#1 Aboitiz Shipping Corporation vs.

Insurance Company of North America

G.R. NO. 168402
AUGUST 6, 2008

REYES, R.T., J.:

FACTS: Insurance Company of North America (ICNA) insured a cargo for a school
institution in Cebu. The insurance policy stated that loss shall be payable to the
Assured or Order and it may be brought against ICNA UK or any of its listed agents
worldwide. The cargo travelled from Germany to Singapore to Manila, in Manila port
it was transferred to Aboitiz to be transported to Cebu. While in its care, the
cargo was placed outside of Aboitiz's warehouse as stated in its bill of lading.
When it finally reached the school, water damage was discovered. The cargo was
found to have damaged/cracked bottoms where water could seep in. It was determined
that because during the time the cargo was in Aboitiz's care there were heavy rains
in Manila and due to the fact that the cargo was left outside the warehouse, a
claim for damages was proper against Aboitiz, the school called Aboitiz 3 days
after discovering the damage and the Head of Claims of Aboitiz personally checked
the cargo. Aboitiz did not pay the claims so ICNA paid the damages under the
insurance policy after the school filed it before ICNA Makati. ICNA now seeks
reimbursement of what it paid to the school. Aboitiz claims that ICNA is not the
proper party and that notice was not properly served before it barring the claim
for damages. ICNA claims that the policy is clear that claims can be brought
against it or any of its agents worldwide therefore it has acquired a cause of
action by subrogation when it paid damages to the school institution.

ISSUE: Is ICNA the proper party in interest to file the claim against Aboitiz?

RULING: Yes. Respondent's cause of action is founded on it being subrogated to the

rights of the consignee of the damaged shipment springing from Article 2207 of the
Civil Code. As the Supreme Court held in the case of Pan Malayan Insurance
Corporation v. Court of Appeals, payment by the insurer to the assured operates as
an equitable assignment of all remedies the assured may have against the third
party who caused the damage. Subrogation is not dependent upon, nor does it grow
out of, any privity of contract or upon written assignment of claim. It accrues
simply upon payment of the insurance claim by the insurer.

Upon payment to the consignee of indemnity for damage to the insured goods, ICNA's
entitlement to subrogation quipped it with a cause of action against petitioner in
case of a contractual breach or negligence.

ISSUE 2: Is the requirement of notice of loss or damage in order to acquire a right

of recovery satisfied?

RULING 2: Yes. There are peculiar circumstances present in this case that led the
Supreme Court to rule affirmatively, and due to such they declared this ruling as
pro hac vice.

Stipulations requiring notice of loss or claim for damage as a condition precedent

to the right of recovery from a carrier must be given a reasonable and practical
construction, adapted to the circumstances of the case under adjudication, and
their application is limited to cases falling fairly within their object and
purpose. The Court gave due consideration to the fact that the final destination of
the damaged cargo was a school institution where authorities are bound by rules and
regulations governing their actions. There had to be proper clearance before
opening the package, a report had to be made as to the condition of the goods and
that report had to pass the proper channels before it is finalized and endorsed by
the school to the claims department of Aboitiz.
The call to petitioner was made two days from delivery, a reasonable period
considering that the goods could not have corroded instantly overnight such that it
could only have sustained the damage during transit. Moreover, petitioner was able
to immediately inspect the damage while the matter was still fresh. In so doing,
the main
objective of the prescribed time period was fulfilled. Thus, there was substantial
compliance with the notice requirement in this case.