Marine Insurance — 

a type of insurance designed to

provide coverage for the transportation of goods
either on the ocean or by land as well as damage to
the waterborne instrument of conveyance and to the
liability for third parties arising out of the process.

Q. DOES MARINE INSURANCE COVER ONLY THOSE THAT

ARE SUBJECT TO THE MARITIME RISKS?

A. No. The present law includes within the coverage of

marine insurance risks not connected with marine
navigation in the following instances:

a) Insurance against loss of or damage to aircraft;

b) Insurance against loss of or damage to goods and
merchandise while being assembled, packed,
crated, baled, compressed or similarly prepared for
shipment;
c) Insurance against loss of or injury to person in
connection with marine transit or transportation
insurance;
d) Insurance against loss of or damage to precious
stones, jewels, jewelry, precious metals, whether in
the course of transportation or otherwise;
e) Insurance against loss of or damage to bridges,
tunnels and other instrumentalities of
transportation and communication

Q. DISTINGUISH “PERILS OF THE SEA” FROM “PERILS OF

THE SHIP”

A. “Perils of the sea” embrace all kinds of marine casualties

and damages done to the ship or goods at sea by the violent
action of the winds or waves, one that could not be
foreseen and not attributable to the fault of anybody.

“Perils of the ship,” on the other hand, are losses or

damages resulting from (a) the natural and inevitable action
of the sea, (b) ordinary wear and tear of the ship, or (c)
negligent failure of the ship’s owner to provide the vessel
with proper equipment to convey the cargo under ordinary
condition.

During the voyage, sea water entered the compartment

where the cargo was stored through a port hole not
securely fastened as a result the rice in the compartment
was damaged.

Q. IS THE INSURER OF THE RICE LIABLE?

A. No. The insurer is not liable because the cause of the loss
was a peril of the ship and not a peril of the sea. The defect
in the port hole of the vessel was obviously the result of the
misuse of the ship and lack of necessary repairs.

Q. WHAT RISKS ARE COVERED BY MARINE INSURANCE?

A. Unless otherwise stated in the policy, loss due to perils of

the ship is not within the coverage of marine insurance. A
marine policy in the usual form, therefore, includes perils of
the sea and not perils of the ship, and accordingly, a marine
insurer upon a policy in the usual form is not liable for a loss
caused by a peril of the ship.

However, marine insurance policy providing that the

insurance is “against all risks” must be construed as creating
a special insurance and extending to other risks that are
usually contemplated, and covers all losses except such as
may arise from the fraud of the insured, intentional
misconduct on the part of the insured or otherwise
excluded in the policy. It covers all losses during the voyage
whether arising from a marine peril or not, including
pilferage losses during war.

Q. WHAT IS THE INSURABLE INTEREST OF THE OWNER OF

A CHARTERED VESSEL?
A. The insurable interest of the owner of the vessel is not
affected by a charter party on the vessel. Thus, even if the
vessel has been chartered by one who undertakes to pay
the owner the value of the vessel in case of loss, the owner
still has insurable interest on the vessel.

However, in case of loss the owner may recover from the

insurer only that part of the loss which he cannot obtain
from the charterer.

A is the owner of a vessel valued at P800-M. It was

chartered by B. B agreed the pay, in case damage, 50% of
the value of vessel.

Q. (1) HOW MUCH IS THE INSURABLE INTEREST OF A? –

P800 M

(2) HOW MUCH IS THE INSURABLE INTEREST OF B? – P400

M

A. (1) The insurable interest of A is P800 M. The insurable

interest of the owner of the vessel is not affected by a
charter party on the vessel. Thus, even if the vessel has
been chartered by one who undertakes to pay the owner
the value of the vessel in case of loss, the owner still has
insurable interest on the vessel. However, in case of loss the
owner may recover from the insurer only that part of the
loss which he cannot obtain from the charterer.

(2) the insurable interest of B is 50% of the value of the

vessel which is the extent of the damage he will suffer when
the vessel is lost.

Q. WHAT IS LOAN ON BOTTOMRY OR LOAN ON

RESPONDANTIA?

A. A loan in which under any condition whatever, the

repayment of the sum loaned, and of the premium
stipulated, depends upon the safe arrival in port of the
goods on which it is made or of the price they may receive
in case of accident, shall be considered a loan on bottomry
or respondentia. It is a loan with things exposed to
maritime risks as collaterals to be paid if the collaterals are
safely transported and the lender shall lose his money if the
latter are lost.

It is a loan bottomry when the security is a vessel,

respondentia where the security is cargo.

C, the creditor, loaned P20 M to D, the debtor, as loan on

bottomry. The value of the vessel is P100 M and was given
as security for the loan.

Q. (1) HOW MUCH IS THE INSURABLE INTEREST OF C IN

THE VESSEL HYPOTHECATED? – P20 M

(2) HOW MUCH IS THE INSURABLE INTEREST OF D IN THE

VESSEL HE OWNS? – 80 M

A. (1) The insurable interest of C on the vessel

hypothecated is P20 M because if the vessel is lost, the
damage to the lender is the extent of the loan which he
cannot collect anymore.

(2) The insurable interest of D is P80 M which is the

difference between the value of the vessel and the loan
because he does not have to pay the loan of P20 M and
therefore, the damage he suffers is only P80 M.

Q. IN MARINE INSURANCE, WHAT MUST BE

COMMUNICATED BY THE INSURED TO THE INSURER?

A. The duty the law imposes to an insured in marine

insurance is the same as that required of an insured in any
kind of insurance, i.e. reveal all information which he
possesses which is material to the risk. However, while in
ordinary insurance the insured is not bound to
communicate even upon inquiry, an opinion upon the
matters in question in marine insurance the insured must
reveal to the insurer information of the belief or
expectation of a third person, in reference to a material
fact.

Therefore, if the insured at the time of effecting the

insurance receives, or has intelligence or information or
knowledge of facts which affect the condition and safety of
the ship on her voyage, and which, in the mind of a prudent
and rational underwriter, would increase the hazard or
liability to a loan, it ought to be disclosed.

Thus, information received from others that there were

French privateers or pirates in certain areas was ruled
material.

Facts: On August 9, 1953, the vessel “Anim” was anchored

at Mercedes wharf, Camarines Norte. Logs being towed by
another vessel, “Gloria”, hit “Anim” on the bow, causing the
three ropes with which it was securely moored to the wharf
to snap and said “Anim” drifted to the mouth of the
Mercedes River where it was stranded. “Anim” was towed
to higher ground at high tide for repairs of the damage it
sustained, consisting of eight holes and several dents. It
took three days to repair the damage. On August 14, 1953,
“Anim”, loaded with heavy machinery and its cargo took
effect and the insurer was not informed of the incident with
“Gloria”. On August 15, 1953, “Anim” encouraged bad
weather, started to list.. or starboard side and finally sunk
off San Bermerdino strait together with its cargo.

Q. WAS THERE A CONCEALMENT OF MATERIAL FACT?

A. Yes. The insured was guilty of concealment of a material

fact. Despite the incident which took place on August 9,
that is, five days before the issuance of the policy on August
14, the insured deliberately omitted to inform the insurer
about it.

Under the law, the insured is bound to disclose to the

insurer such happening because it affected the condition
and safety of the vessel which undoubtedly will influence
the mind of the insurer whether to continue with the
contract of insurance or not or to decide on the rate of
premium. The information that the vessel had been
aground and had received heavy blows was material.
Q. (1) IS CAUSAL CONNECTION BETWEEN THE FACT
CONCEALED AND THE CAUSE OF THE LOSS IN MARINE
INSURANCE NECESSARY?

(2) WHEN IS CAUSAL CONNECTION BETWEEN THE FACT

CONCEALED AND THE CAUSE OF THE LOSS NECESSARY IN
MARINE INSURANCE?

A. (1) Usually, concealment of material fact entitles the

insurer to rescind a contract of insurance even if the fact
concealed is not the cause of the loss. However, in marine
insurance concealment of the matters specified in Section
112 does not entitle the insurer to cancel the policy but
merely exonerates the insurer from a loss resulting from
the risk concealed.

In other words, if the fact concealed is any one of the

matters mentioned in this section, the insurer will still be
liable if the cause of the loss is not the fact concealed but
will be exempted from liability should the fact concealed be
the cause of the loss.

(2) A concealment in a marine insurance in respect to any of

the following matters, does not vitiate the entire contract,
but merely exonerates the insurer from a loss resulting
from the risk concealed:

a) The national character of the insured;

b) The liability of the thing insured to capture and
detention;
c) The liability to seizure from breach of foreign laws
of trade;
d) The want of necessary documents;
e) The use of false and simulated papers

Q. WHAT WARRANTIES ARE IMPLIED IN MARINE

INSURANCE?

A. In marine insurance the following warranties are implied:

 a) The ship is seaworthy;
b) No improper deviation from the agreed voyage will
be made;
c) The vessel will not engage in illegal venture; and
d) Where nationality or neutrality of ship or cargo is
expressly warranted, it is implied that the ship will
carry the requisite documents to show such
nationality or neutrality and will not carry any
document which would cause reasonable suspicion
thereon.

The foregoing warranties are implied as they exist by the

mere fact that a contract of marine insurance is entered
into.

Q. (1) WHEN IS A VESSEL SEAWORTHY?

(2) WHAT IS THE EFFECT OF VIOLATION OF THE IMPLIED

WARRANTY OF SEAWORTHINESS?

A. (1) A ship is seaworthy, when reasonably fit to perform

the service, and to encounter the ordinary perils of the
voyage, contemplated by the parties to the policy.

(2) Whenever the vessel is unseaworthy, the insurer will not

be liable for a loss occasioned thereby whether such fact
was known to the insured or not.

Q. WHEN IS THE IMPLIED WARRANTY OF SEAWORTHINESS

COMPLIED WITH?

A. An implied warranty of seaworthiness is complied with if

the ship be seaworthy at the time of the commencement of
the risk, except in the following cases:

a) When the insurance is made for a specified length

of time, the implied warranty is not complied with
unless the ship be seaworthy at the
commencement of every voyage it undertakes
during that time;
 b) When the insurance is upon the cargo which, by the
terms of the policy, description of the voyage, or
established custom of the trade, is to be
transhipped at an intermediate port, the implied
warranty is not complied with unless each vessel
upon which the cargo is shipped, or transhipped, be
seaworthy at the commencement of each particular
voyage;
c) Where different portions of the voyage
contemplated by a policy differ in respect to the
things requisite to make the ship seaworthy
therefor, a warranty of seaworthiness is complied
with if, at the commencement of each portion, the
ship is seaworthy with reference to that portion.

Q. WHEN A VESSEL IS SEAWORTHY AT THE

COMMENCEMENT OF THE VOYAGE BUT BECOMES
UNSEAWORTHY DURING THE VOYAGE WHAT MUST THE
OWNER OR CAPTAIN OF THE VESSEL DO?

A. Seaworthiness of the vessel, as general rule, is necessary

only at the commencement of the risk, and, therefore, the
insured does not warrant that the ship will be seaworthy
during the entire voyage or throughout the life of the
policy. Accordingly, if a vessel is seaworthy at the inception
of the voyage, subsequent unseaworthiness does not avoid
the policy.

However, when the ship becomes unseaworthy, during the

voyage to which the insurance relates, it is the duty of the
owner or ship captain to have the defect repaired without
unreasonable delay; otherwise, the insurer will be
exonerated from liability for any loss arising therefrom.

Q. At the commencement of the voyage, the vessel insured

was seaworthy. During the voyage, the vessel broke its shaft
and become unseaworthy. The vessel was towed to the
port of Calapan and thereafter towed to the port of
Batangas without being properly repaired. The vessel
sprung a leak while at the port of Batangas and sunk. WILL
THE INSURER BE LIABLE?

A. Unreasonable delay in repairing the defect causing

unseaworthiness arising after the commencement of the
risk will discharge the insurer from liability only when the
damage or loss was caused by the unseaworthiness of the
vessel, and where the damage was caused by the particular
defect that made the ship unseaworthy, the insurer is still
liable.

In this case, since the particular defect that caused

unseaworthiness was not the cause of the loss, the insurer
was liable although there was a failure to repair the vessel’s
defect.

The cargo vessel has a defective toilet such that whenever

it is flush, it leaks to the hull of the vessel where the
shipment of Jasmine rice is stored.

(1) Can the vessel be still seaworthy for insurance of

the vessel? – YES
(2) Is it seaworthy for the insurance of the cargo? –
NO

(1) The vessel may still be considered for purposes of

insurance of the vessel because the leak in the
toilet pipe does not affect its fitness to pursue the
voyage
(2) However, it is not seaworthy for purposes of
insurance of the cargo because it is not fit to
receive cargo. A ship therefore, which is seaworthy
for the purpose of an insurance upon the ship may,
nevertheless, by reason of being unfitted to receive
the cargo, be unseaworthy for the purpose of
insurance upon cargo.

Q. WHEN IS THERE A DEVIATION FROM THE COURSE OF

THE VOYAGE INSURED?
A. Deviation is (a) a departure from the course of the
voyage insured; (b) an unreasonable delay in pursuing the
voyage; or (c) the commencement of an entirely different
voyage.

Q. WHEN IS DEVIATION IMPROPER OR PROPER?

A. A deviation is proper:

a) When caused by circumstance over which neither

the master nor the owner of the ship has any
control (e.g. to avoid ground zero of war);
b) When necessary to comply with a warranty or to
avoid peril, whether or not peril is insured against
(e.g. absence of qualified ship captain);
c) When made in good faith, and upon reasonable
grounds of belief in its necessary to avoid a peril
(e.g. typhoon); or
d) When made in good faith, for the purpose of saving
human life, or relieving another vessel in distress.

Q. IS DEVIATION TO SAVE CARGO PROPER? IS THE

DEVIATION TO SAVE ANOTHER VESSEL OR HUMAN BEING
PROPER?

A. While in the course of the voyage insured, the vessel

receives a distress signal from another vessel, a deviation
made to save the passengers and crew of such vessel or to
relieve the vessel in distress is proper. However, if the
purpose of the deviation is to save cargo or property, such
deviation is improper.

Q. WHAT IS THE EFFECT OF IMPROPER DEVIATION?

A. Where there has been any deviation without just cause,

the insurers become immediately absolved from further
liability under the policy for losses occurring subsequent to
the deviation, even if the risk has not been increased or
even if it has been apparently diminished.