d2015member

Oriental Assurance Corp v. CA and Panama Saw Mill (1991) Melencio-Herrera, J. -------------Short version: Panama Sawmill bought some logs in Palawan. They hired 2 barges to transport these to Manila. Panama Sawmill had the logs insured. In the policy, it stipulated that the subject matter is the entire shipment and it was an insurance against total loss. Barge #2 sank and so did some logs loaded on it. SC says there was no constructive total loss because there is only CTL if more than 3/4 is actually lost. In this case, if we only consider the lost logs in relation to the logs in barge #2, then there would have been CTL. But the policy considered THE ENT IRE SHIPMENT of logs as the subject matter, and not per barge. Panama Sawmill cannot recover from its insurer. -------------Facts: Panama Sawmill bought 1,208 apitong logs in Palawan. It hired 2 barges from Transpacific to transport the logs to Manila. Panama Sawmill insured this for P1million with Oriental Assurance. The policy stipulated that: o The subject matter insured is the entire shipment of the logs o Warranted that this insurance is against total loss only The logs (totalling 1,208) were loaded on the 2 barges, both tugged by the same tug-boat. During the voyage, rough seas & strong winds damaged only barge #2. o Some logs were lost (497 out of 598 logs loaded on barge #2) Panama Sawmill demanded payment from the insurance company. Insurance company refused because its contracted liability was only for total loss Panama Sawmill filed in RTC-Kalookan a Complaint for Damages against the insurance company RTC ordered the insurance company to pay Panama Sawmill some insurance indemnity CA affirmed. Treated the loss as a constructive total loss. Issues: Is the insurance company (Oriental Assurance) liable? Held: No. There was no constructive total loss. Ratio:

As in the Perla Compania case in 1990, the terms of the contract constitute the measure of the insurers liability.

Re: Was it a several and divisible contract? No The policy in this case shows that the subject matter insured was the entire shipment of logs. The fact that the logs were loaded on 2 different barges did not make the contract several and divisible. The logs on the 2 barges were not separately valued or separately insured. o Only one premium was paid for the entire shipment, making for only one cause or consideration. Re: Was there constructive total loss? No The insurer's liability was for "total loss only." A total loss may be either actual or constructive (Sec. 129, Insurance Code). An actual total loss is caused by: (a) A total destruction of the thing insured; (b) The irretrievable loss of the thing by sinking, or by being broken up; (c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or (d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured. A constructive total loss is one which gives to a person insured a right to abandon, under Sec 139 of the Insurance Code. Section 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the loss is a peril injured against, (a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril; (b) If it is injured to such an extent as to reduce its value more than three-fourths . Mathematically speaking, the loss of 497 logs from barge #2 is more than three-fourths () IF it is in relation only to the 598 logs in that particular barge (barge #2). However, the logs were not separately valued by the policy. The requirements for the application of Sec 139 have not been met. The logs were insured as one inseparable unit. The correct basis for determining the existence of constructive total loss is the totality of the shipment of logs. Only 41.45% of the entire shipment was lost.

d2015member

Since the cost of those lost pieces does not exceed 75% of the value of all logs, no constructive total loss. No actual or constructive total loss, no recovery by Panama Sawmill.

Judgment set aside (Insurance company absolved from liability) *And since the SC already reached this conclusion, Panama Sawmill's claims, in its comment, of fraud need not be passed upon. Besides, there was no review in proper form.