Mayer Steel Pipe Corporation vs.

CA
Insurance Law The Policy Prescription of Filing of Insurance Cases
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 carriers liability is extinguished if no suit is brought within one year. But the
liability of the insurer is not extinguished because the insurers 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 shippers 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.