Marine Insurance
During the pendency
1. Aboitiz Shipping Corporation vs. Court Of Appeals, et. al.,
G.R. No. 121833, Oct. 17, 2008
FACTS:
The three petitions stemmed from the recovery of the monetary
value of the cargoes lost, or by the insurers for the
reimbursement of whatever they paid, due to the sinking of M/V P.
Aboitiz owned by Aboitiz Shipping Corporation
1st Case: G.R. No. 121833 (Force Majeure; Negligence of officer
and crew)
1) Respondent Malayan Insurance Company, Inc. filed 5
separate actions against several defendants for the collection
of the amounts of the cargoes allegedly paid by Malayan under
various marine cargo policies.
2) Compagnie Maritime des Chargeurs Reunis (CMCR) and FE
Zuellig, 2 of the defendants,
- filed a 3rd-party complaint against Aboitiz Shipping
Corporation
3) Aboitiz raised the defenses of lack of jurisdiction, lack of cause
of action, and prescription.
- It also claimed that M/V P. Aboitiz was seaworthy, that it
exercised extraordinary diligence, and that the loss was
caused by a fortuitous event.
4) RTC: Aboitiz is liable.
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5) Aboitiz, CMCR, and FE Zuellig appealed.
of the appeal, the Court promulgated the decision in the 1993
GAFLAC case (Aboitiz Shipping Corporation v. General Accident Fire
and Life Assurance Corporation, Ltd.)
6) CA: Affirmed the RTC decision.
- Disregarded Aboitiz’ argument of force majeure in view of
the 1990 GAFLAC case
o where it was found that the sinking of M/V P. Aboitiz
was caused by the NEGLIGENCE of its officers and
crew.
o The computation of the liability should be based on the
declared value of the shipment in consonance with
the exceptional rule under Sec 4(5) of COGSA.
7) Aboitiz moved for reconsideration, arguing that the limited
liability doctrine should be applied in the computation of its
liability.
2nd Case: G.R. No. 130752 (Caused by Typhoon; Failed to show EOD)
1) Asia Traders Insurance, and Allied Guarantee Insurance filed
separate actions for damages against Aboitiz
- to recover by way of subrogation the value of the cargoes
insured by them and
- recover the loss in the sinking of the vessel M/V P. Aboitiz.
2) RTC: Aboitiz is liable, the RTC ordered Aboitiz to pay damages.
3) Aboitiz sought reconsideration, arguing that the findings of the Board
of Marine Inquiry that the sinking was caused by a TYPHOON should
have been considered and the REAL AND HYPOTHECARY DOCTRINE
limiting the monetary award should have applied.
4) The 1993 GAFLAC case was decided.

5) CA: Affirmed the RTC decision. Based on the trial court’s finding
RULING: NO.
that Aboitiz was actually negligent in ensuring the
seaworthiness of M/V P. Aboitiz
The REAL AND HYPOTHECARY DOCTRINE IN MARITIME LAW that

- the real and hypothecary doctrine enunciated in the 1993

GAFLAC case may not be applied.
3rd Case: G.R. No. 137801 (Typhoon; Contributory Negligence)
1) Equitable Insurance filed an action for damages against
Aboitiz
- to recover by way of subrogation the value of the cargoes
insured by Equitable Insurance that were lost in the
sinking of M/V P. Aboitiz.
2) RTC: Aboitiz was guilty of contributory negligence and is
therefore liable for the loss.
3) Aboitiz appealed and invoked the DOCTRINE OF LIMITED
LIABLITY.
- the shipowner or agent’s liability is merely co-extensive
with his interest in the vessel such that a total loss thereof
results in its extinction.
- "No vessel, no liability" expresses in a nutshell the limited
liability rule.
This LIMITED LIABILITY RULE is embodied in Arts 587, 590, and
837 under Book III of the Code of Commerce:
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded
on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipment and the freight it
may have earned during the voyage.

Art. 590. The co-owners of the vessel shall be civilly liable in the
- It also claimed that the typhoon was the proximate cause of
proportion of their interests in the common fund for the results
the loss.
of the acts of the captain referred to in Art. 587.

4) CA: Affirmed the RTC decision. The loss of the cargoes and the
Each co-owner may exempt himself from this liability by the
sinking of the vessel were due to its in seaworthiness and
abandonment, before a notary, of the part of the vessel
failure of the crew to exercise extraordinary diligence.
belonging to him.

ISSUE: W/N Aboitiz can avail the limited liability on the basis of the
Art. 837. The civil liability incurred by shipowners in the case
real and hypothecary doctrine of maritime law? NO.
prescribed in this section, shall be understood as limited to the
value of the vessel with all its appurtenances and freightage
served during the voyage.

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These articles precisely intend to limit the liability of the
shipowner or agent to the
- value of the vessel,
- its appurtenances (accessories), and
- freightage earned in the voyage, provided that the owner
or agent abandons the vessel.
Due to the total loss, the liability of the shipowner or agent for
damages is extinguished.
However, despite the total loss of the vessel, ITS INSURANCE
answers for the damages for which a shipowner or agent may be
held liable.
Nonetheless, THERE ARE STILL EXCEPTIONS wherein the ship
agent could still be held answerable despite the abandonment of
the vessel.
- The international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a
shipowner’s liability, DOES NOT APPLY to cases where the
injury or average was occasioned by the shipowner’s own
FAULT.
- Likewise, the shipowner may be held liable for injuries to
passengers notwithstanding the EXCLUSIVELY REAL AND
HYPOTHECARY NATURE OF MARITIME LAW if fault CAN BE
attributed to the shipowner.
The 1993 GAFLAC case APPLIED THE DOCTRINE OF LIMITED
LIABILITY in view of the absence of an express finding that Aboitiz
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negligence was the direct cause of the sinking of the vessel.
However, this is not applicable in the case at bar.
A perusal of the decisions of the RTC DECISIONS, as approved by
the CA, show that there is a categorical finding of negligence on
the part of Aboitiz.
1st G.R. No. 121833: the RTC therein expressly stated that the
captain of M/V P. Aboitiz was negligent in failing to take a
course of action that would prevent the vessel from sailing
into the typhoon.
2nd Case G.R. No. 130752: the RTC concluded that Aboitiz
failed to show that it had exercised the required
extraordinary diligence in steering the vessel before, during
and after the storm.
3rd Case G.R. No. 137801, the RTC categorically stated that the
sinking of M/V P. Aboitiz was attributable to the
negligence or fault of Aboitiz. In all instances, the Court of
Appeals affirmed the factual findings of the trial courts.
Aboitiz’ contention that its liability should be limited only to the
insurance proceeds of the vessel is not supported by the record.
Thus, Aboitiz is NOT ENTITLED TO THE LIMITED LIABILITY RULE
and is, therefore, liable for the value of the lost cargoes.
- the sinking of M/V P. Aboitiz was caused by the concurrence
of the unseaworthiness of the vessel and the negligence of
both Aboitiz and the vessel’s crew and master and NOT
BECAUSE OF FORCE MAJEURE.
- that the CLAIMANTS be treated as "creditors in an insolvent
corporation whose assets are not enough to satisfy the totality of
claims against it."
The instant petitions provide another occasion for the Court to
reiterate the well-settled doctrine of the real and hypothecary
nature of maritime law.
As a GENERAL RULE: a ship owner’s liability is merely co-
extensive with his interest in the vessel
EXCEPT where actual fault is attributable to the shipowner to
ensure the seaworthiness of the vessel.
Thus, as an exception to the limited liability doctrine, a
shipowner or ship agent may be held liable for damages when
the sinking of the vessel is attributable to the actual fault or
negligence of the shipowner or its failure to ensure the
seaworthiness of the vessel.
The instant petitions cannot be spared from the application of
the exception to the doctrine of limited liability in view of the
unanimous findings of the RTC that both Aboitiz and the crew
failed to ensure the seaworthiness of the M/V P. Aboitiz.
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FGU Insurance Corp. vs. CA, et. al.,
G.R. No. 137775, March 31, 2005
Facts:
1) Anco Enterprises Company (ANCO), a partnership between
Ang Gui and Co To, was engaged in the shipping business
operating 2 common carriers
o M/T ANCO tugboat
o D/B Lucio barge - no engine of its own, it could not
maneuver by itself and had to be towed by a tugboat for
it to move from one place to another.
2) San Miguel Corporation (SMC) shipped from Mandaue City,
Cebu, on board the D/B Lucio, for towage by M/T ANCO:
o 25,000 cases Pale Pilsen and 350 cases Cerveza Negra -
consignee  SMC’s Beer Marketing Division (BMD)-
Estancia Beer Sales Office, Estancia, ILOILO
o 15,000 cases Pale Pilsen and 200 cases Cerveza Negra –
consignee  SMC’s BMD-San Jose Beer Sales Office, San
Jose, ANTIQUE
3) September 30, 1979 (a week later): D/B Lucio was towed by
the M/T ANCO from Mandaue City to  San Jose, Antique &
when they arrived M/T ANCO left the barge immediately
o The clouds were dark and the waves were big so
 o SMC’s District Sales Supervisor, Fernando Macabuag,
requested ANCO’s representative to transfer the barge
to a safer place BUT HE REFUSED
(note: because he was confident that the barge could withstand the
waves)
(this withstanding the fact that only the M/T ANCO was left at the wharf of
San Jose, Antique, as all other vessels already left the wharf to seek
shelter)
o so around midnight, the barge SUNK along with 29,210
CASES of Pale Pilsen and 500 CASES of Cerveza Negra
totaling to P1,346,197
4) As a consequence of the incident, SMC filed a complaint for
Breach of Contract of Carriage and Damages against ANCO for
the amount of said cargo (cases of beer - 1,346,197.00M)
o Note: Upon Ang Gui's death, ANCO, as a partnership, was dissolved
hence, on 26 January 1993, SMC filed a second amended complaint which
was admitted by the Court impleading the surviving partner, Co To and the
Estate of Ang Gui
5) ANCO in its defense stated that:
o they had an agreement with SMC to the effect that ANCO
would not be liable for any losses or damages resulting
to the cargoes by reason of fortuitous event
o that there was another agreement between them and
SMC to insure the cargoes in order to recover indemnity
in case of loss
o Pursuant to that agreement ^ the cargoes to the extent of
20K cases was insured by SMC with FGU Insurance
(FGU) for the total amount P858,500.00 per Marine
Insurance Policy No. 29591
o Thus, ANCO filed a 3rd party complaint against FGU
Insurance
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6) FGU: it is only liable under the policy to ANCO and/or SMC in
case of any of the ff:
a) total loss of the entire shipment;
b) loss of any case as a result of the sinking of the vessel;
or
c) loss as a result of the vessel being on fire.
Furthermore, FGU ALLEGED that ANCO and SMC failed to exercise
ordinary diligence or the diligence of a good father of the family
in the care and supervision of THE CARGOES
7) RTC: ANCO liable to  SMC; and  FGU liable for 53% of the
lost cargoes
o Note: while the cargoes were indeed lost due to fortuitous
event, there was failure on ANCO’s part, through their
representatives, to observe the degree of diligence
required that would exonerate them from liability
8) CA affirmed
Issue: W/N FGU should be exempted from liability to ANCO for the lost
cargoes because of a fortuitous event and negligence of ANCO
Ruling: YES
 3rd-party complainant is dismissed.
o Art. 1733. Common carriers, from the nature of their
business and for reasons of public policy are bound to
observe EXTRAORDINARY DILIGENCE in the vigilance over
the goods and for the safety of the passengers transported
by them, according to all the circumstances of each case.
o Art. 1734. Common carriers ARE RESPONSIBLE for the loss,
destruction, or deterioration of the goods, UNLESS the
same is due to any of the following causes only:
 (1) Flood, storm, earthquake, lightning, or other natural disaster constitute a willful act, the insurer must be
or calamity; exonerated.

 Art. 1739. In order that the common carrier may be exempted  The ACTS OF ANCO’s employees is of such gross character
from responsibility, the natural disaster must have been the that it amounts to a wrongful act which must exonerate FGU
PROXIMATE AND ONLY CAUSE OF THE LOSS. from liability under the insurance contract both the D/B
Lucio and the M/T ANCO were blatantly negligent.
 However, the common carrier must exercise due diligence
to prevent or minimize loss BEFORE, DURING and AFTER
the occurrence of flood, storm, or other natural disaster in
order that the common carrier may be exempted from
liability for the loss, destruction, or deterioration of the goods . .
.

NOTE  IN SUM: To be exempted from responsibility, the natural

disaster should have been the proximate and only cause of the loss. There
must have been no contributory negligence on the part of the common
carrier.

 IN THIS CASE: There was blatant negligence on the part of

M/T ANCO crewmembers:

o 1st: when the patron (operator) of the tug boat who

2. Phil. American General Ins. Co., Inc. v. CA,
immediately left the engine-less barge at the San
Jose, Antique wharf despite the looming bad
G.R. No. 116940, June 11, 1997, 273 SCRA 262
weather.

o 2nd: by ANCO’s representative who DID NOT HEED the Doctrine:

request of SMC that the barge be moved to a more
secure place. “In every marine insurance policy the ASSURED impliedly
o The prudent thing to do, as was done by the other sea warrants to the ASSURER that the vessel is seaworthy and such
warranty is as much a term of the contract as if expressly
vessels during the time in question, was to transfer the
written on the face of the policy.
vessel to a safer wharf and that at that time, THE ONLY
SIMPLE VESSEL LEFT at the wharf in San Jose was the
It becomes the obligation of the cargo owner to look for a reliable
D/B Lucio
common carrier which keeps its vessels in seaworthy condition.
o When evidence show that the insured’s negligence or
recklessness is so gross as to be sufficient to

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In policies where the law will generally imply a warranty of
seaworthiness, such warranty CAN ONLY be excluded by terms
in writing in the policy in the clearest language.”
Facts:
1) Coca-Cola Bottlers Philippines, Inc., loaded on board a vessel
“M/V Asilda” owned and operated by Private Respondent
Felman Shipping Lines (FELMAN)
- 7,500 cases of 1-liter Coca-Cola soft drink bottles to be
transported from Zamboanga City to Cebu City for
consignee Coca-Cola Bottlers Philippines CEBU.
2) The SHIPMENT WAS INSURED with Petitioner Philippines
American General Insurance Co., Inc. (PHILAMGEN) under
Marine Open Policy.
3) A day after the ship left the port of Zamboanga in fine
weather, “M/V Asilda” sank in the waters of Zamboanga del
Norte ALONG WITH THE ENTIRE CARGO.
4) The Coca-Cola Bottlers Cebu filed a claim with FELMAN for
recovery of damages it sustained as a result of the loss.
5) FELMAN denied the claim. Hence, the Coca-Cola Bottlers Cebu
filed an insurance claim with PHILAMGEN which paid its claim
of P755,250.
6) Claiming its right of subrogation, PHILAMGEN sought recourse
against Private Respondent FELMAN which disclaimed any
liability for the loss.
7) PHILAMGEN now sued the FELMAN for sum of money and
damages. PHILAMGEN alleged that the sinking was due to the
vessel’s unseaworthiness as it was put to sea in an unstable
condition.
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8) FELMAN filed a motion to dismiss
- based on the affirmative defense that no right of
subrogation in favor of PHILAMGEN was transmitted by
the shipper, and that FELMAN had abandoned all its rights,
interests and ownership over the vessel together with its
freight and appurtenances for the purpose of limiting and
extinguishing its liability under Art. 587 of the Code of
Commerce.
9) Initially the case was dismissed to which PHILAMGEN appealed,
CA ordered it back to the lower court for trial on the merits.
10) RTC: ruled in favor of FELMAN and DISMISSED COMPLAINT
OF PHILAMGEN.
o PHILAMGEN was able to show that the ship was
INDEED SEA WORTHY by the certificates issued by
the Coast Guard and its own surveyor.
o Thus the loss of the vessel and its entire shipment
could only be attributed to either a fortuitous event,
in which case, NO LIABILITY SHOULD ATTACH
unless there was a stipulation to the contrary, or to the
negligence of the captain and his crew, in which case, Art.
587 of the Code of Commerce should apply.
o Further, Assuming the vessel was unseaworthy, still
PHILAMGEN could not recover from FELMAN since
the assured (Coca-Cola Bottlers Philippines, Inc.)
had breached its implied warranty on the vessel's
seaworthiness.
o Resultantly, the payment made by PHILAMGEN to
the assured was an undue, wrong and mistaken
payment. Since it was not legally owing, it did
not give PHILAMGEN the right of subrogation
 so as to permit it to bring an action in court as a - the vessel is seaworthy and such warranty is as much a
subrogee. term of the contract as if expressly written on the face of
the policy.
11) CA: reversed this decision of the RTC.
 Thus Sec. 113 of the Insurance Code provides that in every
o Denied the claim of PHILAMGEN on the ground that
marine insurance upon a ship or freight, or freightage, or upon
the assured’s implied warranty of seaworthiness
anything which is the subject of marine insurance, a warranty is
was not complied with.
implied that the ship is seaworthy.
o Perfunctorily, PHILAMGEN was not properly
 Under Sec. 114, a ship is seaworthy when reasonably fit to
subrogated to the rights and interests of the Coca-
perform the service, and to encounter the ordinary perils of
Cola Bottlers Philippines.
the voyage, contemplated by the parties to the policy.
o Moreover, the filing of notice of abandonment had
 Thus it becomes the obligation of the cargo owner to look for
absolved the ship owner/agent from liability under
a reliable common carrier which keeps its vessels in
the limited liability rule.
seaworthy condition. Cargo owner may have no control over
12) Hence this petition for review on certiorari of a decision of the the vessel but he has full control in the selection of the
CA. common carrier that will transport his goods.
 In policies where the law will generally imply a warranty of
Issue:
seaworthiness, it can only be excluded by terms in writing in
the policy in the clearest language.
W/N PHILAMGEN was properly subrogated to the rights and legal
actions which the shipper had against FELMAN? o And where the policy stipulates that the seaworthiness
of the vessel as between the assured and the assurer is
admitted,
o the question of seaworthiness cannot be raised by the
Ruling: YES.
assurer without showing concealment or
misrepresentation by the assured.
 When PHILAMGEN paid the claim of the Coca-Cola Bottlers
Philippines there was in effect a voluntary payment and no
 The Marine Insurance Policy issued by PHILAMGEN to the Coca-
right of subrogation accrued in its favor. In other words, when
Cola Bottlers bottling firm in at least 2 instances has dispensed
PHILAMGEN paid it did so at its own risk.
with the usual warranty of worthiness. Paragraph 15 of the
 It is generally held that in every Marine Insurance Policy the Marine Open Policy which reads:
ASSURED impliedly warrants to the ASSURER that
the liberties as per Contract of Affreightment the presence of the
Negligence Clause and/or Latent Defect Clause in the Bill of Lading
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 and/or Charter Party and/or Contract of Affreightment as between  Therefore, the payment made by PHILAMGEN to Coca-Cola
the Assured and the Company shall not prejudice the insurance. The Bottlers Philippines.gave the PHILAMGEN THE RIGHT TO
seaworthiness of the vessel as between the Assured and the BRING AN ACTION AS SUBROGEE AGAINST FELMAN.
Assurers is hereby admitted.
 Petition granted.

 The same clause is present in par. 8 of the Institute Cargo

Clauses (F.P.A.) of the policy which states the seaworthiness of
the vessel as between the Assured and Underwriters is hereby
On Presentation of Policies
admitted.

 The RESULT OF THE ADMISSION OF SEAWORTHINESS by the

assurer PHILAMGEN may mean one or two things:
3. Malayan Insurance Co., Inc. v. Regis Brokerage Corp.,
(a) that the warranty of the seaworthiness is to be taken as
fulfilled; or, G.R. No. 172156, Nov. 23, 2007, 538 SCRA 681
(b) that the risk of unseaworthiness is assumed by the
insurance company. Doctrine:

 The insertion of such waiver clauses in cargo policies is in “Failure to present policy will amount to a failure to establish a cause of
recognition of the realistic fact that cargo owners cannot action”
control the state of the vessel.
Facts:
 Thus it can be said that with such categorical waiver, PHILAMGEN
has accepted the risk of unseaworthiness so that if the ship
 The case stemmed from a complaint for damages filed by
should sink by unseaworthiness, as what occurred in this
Malayan against Regis and Paircargo.
case, PHILAMGEN IS LIABLE.
 Around 1 February 1995, Fasco Motors Group loaded 120 pieces
 Since payment by the ASSURER to the ASSURED operates as an
of motors on board China Airlines Flight to be delivered to
equitable assignment to the ASSURER of all the remedies
consignee ABB Koppel.
which the ASSURED may have against the third party whose
negligence or wrongful act caused the loss  The shipment was purportedly insured with Malayan by ABB
Koppel.
 The doctrine of subrogation has its roots in equity. It is
designed to promote and to accomplish justice and is the mode  When the cargo arrived at NAIA, it was discharged without
which equity adopts to compel the ultimate payment of a debt by exception and forwarded to Paircargos warehouse for temporary
one who in justice, equity and good conscience ought to pay. storage pending release by the BoC.

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  Paircargo remained in possession of the cargo until 7 March
1995, at which point respondent Regis withdrew the cargo and
delivered the same to ABB Koppel at its warehouse.
 When the shipment arrived, it was discovered that only 65 of the
120 pieces of motors were actually delivered, the remaining 55
motors, valued at US$2,374.35, could not be accounted for.
 Upon demand to Regis and Paircargo for payment of the value of
the missing motors by ABB Koppel, both refused to pay.
 Malayan then paid ABB Koppel the P156,549.55 pursuant to its
insurance agreement, with the former being subrogated to the
rights of the latter.
 Malayan filed a complaint for damages against Regis and
Paircargo with the MeTC.
 In the course of trial, Malayan presented Marine Risk Note dated
21 March 1995 as proof that the cargo was insured by Malayan.
 MeTC: held that Regis alone was liable to Malayan.
 RTC affirmed
 CA vacated RTC judgment and ordered the dismissal of
Malayan’s complaint. It was found that the Marine Risk Note
presented as proof that the cargo was insured was invalid.
o It was found that Marine Risk Note was procured from
Malayan only on 21 March 1995, when in fact the insured
ABB had learned of the partial loss of the motors as early
as 7 March 1995.
o CA noted that under Section 3 of the Insurance Code, the
past event which may be insured against must be
unknown to the parties and so for that reason the
insurance contract in this case violated Section 3.
o It was also ruled that the due execution and authenticity
of the subrogation receipt presented before the trial court
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by Malayan were not duly proven since the signatories
thereto were not presented by Malayan before the trial
court to identify their signatures thereon, and neither was
evidence presented to establish the genuineness of such
signatures.
 MR denied.
  According to Malayan, the lost cargo was insured not only by the
Marine Risk Note but by the anteceding Marine Insurance Policy
No. M/OP/95/0001-410 (Marine Insurance Policy) which it
issued in favor of ABB Koppel on 20 January 1995, or many days
before the motors were transported to Manila.
o A copy of the Marine Insurance Policy was attached to the
present petition, but was not presented at the trial.
Issue:
Whether or not Malayan (insurer), as subrogee of ABB (insured), can
obtain favorable relief in an action for recoupment despite failure to
introduce insurance contract/policy as evidence, nor allege the existence
or recite the substance and attach a copy thereof in the complaint. NO.
Ruling:
 Since the Marine Insurance Policy was never presented in
evidence before the trial court or the Court of Appeals even,
there is no legal basis to consider such document in the
resolution of this case, reflective as that document may have
been of the pre-existence of an insurance contract
between Malayan and ABB Koppel even prior to the loss of
the motors.
 It appears quite plain that Malayans theory of the case it pursued
before the trial court was that the perfected insurance contract
which it relied upon as basis for its right to subrogation was not
 the Marine Insurance Policy but the Marine Risk Note which,
unlike the former, was actually presented at the trial and offered
in evidence.
o Thus, the court can only consider the Marine Risk Note in
determining whether there existed a contract of insurance
between ABB Koppel and Malayan at the time of the loss
of the motors.
The insurance contract between Malayan and ABB Koppel was
NOT constituted by the Marine Risk Note alone.
 Aboitiz Shipping Corporation v. Philippine American General
Insurance, Co. - where a trial court had relied on the contents of
a marine risk note, not the insurance policy itself, in dismissing a
complaint. For this act, the Court faulted the trial court in said
Marine Risk Note as an insurance policy when it is not. It
characterized the marine risk note as an acknowledgment or
declaration of the private respondent confirming the specific
shipment covered by its Marine Open Policy, the evaluation of
the cargo, and the chargeable premium, a description that is
reflective as well of the present Marine Risk Note, if not of
marine risk notes in this country in general.  construction and not be extended in its scope so as to work
 What the Marine Risk Note bears, as a matter of evidence, is that
it is not apparently the contract of insurance by itself, but merely
a complementary or supplementary document to the contract of
insurance that may have existed as between Malayan and ABB
Koppel.
 Since Malayan failed to introduce in evidence the Marine
Insurance Policy itself as the main insurance contract, or even
advert to said document in the complaint, ultimately then it
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failed to establish its cause of action for restitution as a subrogee
of ABB Koppel. 
 Malayan’s right of recovery as a subrogee of ABB cannot be
predicated alone on the liability of the respondent to ABB, even
though such liability will necessarily have to be established at the
trial for Malayan to recover.
 Malayan’s right to recovery derives from contractual subrogation
as an incident to an insurance relationship, and not from any
proximate injury to it inflicted by the respondents. It is critical
that Malayan establish the legal basis of such right to
subrogation by presenting the contract constitutive of the
insurance relationship between it and ABB. Without such legal
basis, its cause of action cannot survive. 
 Procedural rules make plain how easily Malayan could have
adduced the Marine Insurance Policy. Ideally, this should have
been accomplished from the moment it filed the complaint. Since
the Marine Insurance Policy was constitutive of the insurer-
insured relationship from which Malayan draws its right to
subrogation, such document should have been attached to the
complaint itself as provided for in Section 71 of the ROC.
  The rule has been held to be imperative, mandatory and not
merely directory, though must be given a reasonable
injustice.
 It was incumbent on Malayan, whose right of subrogation derived
from the Marine Insurance Policy, to set forth the substance of
such contract in its complaint and to attach an original or a copy
of such contract in the complaint as an exhibit. Its failure to do
so signals a more terminal defect than merely excluding the
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SECTION 7. Action or defense based on document. Whenever an action or defense is based upon a written instrument or
document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof
shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like
effect be set forth in the pleading.
 Marine Insurance Policy as relevant evidence, as the failure Facts:
actually casts an irremissible cloud on the substance of Malayans
very cause of action. • Petitioner's liability arose from a lost shipment of "14 Cardboards 400
kgs. of Silver Nitrate, shipped by Hapag-Lloyd AG through the vessel
 Since Malayan alluded to an actionable document, the contract of
Hannover Express from Hamburg, Germany on July 10, 1994, with
insurance between it and ABB, as integral to its cause of action
Manila, Philippines as the port of discharge, and Republic Asahi Glass
against Regis and Paircargo, the contract of insurance should
Corporation (RAGC) as consignee. Said shipment was insured by FGU
have been attached to the complaint. , in the absence of any
Insurance Corporation (FGU). When RAGC's customs broker, Desma
evidentiary consideration of the actual Marine Insurance Policy,
Cargo Handlers, Inc., was claiming the shipment, petitioner, which was
the substance of Malayans right to recovery as the subrogee of
the arrastre contractor, could not find it in its storage area. At the
ABB Koppel is not duly confirmed.
behest of petitioner, the National Bureau of Investigation (NBI)
conducted an investigation. The AAREMA Marine and Cargo Surveyors,
 There can be no consideration of the particular terms and
Inc. also conducted an inquiry. Both found that the shipment was lost
conditions in the insurance contract that specifically give rise to
while in the custody and responsibility of petitioner.
Malayans right to be subrogated to ABB Koppel, or to such terms
that may have absolved Malayan from the duty to pay the
As insurer, FGU paid RAGC and in turn, FGU sought
insurance proceeds to that consignee. The particular date as to
reimbursement from petitioner, but the latter refused. This constrained
when such insurance contract was constituted cannot be
FGU to file with the RTC of Manila Civil Case No. 95-73532 for a sum of
 Petition was denied. Regis won. money.

After trial, the RTC rendered its Decision finding petitioner liable.
On appeal the Court of Appeals (CA), affirmed the RTC Decision. Hence,
4. ITCSI vs. FGU Insurance Corp., the present petition.

G.R. No. 161539, June 27, 2008 Issue:

W/N the marine insurance policy should be presented to prove the claim
on the value of the goods insured.
Doctrine:
Ruling:

By its own act of not charging the corresponding arrastre fees

Jurisprudence has it that the marine insurance policy needs to be based on the value of the shipment after it came to know of such
presented in evidence before the trial court or even belatedly before the declared value from the marine insurance policy, petitioner cannot
appellate court escape liability for the actual value of the shipment. The value of the

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merchandise or shipment may be declared or stated not only in the bill cargo passed through several stages with different parties and it could
of lading or shipping manifest, but also in other documents required by not be determined when the damage to the cargo occurred, such that
law before the shipment is cleared from the piers. Petitioner insists that the insurer should be liable for it.
Marine Open Policy No. MOP-12763 under which the shipment was
insured was no longer in force at the time it was loaded on board the As in Delsan, there is no doubt that the loss of the cargo in the present
Hannover Express on June 10, 1994, as provided in the Endorsement case occurred while in petitioner's custody. Moreover, there is no issue
portion of the policy, which states: "IT IS HEREBY DECLARED AND as regards the provisions of Marine Open Policy No. MOP-12763, such
AGREED that effective June 10, 1994, this policy is deemed that the presentation of the contract itself is necessary for perusal, not
CANCELLED." FGU, on the other hand, insists that it was under Marine to mention that its existence was already admitted by petitioner in open
Risk Note No. 9798, which was executed on May 26, 1994, that said court. And even though it was not offered in evidence, it still can be
shipment was covered. considered by the court as long as they have been properly identified by
testimony duly recorded and they have themselves been incorporated in
It must be emphasized that a marine risk note is not an insurance the records of the case.
policy. It is only an acknowledgment or declaration of the insurer
confirming the specific shipment covered by its marine open policy, the FGU WINS.
evaluation of the cargo and the chargeable premium. It is the marine
open policy which is the main insurance contract. In other words, the
marine open policy is the blanket insurance to be undertaken by FGU on
all goods to be shipped by RAGC during the existence of the contract,
while the marine risk note specifies the particular goods/shipment
insured by FGU on that specific transaction, including the sum insured,
the shipment particulars as well as the premium paid for such shipment.
In any event, as it stands, it is evident that even prior to the
cancellation by FGU of Marine Open Policy No. MOP-12763 on June 10,
1994, it had already undertaken to insure the shipment of the 400 kgs.
of silver nitrate, specially since RAGC had already paid the premium on
the insurance of said shipment.

Indeed, jurisprudence has it that the marine insurance policy needs to

be presented in evidence before the trial court or even belatedly before
the appellate court. However, as in every general rule, there are
admitted exceptions. In Delsan Transport Lines, Inc. v. Court of
Appeals, the Court stated that the presentation of the insurance policy
was not fatal because the loss of the cargo undoubtedly occurred while
on board the petitioner's vessel, unlike in Home Insurance in which the

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