John Alexander S.

Belderol

Insurance Case Digests Marine Insurance

LA RAZON SOCIAL "GO TIAOCO Y HERMANOS," vs. UNION INSURANCE SOCIETY OF CANTON, LTD.
G.R. No. 13983

September 1, 1919

(Perils of the Sea vs. Perils of the Ship)

Facts: Go Tiaoco Brothers, owner of certain rice cavans insured by Union Insurance, transported these cavans on May, 1915, on
the steamship Hondagua from the port of Saigon to Cebu. On discharging the rice from one of the compartments in the after hold,
upon arrival at Cebu, it was discovered that one thousand four hundred seventy-three sacks and been damages by sea water. The
trial court found that the inflow of the sea water during the voyage was due to a defect in one of the drain pipes of the ship and
concluded that the loss was not covered by the policy of insurance. The court found in effect that the opening causing loss had
resulted in course of time from ordinary wear and tear and not from the straining of the ship in rough weather on that voyage.
The court also found that the repairs that had been made on the pipe were slovenly and defective and that, by reason of the
condition of this pipe, the ship was not properly equipped to receive the rice at the time the voyage was begun. For this reason the
court held that the ship was unseaworthy.
The policy of insurance was signed upon a form long in use among companies engaged in maritime insurance. It purports to
insure the cargo from the following among other risks: "Perils . . . of the seas, men of war, fire, enemies, pirates, rovers, thieves,
jettisons, . . . barratry of the master and mariners, and of all other perils, losses, and misfortunes that have or shall come to the
hurt, detriment, or damage of the said goods and merchandise or any part thereof."
Issue: What is meant by the phrase perils of the sea as used in the marine insurance contract between Go Tiaoco and Union
Insurance?
Held: It must be considered to be settled that a loss which, in the ordinary course of events, results from the natural and
inevitable action of the sea, from the ordinary wear and tear of the ship, or from the negligent failure of the ship's owner to
provide the vessel with proper equipment to convey the cargo under ordinary conditions, is not a peril of the sea. Such a loss is
rather due to what has been aptly called the "peril of the ship." The insurer undertakes to insure against perils of the sea and
similar perils, not against perils of the ship.
In the present case the entrance of the sea water into the ship's hold through the defective pipe already described was not due to
any accident which happened during the voyage, but to the failure of the ship's owner properly to repair a defect of the existence
of which he was apprised. The loss was therefore more analogous to that which directly results from simple unseaworthiness than
to that which results from perils of the sea. As applied to the present case it results that the owners of the damages rice must look
to the shipowner for redress and not to the insurer.

CATHAY INSURANCE CO. vs. HON. COURT OF APPEALS, and REMINGTON INDUSTRIAL SALES CORPORATION
G.R. No. 76145

June 30, 1987

(Perils of the Sea vs. Perils of the Ship)

Facts: Private respondent sought to collect losses and damages incurred in a shipment of seamless steel pipes under an
insurance contract in favor of the said private respondent as the insured, consignee or importer of aforesaid merchandise while in
transit from Japan to the Philippines on board vessel SS "Eastern Mariner". According to respondent, such consignment had
earlier been damaged by heavy rusting while in transit. As a result, respondent caused the notation rusty to be placed in the bill
of lading covering the consignment. Respondent now contends that placing of notation "rusty" in the way bills is not only private
respondent's right but a natural and spontaneous reaction of whoever received the seamless steel pipes in a rusty condition at
private respondent's bodega.
Respondent in its comment on the petition, contends that rust is not an inherent vice of the seamless steel pipes without
interference of external factors, while petitioner maintains that the insistence of private respondent that rusting is a peril of the
sea is erroneous.
Issue:

Is rusting of the consignment steel pipes a peril of the sea, or a peril of the ship?

Held: There is no question that the rusting of steel pipes in the course of a voyage is a "peril of the sea" in view of the toll on
the cargo of wind, water, and salt conditions. At any rate if the insurer cannot be held accountable therefor, We would fail to
observe a cardinal rule in the interpretation of contracts, namely, that any ambiguity therein should be construed against the
maker/issuer/drafter thereof, namely, the insurer. Besides the precise purpose of insuring cargo during a voyage would be
rendered fruitless.

CHOA TIEK SENG vs. HON. COURT OF APPEALS, FILIPINO MERCHANTS' INSURANCE COMPANY, et. al.

G.R. No. 84507

March 15, 1990

(All Risks Marine Insurance Policy)

Note: See Succeeding Case

Facts: On November 4, 1976 petitioner imported some lactose crystals from Holland. The goods were loaded at the port at
Rotterdam in sea vans on board the vessel "MS Benalder as the mother vessel, and thereafter aboard the feeder vessel "Wesser

Broker V-25" of respondent Ben Lines Container, Ltd. The goods were insured by the respondent Filipino Merchants' Insurance
Co., Inc. against all risks under the terms of the insurance cargo policy. Upon arrival at the port of Manila, the cargo was
discharged into the custody of the arrastre operator respondent E. Razon, Inc. (broker for short), prior to the delivery to petitioner
through his broker. Of the 600 bags delivered to petitioner, 403 were in bad order.
Respondent insurance company rejected the claim alleging that assuming that spillage took place while the goods were in transit,
petitioner and his agent failed to avert or minimize the loss by failing to recover spillage from the sea van, thus violating the
terms of the insurance policy sued upon; and that assuming that the spillage did not occur while the cargo was in transit, the said
400 bags were loaded in bad order, and that in any case, the van did not carry any evidence of spillage.
Issue:

In an all risks marine insurance policy, does insured have to provide evidence of loss?

Held: No. An all risks insurance policy insures against all causes of conceivable loss or damage, except as otherwise excluded
in the policy or due to fraud or intentional misconduct on the part of the insured. It covers all losses during the voyage whether
arising from a marine peril or not, including pilferage losses during the war. The terms of the policy are so clear and require no
interpretation. The insurance policy covers all loss or damage to the cargo except those caused by delay or inherent vice or nature
of the cargo insured. It is the duty of the respondent insurance company to establish that said loss or damage falls within the
exceptions provided for by law, otherwise it is liable therefor.
An "all risks" provision of a marine policy creates a special type of insurance which extends coverage to risks not usually
contemplated and avoids putting upon the insured the burden of establishing that the loss was due to peril falling within the
policy's coverage. The insurer can avoid coverage upon demonstrating that a specific provision expressly excludes the loss from
coverage. In this case, the damage caused to the cargo has not been attributed to any of the exceptions provided for nor is there
any pretension to this effect. Thus, the liability of respondent insurance company is clear.

FILIPINO MERCHANTS INSURANCE CO., INC. vs. COURT OF APPEALS and CHOA TIEK SENG

G.R. No. 85141 November 28, 1989

(All Risks Marine Insurance Policy)

Note: See Previous Case

Facts: Choa Tiek Seng, consignee of the shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded at the
Port of Manila on or about December 11, 1976, insured said shipment with defendant insurance company against all risks. The
fishmeal in 666 new gunny bags were unloaded from the ship on December 11, 1976 at Manila unto the arrastre contractor E.
Razon, Inc. in bad order. Insurer contends that the Court of Appeals erred in its interpretation and application of the "all risks"
clause of the marine insurance policy when it held the petitioner liable to the private respondent for the partial loss of the cargo,
notwithstanding the clear absence of proof of some fortuitous event, casualty, or accidental cause to which the loss is attributable.
Petitioner further contends that an "all risks" marine policy has a technical meaning in insurance in that before a claim can be
compensable it is essential that there must be "some fortuity, " "casualty" or "accidental cause" to which the alleged loss is
attributable and the failure of herein private respondent, upon whom lay the burden, to adduce evidence showing that the alleged
loss to the cargo in question was due to a fortuitous event precludes his right to recover from the insurance policy.
Issue:

Who has the duty of proving loss under an all risks policy, the insured, or the insurer?

Held: It depends on the stage of the proceedings for claiming reimbursement. Generally, the burden of proof is upon the
insured to show that a loss arose from a covered peril, but under an "all risks" policy the burden is not on the insured to prove the
precise cause of loss or damage for which it seeks compensation. The insured under an "all risks insurance policy" has the initial
burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded
from the vessel; thereafter, the burden then shifts to the insurer to show the exception to the coverage. The basic rule is that the
insurance company has the burden of proving that the loss is caused by the risk excepted and for want of such proof, the company
is liable.
The burden of the insured, therefore, is to prove merely that the goods he transported have been lost, destroyed or deteriorated.
Thereafter, the burden is shifted to the insurer to prove that the loss was due to excepted perils. To impose on the insured the
burden of proving the precise cause of the loss or damage would be inconsistent with the broad protective purpose of "all risks"
insurance. In the present case, there being no showing that the loss was caused by any of the excepted perils, the insurer is liable
under the policy.

NATIONAL FOOD AUTHORITY, et. al. vs. COURT OF APPEALS AND HONGFIL SHIPPING CORPORATION

G.R. No. 96453

August 4, 1999

(Charter Party is NOT a contract of absolute insurance against fortuitous events)

Facts: National Food Authority (NFA) entered into a "Letter of Agreement for Vessel/Barge Hire" with Hongfil Shipping
Corporation for the shipment of 200,000 bags of corn grains from Cagayan de Oro City to Manila. On February 10, 1987, loading
on the vessel commenced and was terminated on March 4, 1987. As there was a strike staged by the arrastre workers and in view
of the refusal of the striking stevedores to attend to their work, the loading of said corn grains took twenty-one (21) days, fifteen

hours (15) and eighteen (18) minutes to finish. On March 11, 1987, the vessel M/V CHARLIE/DIANE arrived at the Port of
Manila and a certification of discharging rate was issued at the instance of Hongfil, stating that it would take twelve (12) days, six
(6) hours and twenty-two (22) minutes to discharge the 200,000 bags of corn grains.
Unfortunately, unloading only commenced on March 15, 1987 and was completed on April 7, 1987. It took a total period of twenty
(20) days, fourteen (14) hours and thirty-three (33) minutes to finish the unloading, due to the unavailability of a berthing space
for M/V CHARLIE/DIANE. Hongfil sent its billing to NFA, claiming payment for freight covering the shut-out load or deadfreight
as well as demurrage, allegedly sustained during the loading and unloading of subject shipment of corn grains. When NFA
refused to pay the amount reflected in the billing, Hongfil brought an action against NFA and its officers for recovery of
deadfreight and demurrage.
Issue:

Is petitioner liable for deadfreight and demurrage due to delay?

Held: No. It bears stressing that subject Letter of Agreement is considered a Charter Party. A charter party is classified into
(1) "bareboat" or "demise" charter and (2) contract of affreightment. Subject contract is one of affreightment, whereby the owner of
the vessel leases part or all of its space to haul goods for others. It is a contract for special service to be rendered by the owner of
the vessel. Under such contract the ship owner retains the possession, command and navigation of the ship, the charterer or
freighter merely having use of the space in the vessel in return for his payment of the charter hire.
In a contract of affreightment, the shipper or charterer merely contracts a vessel to carry its cargo with the corresponding duty to
provide for the berthing space for the loading or unloading. Charterer is merely required to exercise ordinary diligence in
ensuring that a berthing space be made available for the vessel. The charterer does not make itself an absolute insurer
against all events which cannot be foreseen or are inevitable. The law only requires the exercise of due diligence on the part
of the charterer to scout or look for a berthing space. In the present case, shipper, not NFA, had control of the vessel. Not being
the cause of delay, NFA is not liable for the accruing deadfreight and demurrage.