Oriental Assurance Corp. v.

Court of Appeals
G.R. No. 94052 Aug. 9, 1991
Justice Melencio-Herrera
Facts:
Panama a!mill "o., #nc. $Panama% &ire' (rans)aci*c (o!age, #nc. to
trans)ort t&e logs it +oug&t ,rom Pala!an to Manila +- sea. (&e logs !ere insure'
!it& .riental Assurance "or). $.riental%, !&ic& t&e )olic- sti)ulating, among ot&ers,
t&at it is ,or a total loss onl-. (&e logs !ere loa'e' on t!o +arges. /ue to roug& seas
an' strong !in's, more t&an &al, o, t&e logs loa'e' in one o, t&e +arges !ere lost.
0&en Panama 'eman'e' )a-ment ,or t&e loss ,rom .riental, t&e latter re,use' on
t&e groun' t&at its contracte' lia+ilit- !as ,or 1total loss onl-.2 .n t&e com)laint ,or
'amages !as *le' +- Panama against .riental, +ot& t&e trial court an' t&e
a))ellate court rule' in ,a3or o, Panama, s&aring t&e 3ie! t&at t&e insurance
contract s&oul' +e li+erall- construe' in or'er to a3oi' a 'enial o, su+stantial
4ustice5 an' t&at t&e logs loa'e' in t&e t!o +arges s&oul' +e treate' se)aratel-
suc& t&at t&e loss sustaine' +- t&e s&i)ment in one o, t&em ma- +e consi'ere' as
constructi3e total loss an' corres)on'ingl- com)ensa+le.
Issue:
0.N .riental can +e &el' lia+le un'er its marine insurance )olic- +ase' on
t&e t&eor- o, a 'i3isi+le contract o, insurance an', conse6uentl-, a constructi3e
loss.
Held:
No, it cannot +e &el' lia+le. (&e terms o, t&e contract constitute t&e measure
o, t&e insurer lia+ilit- an' com)liance t&ere!it& is a con'ition )rece'ent to t&e
insure'7s rig&t to reco3er- ,rom t&e insurer. 0&et&er a contract is entire or
se3era+le is a 6uestion o, intention to +e 'etermine' +- t&e language em)lo-e' +-
t&e )arties. (&e )olic- in 6uestion s&o!s t&at t&e su+4ect matter insure' !as t&e
entire s&i)ment o, a)itong logs. (&e ,act t&at t&e logs !ere loa'e' on t!o 'i8erent
+arges 'i' not ma9e t&e contract se3eral an' 'i3isi+le as to t&e items insure'. (&e
logs on t&e t!o +arges !ere not se)aratel- 3alue' or se)aratel- insure'. .nl- one
)remium !as )ai' ,or t&e entire s&i)ment, ma9ing ,or onl- one cause or
consi'eration. (&e insurance contract must, t&ere,ore, +e consi'ere' in'i3isi+le.
(&e re6uirements ,or t&e a))lication o, ection 1:9 o, t&e #nsurance "o'e &a3e not
+een met. (&e logs &a3ing +een insure' as one inse)ara+le unit, t&e correct +asis
,or 'etermining t&e e;istence o, constructi3e total loss is t&e totalit- o, t&e
s&i)ment o, logs. ince t&e cost o, t&e lost logs 'i' not e;cee' <5= o, t&e total
3alue, t&e s&i)ment cannot +e sai' to &a3e sustaine' a constructi3e total loss un'er
ection 1:9$a% o, t&e #nsurance "o'e.