What is Marine Insurance?
There is a marine adventure where--
Marine Insurance includes:
"(a) Insurance against loss of or damage to:
"(1) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements,
profits, moneys, securities, choses in action, instruments of debts, valuable papers, bottomry, and
respondentia interests and all other kinds of property and interests therein, in respect to,
appertaining to or in connection with any and all risks or perils of navigation, transit or
transportation, or while being assembled, packed, crated, baled, compressed or similarly prepared
for shipment or while awaiting shipment, or during any delays, storage, transhipment, or
reshipment incident thereto, including war risks, marine builder’s risks, and all personal property
floater risks;
"(2) Person or property in connection with or appertaining to a marine, inland marine, transit or
transportation insurance, including liability for loss of or damage arising out of or in connection with
the construction, repair, operation, maintenance or use of the subject matter of such insurance (but
not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to
any person arising out of ownership, maintenance, or use of automobiles);
"(3) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or
otherwise; and
"(4) Bridges, tunnels and other instrumentalities of transportation and communication (excluding
buildings, their furniture and furnishings, fixed contents and supplies held in storage); piers,
wharves, docks and slips, and other aids to navigation and transportation, including dry docks and
marine railways, dams and appurtenant facilities for the control of waterways.
"(b) Marine protection and indemnity insurance, meaning insurance against, or against legal liability
of the insured for loss, damage, or expense incident to ownership, operation, chartering,
maintenance, use, repair, or construction of any vessel, craft or instrumentality in use of ocean or
inland waterways, including liability of the insured for personal injury, illness or death or for loss of
or damage to the property of another person. (Section 101 Insurance Code of the Philippines)
A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the
assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the losses
incident to marine adventure. (Section 1, Marine Insurance Act of England 1906)
What is Marine Adventure?
Any ship goods or other moveables are exposed to maritime perils. Such property is in this Act
referred to as “insurable property”;
The earning or acquisition of any freight, passage money, commission, profit, or other pecuniary
benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of
insurable property to maritime perils;
Any liability to a third party may be incurred by the owner of, or other person interested in or
responsible for, insurable property, by reason of maritime perils
“Maritime perils” means the perils consequent on, or incidental to, the navigation of the sea, that is
to say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seisures, restraints, and
detainments of princes and peoples, jettisons, barratry, and any other perils, either of the like kind
or which may be designated by the policy. (Section 3, Marine Insurance Act of UK 1906)
What are the kinds of Marine Insurance according to type of policy?
They are as follows:
Voyage Policy
Open Policy
What are the kinds of Marine Insurance according to subject matter?
They are as follows:
Cargo Insurance. It is further classified into the following:
a. Ocean Marine Insurance and
b. Inland Marine Insurance
Hull Insurance
Liability Insurance.
What is general average?
It is a contribution by the several interests engaged in the maritime venture to make good the loss
of one of them for the voluntary sacrifice of a part of the ship or cargo to save the residue of the
property and the lives of those on board, or for extraordinary expenses necessarily incurred for the
common benefit and safety of all (California Canneries Co. v. Canton Ins. Office 25 Cal. App. 303, 143
p. 549-553).

The following are the requisites of a General Average:
1. There must be common danger
2. For the common safety, part of the vessel or of the cargo or both is sacrificed deliberately.
3. From the expenses and damages caused follows the successful saving of the vessel and cargo
4. The expenses of damages should have been incurred or inflicted after taking proper legal steps
and authority. (A Magsaysay, Inc vs Agan, 96 Phil 504)
What is jettison?
It is the intentional throwing overboard of part of the cargo or some piece of the ship in order to
save the ship or its cargo.
What are the implied warranties in Marine Insurance? (2000 Bar Exams)
They are as follows:
Warranty of Seaworthiness. In every marine insurance upon a ship or freight, or freightage, or upon
any thing which is the subject of marine insurance, a warranty is implied that the ship is seaworthy.
A ship is seaworthy when reasonably fit to perform the service and to encounter the ordinary perils
of the voyage contemplated by the parties to the policy. (Sections 115-116, Insurance Code of the
Philippines)
Warranty that the ship has the documents of neutrality or nationality. Where the nationality or
neutrality of a ship or cargo is expressly warranted, it is implied that the ship will carry the requisite
documents to show such nationality or neutrality and that it will not carry any documents which cast
reasonable suspicion thereon. (Section 122, Insurance Code of the Philippines).
Warranty against improper deviation. Deviation is a departure from the course of the voyage
insured, mentioned in the last two (2) sections, or an unreasonable delay in pursuing the voyage or
the commencement of an entirely different voyage.
When is deviation deemed proper?
It is deemed proper if the following are present:
When caused by circumstances over which neither the master nor the owner of the ship has any
control;
When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured
against;
When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or
When made in good faith, for the purpose of saving human life or relieving another vessel in
distress. (Section 126, Insurance Code of the Philippines)
Define seaworthiness and when is a ship deemed seaworthy?
A ship is seaworthy when reasonably fit to perform the service and to encounter the ordinary perils
of the voyage contemplated by the parties to the policy.
An implied warranty of seaworthiness is complied with if the ship be seaworthy at the time of the
commencement of the risk, except in the following cases:
"(a) When the insurance is made for a specified length of time, the implied warranty is not complied
with unless the ship be seaworthy at the commencement of every voyage it undertakes during that
time;
"(b) When the insurance is upon the cargo which, by the terms of the policy, description of the
voyage, or established custom of the trade, is to be transhipped at an intermediate port, the implied
warranty is not complied with unless each vessel upon which the cargo is shipped, or transhipped,
be seaworthy at the commencement of each particular voyage. (Section 116-117, Insurance Code of
the Philippines)
Is the warranty of seaworthiness applicable to the cargo owner too aside from the ship owner?
Since the law provides for an implied warranty of seaworthiness in every contract of ordinary
marine insurance, it becomes the obligation of a cargo owner to look for a reliable common carrier
which keeps its vessels in seaworthy condition. The shipper of cargo may have no control over the
vessel but he has full control in the choice of the common carrier that will transport his goods.
(Isabela Roque vs Intermediate Appellate Court and Pioneer Insurance and Surety Corporation, (G.R.
No. L-66935 November 11, 1985)
What is Perils of the Ship?
A loss, which, in the ordinary course of events, results (1) from the natural and inevitable action of
the sea (2) from the ordinary wear and tear of the ship, (3) from the negligent failure of the
shipowner to provide vessel with proper equipment to convey the cargo under ordinary conditions.
(Hector De Leon, The Law on Insurance with Insolvency Law)
The insurer does not insure against peril of the ship. The purpose of an ocean marine insurance is to
secure indemnity against accidents which may happen not against events which must happen. (Go
Tiaco vs Union Insurance Society of Canton, 40 Phil 40)
T Shipping, Co. insured all of its vessels with R Insurance, Co. The insurance policies stated that the
insurer shall answer for all damages due to perils of the sea. One of the insured's ship, the MV Dona
Priscilla, ran aground in the Panama Canal when its engine pipes leaked and the oil seeped into the
cargo compartment. The leakage was caused by the extensive mileage that the ship had
accumulated. May the insurer be made to answer for the damage to the cargo and the ship? (2011
Bar Exams)
(A) Yes, because the insurance policy covered any or all damage arising from perils of the sea.
(B) Yes, since there appears to have been no fault on the part of the shipowner and shipcaptain.
(C) No, since the proximate cause of the damage was the breach of warranty of seaworthiness of the
ship.
(D) No, since the proximate cause of the damage was due to ordinary usage of the ship, and thus not
due to a peril of the sea.
What is Perils of the Sea?
It refers to fortuitous accidents or casualties of the seas. It embraces all kinds of marine casualty
such as shipwreck, foundering, stranding, collision and every specie of damage done to the ship or
goods at sea by the violent action of the wind or waves (45 CJS 934)
The term 'perils of the sea' extends only to losses caused by sea damage, or by the violence of the
elements, and does not embrace all losses happening at sea. They insure against losses from
extraordinary occurrences only, such as stress of weather, winds and waves, lightning, tempests,
rocks and the like. These are understood to be the "perils of the sea" referred in the policy, and not
those ordinary perils which every vessel must encounter. "Perils of the sea" has been said to include
only such losses as are of extraordinary nature, or arise from some overwhelming power, which
cannot be guarded against by the ordinary exertion of human skill and prudence. Damage done to a
vessel by perils of the sea includes every species of damages done to a vessel at sea, as distinguished
from the ordinary wear and tear of the voyage, and distinct from injuries suffered by the vessel in
consequence of her not being seaworthy at the outset of her voyage. (Isabela Roque vs
Intermediate Appellate Court and Pioneer Insurance and Surety Corporation, (G.R. No. L-66935
November 11, 1985)
A certain policy of marine insurance upon cargo stipulated that the insurer shall be liable for losses
incident to "perils of the sea". During the voyage, sea water entered the compartment where the
cargo was stored due to a defective drain pipe. The insured brings action on the policy.
Is the insurer liable for damages caused to the cargo? Explain your answer briefly. (1960 Bar
Exams)
No. Insurer is not liable for damages caused. The defective drain pipe is not a peril of the sea. Rather
it is a peril of the ship. The insurer is therefore not liable.
Is rusting of the steel pipes in the course of voyage a peril of the sea?
Yes. 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. Rust is not an inherent vice of the steel pipes without
interference of external factors. (Cathay Insurance vs Court of Appeals, 151 SCRA 710)
What is barratry?
It is the willful misconduct on the part of the master or crew in pursuance of some unlawful or
fraudulent purpose without the consent of the owners, and to the prejudice of the owner's interest.
Barratry requires a willful and intentional act in its commission. No honest error or judgement or
mere negligence, unless criminally gross, can be barratry.
What is a common carrier?
Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case. (Articles 1732-33)
What is the test for determining whether a party is a common carrier of goods or not?
The following elements must be satisfied:
He must be engaged in the business of carrying goods for others as a public employment, and must
hold himself out as ready to engage in the transportation of goods for person generally as a business
and not as a casual occupation;
He must undertake to carry goods of the kind to which his business is confined;
He must undertake to carry by the method by which his business is conducted and over his
established roads; and
The transportation must be for hire. (First Philippine Industrial Corporation vs Court of Appeals,
[G.R. No. 125948 December 29, 1998] citing Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol.
4, p. 5.)
Based on the foregoing, First Philippine Industrial Corporation is a common carrier because "it is
engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a
public employment. It undertakes to carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by land and for compensation."
Will the fact that petitioner has a limited clientele does not exclude it from the definition of a
common carrier?
Art. 1732 of the Civil Code makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in
local idiom, as a "sideline"). Article 1732 . . . avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population. We think that Article 1877 deliberately refrained from making such distinctions.
The concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which
at least partially supplements the law on common carriers set forth in the Civil Code. Under Section
13, paragraph (b) of the Public Service Act, "public service" includes: every person that now or
hereafter may own, operate. manage, or control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system gas, electric light heat and power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless broadcasting stations and other similar
public services. (De Guzman vs. Court of Appeals, [168 SCRA 617-618, 1988])
Is a carrier under under a charter party a common carrier?
Charter party is contract between a shipowner and a merchant, by which a ship is let or hired for the
conveyance of goods on a specified voyage, or for a defined period. A vessel might also be chartered
to carry passengers on a journey. (Wikipedia)
Generally, private carriage is undertaken by special agreement and the carrier does not hold himself
out to carry goods for the general public. The most typical, although not the only form of private
carriage, is the charter party, a maritime contract by which the charterer, a party other than the
shipowner, obtains the use and service of all or some part of a ship for a period of time or a voyage
or voyages. (Hernandez and Peñasales, Philippine Admiralty and Maritime Law, p. p. 243; citing
Schoenbaum & Yiannopoulos, p. 364.)
It is a hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to
prove that the carrier was negligent or unseaworthy, and the fact that the goods were lost or
damaged while in the carrier's custody does not put the burden of proof on the carrier.
Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the protection
of the goods committed to its care, the burden of proving negligence or a breach of that duty rests
on plaintiff and proof of loss of, or damage to, cargo while in the carrier's possession does not cast
on it the burden of proving proper care and diligence on its part or that the loss occurred from an
excepted cause in the contract or bill of lading. However, in discharging the burden of proof, plaintiff
is entitled to the benefit of the presumptions and inferences by which the law aids the bailor in an
action against a bailee, and since the carrier is in a better position to know the cause of the loss and
that it was not one involving its liability, the law requires that it come forward with the information
available to it, and its failure to do so warrants an inference or presumption of its liability. However,
such inferences and presumptions, while they may affect the burden of coming forward with
evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes
forward with evidence explaining the loss or damage, the burden of going forward with the
evidence is again on plaintiff.
Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a
breach thereof and that such breach was the proximate cause of the damage rests on plaintiff, and
proof that the goods were lost or damaged while in the carrier's possession does not cast on it the
burden of proving seaworthiness. . . . Where the contract of carriage exempts the carrier from
liability for unseaworthiness not discoverable by due diligence, the carrier has the preliminary
burden of proving the exercise of due diligence to make the vessel seaworthy. (Vlasons Shipping Inc
vs Court of Appeals and National Steel Corporation, G.R. No. 112350 [December 12, 1997])
TYPES OF LOSSES
What are the types of losses in Marine Insurance?
Partial Loss
Constructive Total Loss
Actual Total Loss
What is a partial loss?
Funny but this is true. The law defines it in this manner - "Every loss which is not total is partial."
(Section 130, Insurance Code of the Philippines)
What is an actual loss?
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. (Section 132, Insurance Code of the Philippines)
RC Corporation purchased rice from Thailand, which it intended to sell locally. Due to stormy
weather, the ship carrying the rice became submerged in sea water, and with it the rice cargo.
When the cargo arrived in Manila, RC filed a claim for total loss with the insurer, because the rice
was no longer fit for human consumption. Admittedly, the rice could still be used as animal feed. Is
RC’s claim for total loss justified? Explain.
Yes, RC’s claim for total loss is justified. The rice, which was imported from Thailand for sale locally,
is obviously intended for consumption by the public. The complete physical destruction of the rice is
not essential to constitute an actual total loss. Such a loss exists in this case since the rice, having
been soaked in sea water and thereby rendered unfit for human consumption, has become totally
useless for the purpose for which it was imported (Pan Malayan Ins Co vs CA GR No. 95070 [Sep 5,
1991])
What is a constructive total loss?
It is sometimes referred to as a technical total loss. As a consequence, it gives the insured a right to
abandon. Abandonment is necessary in order to recover for a total loss.
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 insured against:
"(a) If more than three-fourths (¾) 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 (¾);
"(c) If the thing insured is a ship, and the contemplated voyage cannot be lawfully performed
without incurring either an expense to the insured of more than three-fourths (¾) the value of the
thing abandoned or a risk which a prudent man would not take under the circumstances; or
"(d) If the thing insured, being cargo or freightage, and the voyage cannot be performed, nor
another ship procured by the master, within a reasonable time and with reasonable diligence, to
forward the cargo, without incurring the like expense or risk mentioned in the preceding
subparagraph. But freightage cannot in any case be abandoned unless the ship is also abandoned.
(Section 141, Insurance Code of the Philippines)
An insurance company issued a marine insurance policy covering a shipment by sea from Mindoro
to Batangas of 1,000 pieces of Mindoro garden stones against “total loss only.” The stones were
loaded in two lighters, the first with 600 pieces and the second with 400 pieces. Because of rough
seas, damage was caused the second lighter resulting in the loss of 325 out of the 400 pieces. The
owner of the shipment filed claims against the insurance company on the ground of constructive
total loss inasmuch as more than ¾ of the value of the stones had been lost in one of the lighters. Is
the insurance company liable under its policy? Why? (1992 Bar Exams)
The insurance company is not liable under its policy covering against “total loss only” the shipment
of 1,000 pieces of Mindoro garden stones. While the same was carried in two barges, it was insured
under a single policy. There is no constructive total loss that can claimed since the ¾ rule is to be
computed on the total 1,000 pieces of Mindoro garden. The loss of 325 pieces of garden stones is
definitely less than 3/4 of 1,000 pieces of garden stones. (Section 139, Insurance Code, cited in
Oriental Assurance v. Court of Appeals and Panama Saw Mill, G.R. No. 94052 [August 9, 1991])
M/V Pearly Shells, a passenger and cargo vessel, was insured for P40,000,000.00 against
“constructive total loss.” Due to a typhoon, it sank near Palawan. Luckily, there were no casualties,
only injured passengers. The ship owner sent a notice of abandonment of his interest over the
vessel to the insurance company which then hired professionals to afloat the vessel for P900,000.00.
When re-floated, the vessel needed repairs estimated at P2,000,000.00. The insurance company
refused to pay the claim of the ship owner, stating that there was “no constructive total loss.”
a) Was there “constructive total loss” to entitle the ship owner to recover from the insurance
company? Explain.
No, there was no "constructive total loss" because the vessel was refloated and the costs of
refloating plus the needed repairs (P 2.9 Million) will not be more than three-fourths of the value of
the vessel. A constructive total loss is one which gives to a person insured a right to abandon. (Sec,
131, Insurance Code) There would have been a constructive total loss had the vessel MN Pearly
Shells suffer loss or needed refloating and repairs of more than the required three-fourths of its
value, i.e., more than P30.0 Million. (Sec. 139, Insurance Code, cited in Oriental Assurance v. Court
of Appeals and Panama Saw Mill, G.R. No. 94052 [August 9, 1991])
However, the insurance company shall pay for the total costs of refloating and needed repairs (P2.9
Million).
b) Was it proper for the ship owner to send a notice of abandonment to the insurance company?
Explain.
No, it was not proper for the ship owner to send a notice of abandonment to the insurance
company because abandonment can only be availed of when, in a marine insurance contract, the
amount to be expended to recover the vessel would have been more than three-fourths of its value.
Vessel MN Pearly Shells needed only P2.9 Million, which does not meet the required three-fourths
of its value to merit abandonment. (Section 139, Insurance Code, cited in Oriental Assurance v.
Court of Appeals and Panama Saw Mill, G.R. No. 94052 [August 9, 1991])
What is abandonment?
Abandonment is the act of the insured by which, after a constructive total loss, he declares the
relinquishment to the insurer of his interest in the thing insured. It must satisfy the following:
An abandonment must be made within a reasonable time after receipt of reliable information of the
loss, but where the information is of a doubtful character, the insured is entitled to a reasonable
time to make inquiry.
An abandonment must be neither partial nor conditional.
Abandonment is made by giving notice thereof to the insurer, which may be done orally, or in
writing: Provided, That if the notice be done orally, a written notice of such abandonment shall be
submitted within seven (7) days from such oral notice.
A notice of abandonment must be explicit, and must specify the particular cause of the
abandonment, but need state only enough to show that there is probable cause therefor, and need
not be accompanied with proof of interest or of loss. (Sections 142-146, Insurance Code of the
Philippines)
What is deviation in marine insurance policy? (1985 Bar Exams)
Deviation is departure of the vessel from the course of voyage, or unreasonable delay in pursuing
the voyage or the commencement of an entirely different voyage.
If the deviation is proper, the contract remains valid. If improper, the insurer is not liable.
A deviation is proper in the following cases:
If due to circumstances outside of the control of the captain or shipowner
If done to comply with warranty
If made in good faith to avoid a peril
If made to save human life or another distressed vessel (Jorge Miravite, Bar Review Materials in
Commercial Law, 1998 Edition, p183-184)
T, the captain of MV Don Alan, while asleep in his cabin, dreamt of an Intensity 8 earthquake along
the path of his ship. On waking up, he immediately ordered the ship to return to port. True enough,
the earthquake and tsunami struck three days later and his ship was saved. Was the deviation
proper?
(A) Yes, because the deviation was made in good faith and on a reasonable ground for believing that
it was necessary to avoid a peril.
(B) No, because no reasonable ground for avoiding a peril existed at the time of the deviation.
(C) No, because T relied merely on his supposed gift of prophecy.
(D) Yes, because the deviation took place based on a reasonable belief of the captain.
CLAIMS
What are the standard exclusions under the Institute Cargo Clauses A to C?
They are as follows:
loss, damage or expense attributable to wilful misconduct of the Assured
loss due to ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the
subject-matter insured
loss, damage or expense caused by insufficiency or unsuitability of packing or preparation of the
subject-matter insured
"packing" shall be deemed to include stowage in a container or liftvan but only when such stowage
is carried out prior to attachment of this insurance or by the Assured or their servants)
loss, damage or expense caused by inherent vice or nature of the subject-matter insured
loss, damage or expense proximately caused by delay, even though the delay be caused by a risk
insured against
loss, damage or expense arising from insolvency or financial default of the owners managers
charterers or operators of the vessel
loss, damage or expense arising from the use of any weapon of war employing atomic or nuclear
fission and/or fusion or other like reaction or radioactive force or matter.
loss, damage or expense arising from unseaworthiness of vessel or craft, unfitness of vessel craft
conveyance container or liftvan for the safe carriage of the subject-matter insured, where the
Assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject-
matter insured is loaded therein.
loss, damage or expense due to war civil war revolution rebellion insurrection, or civil strife arising
therefrom, or any hostile act by or against a belligerent power
loss, damage or expense due tocapture seizure arrest restraint or detainment (piracy excepted), and
the consequences thereof or any attempt thereat
loss, damage or expense due to derelict mines torpedoes bombs or other derelict weapons of war.
loss, damage or expense due to caused by strikers, locked-out workmen, or persons taking part in
labour disturbances, riots or civil commotions
loss, damage or expense due to resulting from strikes, lock-outs, labour disturbances, riots or civil
commotions
loss, damage or expense due to caused by any terrorist or any person acting from a political motive
Define inherent vice.
The “inherent vice” exclusion is also used to describe a loss that, due to the manner in which the
cargo is shipped, is regarded as inevitable. For example, fresh eggs shipped without any packing or
protection are likely to sustain damage no matter how carefully they are handled. Chocolates
shipped in an ordinary container in the summer are bound to melt. Damage that occurs in the
course of ordinary handling and transportation of cargos, without the intervention of fortuity, is due
to inherent vice and must be excluded from coverage. (Kim A. Wigmore & Michael D. Silva. (July 01,
2005). Inherent Vice & Fortuitous Events in Marine "All Risks" Policies. Retrieved from:
http://www.whitelawtwining.com/news-articles/articles-publications/transportation/marine/05-07-
01/Inherent_Vice_Fortuitous_Events_in_Marine_All_Risks_Policies.aspx)
What is the meant by an All Risk Marine Policy?
An insurance "against all risk" has a technical meaning in marine insurance. Under an "all risk"
marine policy, there must be a general rule be a fortuitous event in order to impose liability on the
insurer; losses occasioned by ordinary circumstances or wear and tear are not covered, thus, while
an "all risk" marine policy purports to cover losses from casualties at sea, it does not cover losses
occasioned by the ordinary circumstances of a voyage, but only those resulting from extra and
fortuitous events.
It has been held that damage to a cargo by high seas and other weather is not covered by an "all
risk" marine policy, since it is not fortuitous, particularly where the bad weather occurs at a place
where it could be expected at the time in question. (Choa Tiek Seng vs Court of Appeals and Filipino
Merchants Insurance Company, Inc. [G.R. No. 84507 March 15, 1990])
In Gloren Inc. vs. Filipinas Cia. de Seguros, it was held that an all risk 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. (65 O.G. 3392; see also 45 C.J.S. 941.)
What is the prescription period to file a suit against the carrier and ship under Carriage of Goods by
Sea Act (COGSA)?
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: Provided, That if a notice of loss or damage, either apparent or concealed, is not given as
provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring
suit within one year after the delivery of the goods or the date when the goods should have been
delivered. (Section 7 of Commonwealth Act No. 65)
Is there exception to the preceding question?
Yes. In case there is an express agreement between the parties. The agreement shall be the law
between them. (Phoenix Assurance Co. Ltd vs United Stated Lines, [22 SCRA 674], Baluyot vs
Venegas, [22 SCRA 412], Lazo vs Republic Surety and Insurance Co., Inc., [31 SCRA 329], Philippine
American General Insurance Co., Inc vs Mutuc, [61 SCRA 22-23]).
Is the one-year prescription period applicable to insurers as well?
Yes. Otherwise, what COGSA intends to to prohibit after the lapse of the one-year prescriptive
period can be done indirectly by the shipper or owner by simply filing a claim against the insurer
even after the lapse of one year. (Filipino Merchants Insurance Co., Inc vs Hon. Jose Alejandro and
Frota Oceanica, [GR No. L-51440, October 14, 1986, Yek Ton Fire and Marine Insurance Co., Ltd vs
American President Lines, Inc. [103 Phil 2225-26])
The case applies only if the suit is filed against the carrier either by the shipper, the consignee or the
insurer. The prescription shall not apply in case the shipper is pursuing a claim against the insurer.
The basis of liability of the insurer is the insurance contract and not the contract of carriage. (See
Mayer Steel Pipe Corporation and Hong Kong Government Department vs Court of Appeals, South
Sea Surety and Insurance Co., Inc and Charter Insurance Corporation,[274 SCRA 432])
Is the one year prescription period applicable in case of misdelivery or conversion?
No. As a consequence, the prescription period of 10 years shall apply for breach of a written
contract or 4 years in case of quasi-delict. (Ang vs. American Steamship Agencies, Inc. [19 SCRA
123])
What are the defenses of the common carrier in case of loss, destruction, or deterioration of the
goods under their custody?
The common carrier must prove that the loss, destruction, or deterioration of the goods are caused
by the following: (a) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (b)
Act of the public enemy in war, whether international or civil; (c) Act or omission of the shipper or
owner of the goods; (d) The character of the goods or defects in the packing or in the containers; (d)
Order or act of competent public authority. (Article 1733, New Civil Code)
If the goods are lost, destroyed or deteriorated, common carriers by causes outside of the above list,
common carrier must prove that they observed extraordinary diligence. Note that common carriers
are presumed to have been at fault or to have acted negligently in case of a loss. (Articles 1734,
New Civil Code).
Fire is not a natural disaster or calamity. (Eastern Shipping Lines, Inc. vs The Nisshin Fire and Marine
Insurance Co. and Dowa Fire and Marine Insurance Co., Ltd. (GR No. L71478, May 29, 1987)
Is the stipulation between the common carrier and the shipper or owner limiting the liability of the
former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary
diligence valid?
Yes, provided the following must concur:
In writing, signed by the shipper or owner;
Supported by a valuable consideration other than the service rendered by the common carrier; and
Reasonable, just and not contrary to public policy. (Article 1744, New Civil Code)
Is the stipulation that the common carrier's liability is limited to the value of the good appearing in
the Bill of Lading valid?
Yes. Unless the shipper or owner declares a greater value. (See Article 1749, New Civil Code)
Jacob, the owner of the barge, offered to transport the logs of Essau from Palawan to Manila. Essau
accepted the offer not knowing that the barge would be managed by irresponsible crew with deep-
seated resentments against Jacob, their employer.
Essau insured his cargo of logs against both perils of the sea and barratry.
The logs were improperly loaded on one side thereby causing the barge to tilt and to navigated on
an uneven keel. When the strong winds and high water, normal for the season, started to pound the
barge, the crew took advantage of the situation and unbolted the sea valves of the barge causing
sea water to come in. The barge sank.
When Essau tried to collect from the insurance firm, the latter stated it could not be held
responsible considering the unseaworthiness of both the barge and its crew. Essau countered that
he was not the owner of the barge and he could not be held responsible for conditions about which
he is innocent.
Is the insurance company liable? Decide with reasons (1986 Bar Exams)
No, the insurance company is not liable. The shipper of the cargo may have no control over the
vessel, but he has full control in the choice of the common carrier that will transport his goods. The
shipper's choice of the vessel which turns out to be unseaworthy will free the insurer from liability
under the insurance contract. (Jorge Miravite, Bar Review Materials in Commercial Law, 1998
Edition, p183)
A shipped 100 pieces of plywood from Davao City to Manila. He took a marine insurance policy to
insure the shipment against loss or damage due to "perils of the sea, barratry, fire, jettison, pirates
and other such perils"
When the ship left the port of Davao, the shipman in charge forgot to secure on the portholes thru
which sea water seeped during the voyage, damaging the plywood. A filed a claim against the
insurance company which refused to pay on the ground that the loss was not due to peril of the sea
or any of the risk covered under the policy. It was admitted that the sea was reasonably calm during
the voyage and that no strong winds or waves were encountered by the vessel.
How would you decide the case? Explain. (1983 Bar Exams)
Recovery under the policy will not prosper. The policy enumerates the perils insured against: perils
of the sea, fire, jettison, pirates and other such perils. The last phrase "and other perils" must
necessarily have common characteristics as the first five mentioned. Immediately noticeable is that
the five does not cover losses due to the fault or negligence of the members of the crew, like the
failure to secure one of the portholes of the vessels.
Hence, A cannot recover the damage to his goods from the insurer. (Jorge Miravite, Bar Review
Materials in Commercial Law, 1998 Edition, p183-184)
Marine insurance for a sugar shipment was procured by a shipper-consignee on the basis of a sales
invoice of the supplier stating that the sugar is in waterproof plastic bags. The insurer, relying on the
sales invoice, did not examine the shipment, and issued the covering policy forthwith. Later, the ship
carrying the sugar shipment sank at the sea due to a fire of unknown origin. May the shipper-
consignee recover on the policy? (1974 Bar Exams)

No, the shipper-consignee may not recover under the marine insurance policy. An ordinary marine
insurance policy is an insurance against loss or damage arising from perils of the sea. The fire which
burned the cargo is not a peril of the sea. (Jorge Miravite, Bar Review Materials in Commercial Law,
1998 Edition, p183-184)