MALAYAN INSURANCE CORPORATION, petitioner, vs.

THE HON. COURT OF APPEALS and TKC MARKETING

CORPORATION, respondents.
G.R. No. 119599
March 20, 1997
Facts: TKC Marketing Corp.(TKC) imported 3,189.171 metric tons of soya bean meal. The
cargo was insured against the risk of loss by Malayan Insurance Corporation(Malayan). When
the vessel docked in Durban South Africa, the civil authorities arrested and detained it
because of a lawsuit on a question of ownership and possession. As a result, TKC notified
Malayan and made a formal claim.
Malayan replied that the arrest of the vessel by civil authority was not a peril covered by the
policies. The cargo was sold in Durban, due to its perishable nature. Thus, TKC reduced its
claim after deducting the proceeds of the sale. However, Malayan refused to pay, that the
clause 12 of the policy regarding an excepted risk due to arrest by civil authorities was
deleted by Section 1.1 of the Institute War clauses which covered ordinary arrests by civil
authorities. Failure of the cargo to arrive was also covered by the Theft, Pilferage, and Nondelivery Clause of the contract. Thus, TKC filed a complaint against Malayan.
Issue: whether or not the seizure by the civil authority was a risk covered by the marine
insurance policy?
Ruling: Yes. Section 12 or the "Free from Capture & Seizure Clause" states: "Warranted free
of capture, seizure, arrest, restraint or detainment, and the consequences thereof or of any
attempt thereat. Should Clause 12 be deleted, the relevant current institute war clauses
shall be deemed to form part of this insurance.
Under subsection 1.1 of section 1 of Institute War Clauses (Cargo) which included the risks
excluded from the standard form of English Marine Policy by the clause warranted free of
capture, seizure, arrest, restraint or detainment, and the consequences thereof of hostilities
or warlike operations, whether there be a declaration of war or not.
The petitioners claim that the Institute War Clauses can be operative in case of hostilities or
warlike operations on account of its heading "Institute War Clauses" is not tenable. It
reiterated the CAs stand that its interpretation in recent years to include seizure or
detention by civil authorities seems consistent with the general purposes of the clause. This
interpretation was regardless of the fact whether the arrest was in war or by civil authorities.
Indemnity and liability insurance policies are construed in accordance with the general rule
of resolving any ambiguity therein in favor of the insured, where the contract or policy is
prepared by the insurer. A contract of insurance, being a contract of adhesion, means that
any ambiguity should be resolved against the insurer.