Mayer Steel Pipe Corporation vs Court of Appeals

In 1983, Hongkong Government Supplies Department (HGSD) contracted Mayer Steel Pipe
Corporation for the latter to manufacture and deliver various steel pipes and fittings. Before
Mayer Steel shipped the said pipes, it insured them with  two insurance companies namely,
South Sea Surety and Insurance Co., Inc. and Charter Insurance Corporation – each
insurer covering different portions of the shipment. The insurance policies cover “all risks”
which include all causes of conceivable loss or damage.
When the pipes reached Hongkong, the pipes were discovered to have been damaged.
The insurance companies refused to make payment. On April 17 1986, Mayer Steel sued
the insurance companies. The case reached the Court of Appeals. The CA ruled that the
case filed by Mayer Steel should be dismissed. It held that the action is barred under
Section 3(6) of the Carriage of Goods by Sea Act since it was filed only on April 17, 1986,
more than two years from the time the goods were unloaded from the vessel. Section 3(6)
of the Carriage of Goods by Sea Act provides that “the carrier and the ship shall be
discharged from all liability in respect of loss or damage unless suit is brought within one
year after delivery of the goods or the date when the goods should have been delivered.”
The CA ruled that this provision applies not only to the carrier but also to the insurer, citing
the case of Filipino Merchants Insurance Co., Inc. vs Alejandro.
ISSUE: Whether or not the Court of Appeals is correct.
HELD: No. Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the
ship shall be discharged from all liability for loss or damage to the goods if no suit is filed
within one year after delivery of the goods or the date when they should have been
delivered. Under this provision, only the carrier’s liability is extinguished if no suit is brought
within one year. But the liability of the insurer is not extinguished because the insurer’s
liability is based not on the contract of carriage but on the contract of insurance. A close
reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship
between the carrier on the one hand and the shipper, the consignee and/or the insurer on
the other hand. It defines the obligations of the carrier under the contract of carriage. It does
not, however, affect the relationship between the shipper and the insurer. The latter case is
governed by the Insurance Code.
The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was
the insurer which filed a claim against the carrier for reimbursement of the amount it paid to
the shipper. In the case at bar, it was the shipper which filed a claim against the insurer.
The basis of the shipper’s claim is the “all risks” insurance policies issued by the insurers to
Mayer Steel.
The ruling in Filipino Merchants should apply only to suits against the carrier filed either by
the shipper, the consignee or the insurer.

Pacific Timber Export Corporation vs Court of Appeals

112 SCRA 199 – Mercantile Law – Insurance Law – The Policy – Separate Premiums Not
Required for Cover Notes 
In 1963, Pacific Timber Export Corporation (PTEC) applied for a temporary
marineinsurance from Workmen’s Insurance Company (WIC) in order for the latter to
insure 1,250,000 board feet of logs to be exported to Japan. In March 1963, WIC issued a
cover note to PTEC for the said logs. On April 2, 1963, WIC issued two policies for the logs.
However, the total board feet covered this time is only 1,195,498. On April 4, 1963, while
the logs were in transit to Japan, bad weather prevailed and this caused the loss of 32
pieces of logs.
WIC then asked an adjuster to investigate the loss. The adjuster submitted that the logs lost
were not covered by the two policies issued on April 2, 1963 but said logs were included in
the cover note earlier issued.
WIC however denied the insurance claim of PTEC as it averred that the cover note became
null and void when the two policies were subsequently issued. The Court of Appeals ruled
that the cover note is void for lack of valuable consideration as it appeared that no premium
payment therefor was made by PTEC.
ISSUE: Whether or not a separate premium is needed for cover notes.
HELD: No. The Cover Note was not without consideration for which the Court of Appeals
held the Cover Note as null and void, and denied recovery therefrom. The fact that no
separate premium was paid on the Cover Note before the loss insured against occurred,
does not militate against the validity of PTEC’s contention, for no such premium could have
been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do
not contain particulars of the shipment that would serve as basis for the computation of the
premiums. As a logical consequence, no separate premiums are intended or required to be
paid on a Cover Note.
At any rate, it is not disputed that PTEC paid in full all the premiums as called for by the
statement issued by WIC after the issuance of the two regular marine insurancepolicies,
thereby leaving no account unpaid by PTEC due on the insurance coverage, which must
be deemed to include the Cover Note. If the Note is to be treated as a separate policy
instead of integrating it to the regular policies subsequently issued, the purpose and
function of the Cover Note would be set at naught or rendered meaningless, for it is in a
real sense a contract, not a mere application for insurancewhich is a mere offer.

Antonina Lampano vs Placida Jose

30 Phil. 537 – Mercantile Law – Insurance Law – The Policy – Insurance as a Contract
between Insurer and Insured Only 
In 1912, Placida Jose contracted with Mariano Barreto for the construction of a house worth
P6,000.00. While the house is under construction, Barreto, with the consent of Jose, took
out an insurance policy in his own name on the said building. Barreto paid the
corresponding premium.
Later, Jose sold the house to Antonina Lampano for P6,000.00. In 1913, the house was
gutted by fire. Barreto was able to collect P3,600.00 from the insurance policy. Lampano
then demanded that Barreto hand her over the proceeds because she alleged that Jose
verbally agreed to transfer to her the said insurance policy along with the property.
ISSUE: Whether or not Lampano has a right to collect from the insurance policy.
HELD: No. In the case at bar, Barretto assumed the responsibility for the insurance. The
premiums were paid by him without any agreement or right to recoup the amount paid
therefor should no loss result to the property. It would not, therefore, be in accordance with
law and his contractual obligations to compel him to account for the insurance money, or
any part thereof, to Lampano, who assumed no risk whatever. It is well settled that a policy
of insurance is a distinct independent contract between the insured and insurers, and third
persons have no right either in a court of equity, or in a court of law, to the proceeds of it,
unless there be some contract or trust, expressed or implied, between the insured and third
persons.
As to the question whether or not Barreto has an insurable interest on the house, the
answer is in the affirmative. He constructed the building, furnishing all the materials and
supplies, and insured it after it had been completed. Further, it appears that Jose has not
fully paid Barreto as she has an outstanding balance of P2,000.00.