the tugboat proceeded to west of Cabuli point where it was
protected by the mountain side from the storm and waves coming from the east direction. x
x x"

PERILS OF THE SHIP" DEFINED

lt must be considered to be settled, 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. As was well said by Lord Herschell in Wilson, Sons & Co. v. Owners of Cargo
per the Xantho ([1887], 12 A. C., 503, 509), 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.

BARRATRY" DEFINED
Barratry as defined in American Insurance Law is "any willful misconduct on the
part of master or crew in pursuance of some unlawful or fraudulent purpose without the
consent of the owners, and to the prejudice of the owner's interest," (Sec. 171, U.S.
Insurance Law, quoted in Vance, Handbook on Law of Insurance, 1951, p. 929.) Barratry
necessarily requires a willful and intentional act in its commission. No honest error of
judgment or mere negligence, unless criminally gross, can be barratry. (See Vance on Law
of Insurance, p. 929 and cases cited therein.)
There is no barratry as will enable a cargo shipper to recover on a marine cargo
insurance where ship's crew's acts constitute only simple negligence or lack of skill.—In the
case at bar, there is no finding that the loss was occasioned by the willful or fraudulent acts
of the vessel's crew. There was only simple negligence or lack of skill. Hence, the second
assignment of error must likewise be dismissed.

Cathay Insurance Co. vs. Court of Appeals

FACTS:
A complaint was filed by private respondent corporation against petitioner (then defendant) company
seeking collection of the sum of P868,339.15 representing private respondent's losses and damages
incurred in a shipment of seamless steel pipes under an insurance contract in favor of the said private
respondent as the insured, consignee or importer of aforesaid merchandise while in transit from Japan to
the Philippines on board vessel SS "Eastern Mariner."

RTC: decided in favor of private respondent corporation.

CA: affirmed
1. Alleged contractual limitations contained in 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.
2. Rust is not an inherent vice of the seamless steel pipes without interference of external
factors.

ISSUE: WON 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.

RULING:
YES. 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. At
any rate if the insurer cannot be held accountable therefor, we 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. Be it noted
that any attack of the 15-day clause in the policy was foreclosed right in the pre-trial
conference.
Civil Procedure

Finally, it is a cardinal rule that save for certain exceptions, findings of facts of the
appellate tribunal are binding on Us. Not one of said exceptions can apply to this case.

FILIPINO MERCHANTS INSURANCE CO., INC., petitioner, vs. COURT OF

APPEALS and CHOA TIEK SENG, respondents.

DOCTRINES:

“ALL RISKS” POLICY

The very nature of the term “all risks” must be given a broad and comprehensive
meaning as covering any loss other than a wilful and fraudulent act of the insured.
This is pursuant to the very purpose of an “all risks” insurance to give protection to the
insured in those cases where difficulties of logical explanation or some mystery surround
the loss or damage to property. An “all risks” policy has been evolved to grant greater
protection than that afforded by the “perils clause,” in order to assure that no loss can
happen through the incidence of a cause neither insured against nor creating liability in the
ship; it is written against all losses, that is, attributable to external causes.
Generally, 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. As we held in Paris-Manila Perfumery Co. vs. Phoenix Assurance Co., Ltd. the
basic rule is that the insurance company has the burden of proving that the loss is
caused by the risks excepted and for want of such proof, the company is liable.

Herein private respondent, as vendee/consignee of the goods in transit has such

existing interest therein as may be the subject of a valid contract of insurance. 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 he 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. The perfected contract of sale even without delivery vests in the vendee
an equitable title, an existing interest over the goods sufficient to be the subject
of insurance.
 Further, 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.

All risk insurance 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.
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.
All risk insurance policy
In Gloren Inc. vs. Filipinas Cia. deSeguros, 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. 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.
Same; Same; Same; Where the formalities prescribed under Articles 813 and 814 of the Code of Commerce in order to
incur the expenses and cause the damage corresponding to gross average were not complied with, the carrier cannot
claim for contribution from the consignees for additional freight and salvage charges.—While the instant case may
technically fall within the purview of the said provision, the formalities prescribed under Articles 813 and 814 of the
Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were not
complied with. Consequently, respondent ESLI’s claim for contribution from the consignees of the cargo at the time of
the occurrence of the average turns to naught. Prescinding from the foregoing premises, it indubitably follows that the
cargo consignees cannot be made liable to respondent carrier for additional freight and salvage charges. Consequently,
respondent carrier must refund to herein petitioner the amount it paid under protest for additional freight and salvage
charges in behalf of the consignees.