INSURANCE (Week 5)

Sec. 99. Marine Insurance includes: repair, or construction of any vessel, craft or instrumentality in use of
ocean or inland waterways, including liability of the insured for personal
(1) Insurance against loss of or damage to
injury, illness or death or for loss of or damage to the property of another
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes,
person.
merchandise, effects, disbursements, profits, moneys, securities, choses
in action, evidences of debts, valuable papers, bottomry, and Sec. 101. The insurable interest of the owner of the ship hypothecated
respondentia interests and all other kinds of property and interests by bottomry is only the excess of its value over the amount secured by
therein, in respect to, appertaining to or in connection with any and all bottomry.
risks or perils of navigation, transit or transportation, or while being
Roque v IAC (Insurance)
assembled, packed, crated, baled, compressed or similarly prepared for
shipment or while awaiting shipment, or during any delays, storage, FACTS:
transhipment, or reshipment incident thereto, including war risks, On February 19, 1972, the Manila Bay Lighterage Corporation
marine builder's risks, and all personal property floater risks; (Manila Bay), a common carrier, entered into a contract with the
petitioners whereby the former would load and carry on board its barge
(b) Person or property in connection with or appertaining to a
Mable 10 about 422.18 cubic meters of logs from Malampaya Sound,
marine, inland marine, transit or transportation insurance, including
Palawan to North Harbor, Manila. The petitioners insured the logs
liability for loss of or damage arising out of or in connection with the
against loss for P100,000.00 with respondent Pioneer Insurance and
construction, repair, operation, maintenance or use of the subject matter
Surety Corporation (Pioneer).
of such insurance (but not including life insurance or surety bonds nor
On February 29, 1972, the petitioners loaded on the barge, 811 pieces
insurance against loss by reason of bodily injury to any person arising
of logs at Malampaya Sound, Palawan for carriage and delivery to
out of ownership, maintenance, or use of automobiles);
North Harbor, Port of Manila, but the shipment never reached its
(c) Precious stones, jewels, jewelry, precious metals, whether in destination because Mable 10 sank with the 811 pieces of logs
course of transportation or otherwise; somewhere off Cabuli Point in Palawan on its way to Manila.
Hence, petitioners commenced Civil Case No. 86599 against Manila
(d) Bridges, tunnels and other instrumentalities of transportation
Bay and respondent Pioneer.
and communication (excluding buildings, their furniture and
furnishings, fixed contents and supplies held in storage); piers, wharves,
DECISION OF LOWER COURTS:
docks and slips, and other aids to navigation and transportation,
(1) Trial Court: found in favor of petitioners.
including dry docks and marine railways, dams and appurtenant
(2) Intermediate Appellate Court: absolved the respondent insurance
facilities for the control of waterways.
company from liability on the grounds that the vessel carrying the
(2) "Marine protection and indemnity insurance," meaning insurance insured cargo was unseaworthy and the loss of said cargo was caused
against, or against legal liability of the insured for loss, damage, or not by the perils of the sea but by the perils of the ship
expense incident to ownership, operation, chartering, maintenance, use,
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INSURANCE (Week 5)
ISSUES:
I. THE INTERMEDIATE APPELLATE COURT ERRED IN
HOLDING THAT IN CASES OF MARINE CARGO INSURANCE,
THERE IS A WARRANTY OF SEAWORTHINESS BY THE
CARGO OWNER.
II. THE INTERMEDIATE APPELLATE COURT ERRED IN
HOLDING THAT THE LOSS OF THE CARGO IN THIS CASE
WAS CAUSED BY "PERILS OF THE SHIP" AND NOT BY
"PERILS OF THE SEA.”
RULING:
I. No. The IAC is correct.
The liability of the insurance company is governed by law. Section
113 of the Insurance Code provides:
In every marine insurance upon a ship or freight, or freightage, or upon
any thing that is the subject of marine insurance, a warranty is implied
that the ship is seaworthy.
Section 99 of the same Code also provides in part. Marine insurance
includes:
(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes,
merchandise, ...
From the above-quoted provisions, there can be no mistaking the fact
that the term "cargo" can be the subject of marine insurance and that
once it is so made, the implied warranty of seaworthiness immediately
attaches to whoever is insuring the cargo whether he be the shipowner
or not.
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
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common carrier that will transport his goods. Or the cargo owner may
enter into a contract of insurance which specifically provides that the
insurer answers not only for the perils of the sea but also provides for
coverage of perils of the ship.
II. No, the IAC is correct.
In marine cases, the risks insured against are "perils of the sea"
A policy does not cover a loss or injury that must inevitably take place
in the ordinary course of things. There is no doubt that 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, 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 (as
in this case). It is also the general rule that everything which happens
thru the inherent vice of the thing, or by the act of the owners, master
or shipper, shall not be reputed a peril, if not otherwise borne in the
policy.
It is quite unmistakable that the loss of the cargo was due to the perils
of the ship rather than the perils of the sea. The facts clearly negate the
petitioners' claim under the insurance policy.
INSURANCE (Week 5)
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 result
from the perils of the sea.
LA RAZON SOCIAL "GO TIAOCO Y HERMANOS," vs.
UNION INSURANCE SOCIETY OF CANTON, LTD.,
Facts:
Union Insurance Society of Canton (Union Insurance) issued a marine
insurance policy upon a cargo of rice belonging to Go Tiaoco Brothers,
which was transported on May 1915 from Saigon to Cebu. The policy
states that it insures 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."
However, upon arrival in Cebu, it was discovered that 1,473 sacks of
rice have been damaged by sea water. The loss amounted to Php
3,875.25, which the GO Tiaoco demanded from Union Insurance, which
the insurer denied. Hence, an action was filed by Go Tiaoco Brothers
for the amount of the loss.
The facts show that the drain pipe, which discharges water from the
water closet to the sea, passed through the compartment where the rice
was stowed. Since the pipe had become corroded and abraded due to
course of time, a hole had appeared in the pipe. Such hole had been in
existence even before the voyage, and the crew attempted to fix it by
filling it with cement and bolting a strip of iron over it. However, the
effect of loading the boat was to submerge the vent of the pipe until it
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was 2ft below sea level, making the sea water rise in the pipe. This
resulted in the washing out of the cement filling, and thus allowing the
flow of salt water into the compartment of the rice.
The trial court ruled in favor of Union Insurance, finding that the hole
was through wear and tear, and not through the straining of the ship due
to the rough weather. Also, the repairs made were defective, and by
reason of the condition of the pipe, the ship was unseaworthy, and not
equipped to receive the rice at the time the voyage began. As such, the
loss was not covered by the insurance policy.
Hence, this appeal by the Go Tiaoco Brothers. It argues that “…all
other perils, losses and misfortunes” cover their case.
Issue: W/N Union Insurance is liable for the loss cause under the
policy
Held: No. Union Insurance is not liable.
Construction of the Expression “…all other perils, losses and
misfortunes”
The words "all other perils, losses, and misfortunes" are to be interpreted
as covering risks which are of like kind (ejusdem generis) with the
particular risks which are enumerated in the preceding part of the same
clause of the contract. According to the ordinary rules of construction,
these words must be interpreted with reference to the words which
immediately precede them. They were no doubt inserted in order to
prevent disputes founded on nice distinctions. Their office is to cover in
terms whatever may be within the spirit of the cases previously
enumerated.
[DOCTRINE] 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
INSURANCE (Week 5)
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. There must, in order to make the insurer
liable, be some casualty, something which could not be foreseen as one
of the necessary incidents of the adventure.
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.
According to the cases decided by House of Lords1 (check Notes for
the summaries as they were extensively discussed), the insurer is
generally not liable as the shipowner excepts the perils of the sea from
his engagement. As applied to the present case, it results that the
owners of the race must look to the shipowner for redress and no to the
insurer.
There was an implied warranty of seaworthiness of the ship
It is universally accepted that in every contract of insurance upon
anything which is the subject of marine insurance, a warranty is
implied that the ship shall be seaworthy at the time of the inception of
the voyage. A ship which is seaworthy for the purpose of insurance
upon the ship may yet be unseaworthy for the purpose of insurance
upon the cargo. Hence, according to jurisprudence2, the ship was
accordingly held unseaworthy. The trial court was not in error in
absolving Union Insurance from the complaint.
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CHOA TIEK SENG vs. HON. COURT OF APPEALS, FILIPINO
MERCHANTS' INSURANCE COMPANY, INC., BEN LINES
CONTAINER, LTD. AND E. RAZON, INC.
Facts: 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' and thereafter another 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 only to find out that of the 600 bags delivered to petitioner,
403 were in bad order. The surveys showed that the bad order bags
suffered spillage. (take not of the cause of damage)
Petitioner filed a claim for the loss against respondent insurance
company.
Both RTC and CA favor the respondent insurance on the following
ground:
In the case at bar, appellant failed to prove that the alleged damage
was due to risks connected with navigation.
A distinction should be made between "perils of the sea" which render
the insurer liable on account of the loss and/or damage brought about
thereof and "perils of the ship" which do not render the insurer liable for
any loss or damage. Perils of the sea or perils of navigation embrace all
kinds of marine casualties, 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 winds or waves. They do not embrace all loses
happening on the sea. A peril whose only connection with the sea is that
it arises aboard ship is not necessarily a peril of the sea; the peril must
be of the sea and not merely one accruing on the sea. (so since the
INSURANCE (Week 5)

spillage is not cause by perils of sea, then respondent Insurance is not An "all risks" provision of a marine policy creates a special type of
liable) insurance which extends coverage to risks not usually contemplated
and avoids putting upon the insured the burden of establishing that the
Issue: Respondent Court erred in holding That An "All Risks"
loss was due to peril falling within the policy's coverage. The insurer
Coverage covers only losses occasioned by or Resulting From "Extra
can avoid coverage upon demonstrating that a specific provision
And Fortuitous Events".
expressly excludes the loss from coverage.
(meaning only perils by the sea are covered, which spillage is not one)
In this case, the damage caused to the cargo has not been attributed to
Ruling: any of the exceptions provided for nor is there any pretension to this
effect. Thus, the liability of respondent insurance company is clear.
(Take note that the policy here is “all risk policy)
Filipino Merchants Insurance v CA
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 G.R. No. 85141 November 28, 1989
damage, except as otherwise excluded in the policy or due to fraud or
Facts:
intentional misconduct on the part of the insured. It covers all losses
during the voyage whether arising from a marine peril or not, Choa insured 600 tons of fishmeal for the sum of P267,653.59 from
including pilferage losses during the war. Bangkok, Thailand to Manila against all risks under warehouse to
warehouse terms. What was imported in the SS Bougainville was
In the present case, the "all risks" clause of the policy sued upon reads
59.940 metric tons at $395.42 a ton. The cargo was unloaded from the
as follows:
ship and 227 bags were found to be in bad condition by the arrastre.
5. This insurance is against all risks of loss or damage to the subject
Choa made a formal claim against the defendant Filipino Merchants
matter insured but shall in no case be deemed to extend to cover loss,
Insurance Company for P51,568.62 He also presented a claim against
damage, or expense proximately caused by delay or inherent vice or
the ship, but the defendant Filipino Merchants Insurance Company
nature of the subject matter insured. Claims recoverable hereunder
refused to pay the claim. The plaintiff brought an action against the
shall be payable irrespective of percentage.
company and presented a third party complaint against the vessel and
The terms of the policy are so clear and require no interpretation. The the arrastre contractor.
insurance policy covers all loss or damage to the cargo except those
The court below, after trial on the merits, rendered judgment in favor
caused by delay or inherent vice or nature of the cargo insured. It is the
of private respondent, for the sum of P51,568.62 with interest at legal
duty of the respondent insurance company to establish that said loss or
rate.
damage falls within the exceptions provided for by law, otherwise it is
liable therefor. The common carrier, Compagnie, was ordered to pay as a joint debtor.

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INSURANCE (Week 5)
On appeal, the respondent court affirmed the decision of the lower
court insofar as the award on the complaint is concerned and modified
the same with regard to the adjudication of the third-party complaint.
A motion for reconsideration of the aforesaid decision was denied. The
AC made Filipino Merchants pay but absolved the common carrier,
Compagnie. Hence this petition.
Issues:
1. WON the "all risks" clause of the marine insurance policy 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.
2. WON The Court of Appeals erred in not holding that the
private respondent had no insurable interest in the subject cargo,
hence, the marine insurance policy taken out by private respondent is
null and void.
Held: No. No. Petition denied.
Ratio:
1. The "all risks clause" of the Institute Cargo Clauses read as follows:
“5. This insurance is against all risks of loss or damage to the subject-
matter insured but shall in no case be deemed to extend to cover loss,
damage, or expense proximately caused by delay or inherent vice or
nature of the subject-matter insured. Claims recoverable hereunder
shall be payable irrespective of percentage.“
An "all risks policy" should be read literally as meaning all risks
whatsoever and covering all losses by an accidental cause of any kind.
“Accident” is construed by the courts in their ordinary and common
acceptance.
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The very nature of the term "all risks" must be given a broad and
comprehensive meaning as covering any loss other than a willful and
fraudulent act of the insured. This is pursuant to the very purpose of an
"all risks" insurance to give protection to the insured in those cases
where difficulties of logical explanation or some mystery surround the
loss or damage to property.
Institute Cargo Clauses extends to all damages/losses suffered by the
insured cargo except (a) loss or damage or expense proximately caused
by delay, and (b) loss or damage or expense proximately caused by the
inherent vice or nature of the subject matter insured.
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. The burden then shifts to the insurer to
show the exception to the coverage. This 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 the peril falling within the policy's coverage; the
insurer can avoid coverage upon demonstrating that a specific
provision expressly excludes the loss from coverage.
Under an 'all risks' policy, it was sufficient to show that there was
damage occasioned by some accidental cause of any kind, and there is
no necessity to point to any particular cause.
2. Section 13 of the Insurance Code- anyone has an insurable interest
in property who derives a benefit from its existence or would suffer
loss from its destruction
INSURANCE (Week 5)
Insurable interest in property may consist in (a) an existing interest; (b)
an inchoate interest founded on an existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the
expectancy arises.
Choa, as vendee/consignee of the goods in transit, has such existing
interest as may be the subject of a valid contract of insurance. His
interest over the goods is based on the perfected contract of sale. The
perfected contract of sale between him and the shipper of the goods
operates to vest in him an equitable title even before delivery or before
conditions have been performed.
Further, Article 1523 of the Civil Code provides that where, in
pursuance of a contract of sale, the seller is authorized or required to
send the goods to the buyer, delivery of the goods to a carrier, for the
purpose of transmission to the buyer is deemed to be a delivery of the
goods to the buyer. The Court has heretofore ruled that the delivery of
the goods on board the carrying vessels partake of the nature of actual
delivery since, from that time, the foreign buyers assumed the risks of
loss of the goods and paid the insurance premium covering them.
Sec. 102. Freightage, in the sense of a policy of marine insurance,
signifies all the benefits derived by the owner, either from the
chartering of the ship or its employment for the carriage of his own
goods or those of others.
Sec. 103. The owner of a ship has an insurable interest in expected
freightage which according to the ordinary and probable course of
things he would have earned but for the intervention of a peril insured
against or other peril incident to the voyage.
Sec. 104. The interest mentioned in the last section exists, in case of a
charter party, when the ship has broken ground on the chartered
voyage. If a price is to be paid for the carriage of goods it exists when
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they are actually on board, or there is some contract for putting them
on board, and both ship and goods are ready for the specified voyage.
Sec. 105. One who has an interest in the thing from which profits are
expected to proceed has an insurable interest in the profits.
Sec. 106. The charterer of a ship has an insurable interest in it, to the
extent that he is liable to be damnified by its loss.
Sec. 107. In marine insurance each party is bound to communicate, in
addition to what is required by section twenty-eight, all the
information which he possesses, material to the risk, except such as is
mentioned in Section thirty, and to state the exact and whole truth in
relation to all matters that he represents, or upon inquiry discloses or
assumes to disclose.
Sec. 108. In marine insurance, information of the belief or expectation
of a third person, in reference to a material fact, is material.
Caltex V. Sulpicio Lines (1999)
FACTS:
December 19, 1987 8 pm: motor tanker MT Vector owned and
operated by Vector Shipping Corporation carried 8,800 barrels of
petroleum products of Caltex by virtue of a charter contract
December 20, 1987 6:30 am: MV Doña Paz passenger and cargo
vessel owned and operated by Sulpicio Lines, Inc. left the port of
Tacloban headed for Manila with 1,493 passengers indicated in the
Coast Guard Clear
December 20, 1987: MT Vector collided with MV Doña Paz in the
open sea within the vicinity of Dumali Point between Marinduque and
Oriental Mindoro, killing almost all the passengers and crew members
of both ships except for 24 survivors
INSURANCE (Week 5)
MV Doña Paz carried an estimated 4,000 passengers most were not in
the passenger manifest
board of marine inquiry in BMI Case No. 653-87 after investigation
found that the MT Vector, its registered operator Francisco Soriano,
and its owner and actual operator Vector Shipping Corporation, were
at fault and responsible for its collision with MV Doña Paz
February 13, 1989: Teresita Cañezal and Sotera E. Cañezal, Sebastian
Cañezal’s wife and mother respectively, filed a complaint for
“Damages Arising from Breach of Contract of Carriage” against
Sulpicio Lines, Inc. for the death of Sebastian E. Cañezal (public
school teacher 47 years old) and his 11-year old daughter Corazon G.
Cañezal
Sulpicio, in turn, filed a 3rd party complaint against Francisco Soriano,
Vector Shipping Corporation and Caltex
Sulpicio alleged that Caltex chartered MT Vector with gross and
evident bad faith knowing fully well that MT Vector was improperly
manned, ill-equipped, unseaworthy and a hazard to safe navigation
RTC: dismissed the third party complaint and favored the Cañezal's
against Sulpicio Lines
CA: included Caltex as liable party
ISSUE: W/N Caltex as a voyage charterer of a sea vessel liable for
damages resulting from a collision between the chartered vessel and a
passenger ship
HELD: NO. Grants Petition. CA set aside.
respective rights and duties of a shipper and the carrier depends not on
whether the carrier is public or private, but on whether the contract of
carriage:
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bill of lading or equivalent shipping documents; or
charter party or similar contract on the other
Caltex and Vector entered into a contract of affreightment, also known
as a voyage charter
charter party
contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time or use
Charter parties fall into three main categories:
(1) Demise or bareboat
charterer mans the vessel with his own people and becomes, in
effect, the owner for the voyage or service stipulated, subject to
liability for damages caused by negligence
common carrier becomes private
contract of affreightment
one by which the owner of a ship or other vessel lets the whole
or part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of
freight
may be either:
(2)time charter - wherein the leased vessel is leased to the charterer for
a fixed period of time
(3) voyage charter - wherein the ship is leased for a single voyage
charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the
INSURANCE (Week 5)
ship owner to supply the ship’s store, pay for the wages of the master
of the crew, and defray the expenses for the maintenance of the ship
charterer is free from liability to third persons in respect of the ship
does not convert the common carrier into a private carrier
Carriage of Goods by Sea Act :
Sec. 3. (1) The carrier shall be bound before and at the beginning of
the voyage to exercise due diligence to -
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness
of the ship. For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to
maintain in seaworthy condition the vessel involved in its contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code
a passenger or a shipper of goods is under no obligation to conduct an
inspection of the ship and its crew, the carrier being obliged by law to
impliedly warrant its seaworthiness
nature of the obligation of Caltex demands ordinary diligence like any
other shipper in shipping his cargoes
Caltex and Vector Shipping Corporation had been doing business since
1985, or for about two years before the tragic incident occurred in
1987. Past services rendered showed no reason for Caltex to observe a
higher degree of diligence.
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Caltex had the right to presume that the ship was seaworthy as even
the Philippine Coast Guard itself was convinced of its seaworthiness
San Miguel v Heirs of Sabiniano lnguito
Facts:
San Miguel Corporation entered into a Time Charter Party Agreement
wth Julius Ouano, doing business under the name and style J. Oano
Marine Services. Under the terms of the agreement, SMC chartered the
M/V Doa Roberta owned by Julius Ouano for a period of two years,
for the purpose of transporting SMCs beverage products.
OWNER warrants that the vessel is seaworthy amd in proper useful
and operations condition and in the event that the CHARTERER finds
any defect in the vessel with regards to its working order, condition
and function, CHARTERER shall immediately notify OWNER of this
fact;
During the term of the charter, SMC issued sailing orders to the
Master, Captain INguito instructing him
Sail for Opol, Cagayan 0500H Nov. 12, 1990, or as soon as loading of
FGS is completed, with load:
SEE BILL OF LADING
2. You are expected to arrive Opol 0900H Nov. 13, 1990.
3. You are expected to depart Opol 0900H Nov. 14, 1990, or as soon
as loading of empties is completed, back to Mandaue.
4. You are expected to arrive Mandaue 1300H Nov. 15, 1990.
5. In case you need cash advance, send your request thru radio
addressed to us for needed authority.
INSURANCE (Week 5)
6. Maintain communications and keep us posted of your developments.
7. Observe weather condition, exercise utmost precautionary measures.
Because of said orders, Captain obtained necessary sailing clearance
from the PH Coast Guard. Loading of the cargo on the vessel was
complete HOWEVER THE VESSEL DID NOT LEAVE MANDAUE
CITY until 6 am the next day.
At 4 am, typhoon Rupong was spotted. At 7 AM one hour after the
vessel departed, Captain waws advised to take shelter but Captain
Inguito proceeded despite the typhoon saying that the typhoon was
already far from them already.
At 2 PM, Captain was again advised to take shelter, Capt. Responded
that they can manage. At midnight Capt. Is already asking to rescue
them. The ship sank.
The shipowner Julius Ouano, in lieu of the captain who erished in the
sea tragedy, FILED A MARINE PROTEST. He alleged that the
proximate cause of the loss of the vessel was the fault and negligence
of SMC which had complete control and disposal of the vessel as
charterer and which issued the sailing order for its departure despite
being forewarned of the typhoon.
SMC countered that it was Ouan who had control over the vessel. That
notwithstanding his knowledge, braved the typhoon.
Both SMC and Ouano appealed to the CA. SMC argued that as mere
charterer, it did not have control of the vessel ad that the proximate
cause of the loss of the vessel and its cargo was the negligence of the
ship captain. Fr his part, Ouano complained of the reduced damages
awarded to him by the trial court.
Ruling:
10 | P a g e
In deciding the cases at bar, the CA correctly resolved with the issues
an initial discussion of the definition and kinds of charter parties.
Preliminarily, a charter party is a contract by virtue of which the owner
or the agent of a vessel binds himself to transport merchandise or
persons for a fixed price. It has also been defined as a contract by
virtue of which the owner or the agent of the vessel leases for a certain
price the whole or portion of the vessel for the transportation of goods
or persons from one port to another.
A charter party may either be a
(1) Bareboat or demise charter or
(2) Contract of affreightment.
We concur with the findings of the CA that the charter party in the
case at hand was a contract of affreightment, contrary to petitioner
Ouanos protestation that it was a demise charter, as shown by the
following stipulations in the Time Charter Party Agreement.
There shall be no employer-employee relations between the OWNER
and/or its vessels crew on one hand and the CHARTERER on the
other. The crew of the vessel shall continue to be under the employ,
control and supervision of the OWNER. Consequently, admage or loss
that may be attributable to the crew, including loss of the vessel used
shall continue to be the responsibility of, and shallbe borne, by the
OWNER; the OWNER further covenants to hold the CHARTERER
free from all claims and liabilities arising out of the acts of the crew
and the condition of the vessel;
It appearing that Ouano was the employer of the captain and crew if
the M/V Doa Roberta during the term of the charter, he therefore had
command and control over the vessel.
Under the foregoing definitions, as well as the clear terms of the
Charter Party Agreement between the parties, the charterer, SMC,
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should be free from liability for any loss or damage sustained during
the voyage, unless it be shown that the same was due to its fault or
negligence.
In the assailed decisions, the CA found that the proximate cause of the
sinking of the vessel was the negligence of the Captain as the gross
failure of the Captain of the vessel to observe due care and to heed
SMCs advices to take shelter.
Sec. 109. A person insured by a contract of marine insurance is
presumed to have knowledge, at the time of insuring, of a prior loss, if
the information might possibly have reached him in the usual mode of
transmission and at the usual rate of communication.
Sec. 110. A concealment in a marine insurance, in respect to any of the
following matters, does not vitiate the entire contract, but merely
exonerates the insurer from a loss resulting from the risk
concealed:chanroblesvirtuallawlibrary
(a) The national character of the insured;
(b) The liability of the thing insured to capture and detention;
(c) The liability to seizure from breach of foreign laws of trade;
(d) The want of necessary documents;
(e) The use of false and simulated papers.
Sec. 111. If a representation by a person insured by a contract of
marine insurance, is intentionally false in any material respect, or in
respect of any fact on which the character and nature of the risk
depends, the insurer may rescind the entire contract.
Sec. 112. The eventual falsity of a representation as to expectation
does not, in the absence of fraud, avoid a contract of marine insurance.
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Sec. 113. 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.
Sec. 114. 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.
Sec. 115. An implied warranty of seaworthiness is complied with if the
ship be seaworthy at the time of the of commencement of the risk,
except in the following cases:chanroblesvirtuallawlibrary
(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.
Sec. 116. A warranty of seaworthiness extends not only to the
condition of the structure of the ship itself, but requires that it be
properly laden, and provided with a competent master, a sufficient
number of competent officers and seamen, and the requisite
appurtenances and equipment, such as ballasts, cables and anchors,
cordage and sails, food, water, fuel and lights, and other necessary or
proper stores and implements for the voyage.
Sec. 117. Where different portions of the voyage contemplated by a
policy differ in respect to the things requisite to make the ship
seaworthy therefor, a warranty of seaworthiness is complied with if, at
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the commencement of each portion, the ship is seaworthy with
reference to that portion.
Sec. 118. When the ship becomes unseaworthy during the voyage to
which an insurance relates, an unreasonable delay in repairing the
defect exonerates the insurer on ship or shipowner's interest from
liability from any loss arising therefrom.
Sec. 119. A ship which is seaworthy for the purpose of an insurance
upon the ship may, nevertheless, by reason of being unfitted to receive
the cargo, be unseaworthy for the purpose of the insurance upon the
cargo.
Sec. 120. 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.
Sec. 121. When the voyage contemplated by a marine insurance policy
is described by the places of beginning and ending, the voyage insured
in one which conforms to the course of sailing fixed by mercantile
usage between those places.
Philippine American General Insurance Company vs. CA
FACTS:
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc. (Coca-Cola
Bottlers), loaded on board "MV Asilda," a vessel owned and operated
by respondent Felman Shipping Lines (FELMAN), 7,500 cases of 1-
liter Coca-Cola softdrink bottles to be transported from Zamboanga
City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc.,
Cebu. The shipment was insured with petitioner Philippine American
General Insurance Co., Inc. (PHILAMGEN)
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In a joint statement, the Captain as well as the chief mate of the vessel
confirmed that the weather was fine when "MV Asilda" left the port of
Zamboanga at 8 p.m. on 6 July. The ship captain stated that around 4
a.m. of 7 July 1983 he was awakened by the officer on duty to inform
him that the vessel had hit a floating log.
At that time he noticed that the weather had deteriorated with strong
southeast winds inducing big waves. After 30 minutes, he observed
that the vessel was listing slightly to starboard and would not correct
itself despite the heavy rolling and pitching. He then ordered his crew
to shift the cargo from starboard to portside until the vessel was
balanced. At about 7 a.m., the master of the vessel stopped the engine
because the vessel was listing dangerously to portside. He ordered his
crew to shift the cargo back to starboard (right). The shifting of cargo
took about an hour after which he rang the engine room to resume full
speed.
At around 8:45 a.m., the vessel suddenly listed to portside and before
the captain could decide on his next move, some of the cargo on deck
were thrown overboard and seawater entered the engine room and
cargo holds of the vessel. At that instance, the master of the vessel
ordered his crew to abandon ship.
Shortly thereafter, "MV Asilda" capsized and sank in the waters of
Zamboanga del Norte bringing down her entire cargo with her
including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.
The Ship Captain ascribed the sinking to the entry of seawater through
a hole in the hull caused by the vessel's collision with a partially
submerged log.
On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc.,
Cebu plant, filed a claim with respondent FELMAN for recovery of
damages. FELMAN denied the claim thus prompting the consignee to
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file an insurance claim with PHILAMGEN which paid its claim of
P755,250.00.
Claiming its right of subrogation PHILAMGEN sought recourse
against respondent FELMAN which disclaimed any liability for the
loss. Consequently, on 29 November 1983 PHILAMGEN sued the
shipowner for sum of money and damages, alleging that the total loss
of cargo was due to the vessel’s unseaworthiness as she was put to sea
in an unstable condition. FELMAN, on the other hand, filed a motion
to dismiss contending that there was no right of subrogation in favor of
PHILAMGEN since it had abandoned all its rights, interests and
ownership over the vessel together with her freight and appurtenances
for the purpose of limiting and extinguishing its liability under Art.
587 of the Code of Commerce.
The RTC dismissed PHILAMGEN’s complaint and appealed to the
CA which remanded the case and denied its motion for
reconsideration. The RTC then ruled that the vessel was seaworthy and
even if assumed unseaworthy, PHILAMGEN still could not recover
from FELMAN since Coca-Cola Bottlers had breached its implied
warranty on the vessel’s seaworthiness.
On appeal, the CA ruled that the vessel was unseaworthy for being
top-heavy as 2,500 cases of Coca-Cola softdrinks bottles were
improperly stowed on deck. Even though the vessel possessed the
necessary Coast Guard certification indicating its seaworthiness with
respect to the structure of the ship itself, it was not seaworthy with
respect to the cargo. However, it denied the money claim of
PHILAMGEN because of the implied breach of warranty of
seaworthiness by Coca-Cola Bottlers. Furthermore, the filing of notice
of abandonment had absolved FELMAN from liability under the
limited liability rule.
ISSUES:
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Whether MV Asilda was seaworthy when it left port of Zamboanga
Whether the limited liability under Article 587 of the Code of
Commerce should apply
RULING:
NO. The Supreme Court subscribe to the findings of the Elite
Adjusters and the Court of Appeals that the proximate cause of the
sinking of the MV Asilda was its being top-heavy. As according to the
report submitted by the Elite Adjusters, while the vessel may not have
been overloaded, the distribution or stowage of the cargo on board was
done in such a manner that the vessel was in top-heavy condition at the
time of its departure which rendered it unstable and unseaworthy for
that particular voyage. Furthermore, MV Asilda was designed as a
fishing vessel and was not designed to carry a substantial amount or
quantity of cargo in deck and from the moment it was utilized to load
heavy cargo, the vessel was rendered unseaworthy for the purpose of
carrying the type of cargo and that the capsizing and sinking of the
vessel was bound to happen and an inevitable occurrence.
NO. The Supreme Court held that Article 587 of the Code of
Commerce is not applicable. The ship agent is liable for the negligent
acts of the captain in the care of the goods loaded on the vessel. This
liability, although can be limited through abandonment of the vessel,
its equipment and freightage, as provided in Art. 587, there exceptional
circumstances wherein the ship agent could still be held answerable, as
where the loss or injury was due to the fault of the ship owner and the
captain. The international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a ship owner's
liability, does not apply to cases where the injury or average was
occasioned by the ship owner's own fault. It must be stressed at this
point that Art. 587 speaks only of situations where the fault or
negligence is committed solely by the captain. Where the ship owner is
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likewise to be blamed, Art. 587 will not apply, and such situation will
be covered by the provisions of the Civil Code on common carrier.
Under Art 1733 of the Civil Code, "(c)ommon 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 . . ." In the event of loss of goods, common
carriers are presumed to have acted negligently. FELMAN, the ship
owner, was not able to rebut this presumption.
Caltex V. Sulpicio Lines (1999)
FACTS:
December 19, 1987 8 pm: motor tanker MT Vector owned and
operated by Vector Shipping Corporation carried 8,800 barrels of
petroleum products of Caltex by virtue of a charter contract
December 20, 1987 6:30 am: MV Doña Paz passenger and cargo
vessel owned and operated by Sulpicio Lines, Inc. left the port of
Tacloban headed for Manila with 1,493 passengers indicated in the
Coast Guard Clear
December 20, 1987: MT Vector collided with MV Doña Paz in the
open sea within the vicinity of Dumali Point between Marinduque and
Oriental Mindoro, killing almost all the passengers and crew members
of both ships except for 24 survivors
MV Doña Paz carried an estimated 4,000 passengers most were not in
the passenger manifest
board of marine inquiry in BMI Case No. 653-87 after investigation
found that the MT Vector, its registered operator Francisco Soriano,
and its owner and actual operator Vector Shipping Corporation, were
at fault and responsible for its collision with MV Doña Paz
February 13, 1989: Teresita Cañezal and Sotera E. Cañezal, Sebastian
Cañezal’s wife and mother respectively, filed a complaint for
“Damages Arising from Breach of Contract of Carriage” against
Sulpicio Lines, Inc. for the death of Sebastian E. Cañezal (public
school teacher 47 years old) and his 11-year old daughter Corazon G.
Cañezal
Sulpicio, in turn, filed a 3rd party complaint against Francisco Soriano,
Vector Shipping Corporation and Caltex
Sulpicio alleged that Caltex chartered MT Vector with gross and
evident bad faith knowing fully well that MT Vector was improperly
manned, ill-equipped, unseaworthy and a hazard to safe navigation
RTC: dismissed the third party complaint and favored the Cañezal's
against Sulpicio Lines
CA: included Caltex as liable party
ISSUE: W/N Caltex as a voyage charterer of a sea vessel liable for
damages resulting from a collision between the chartered vessel and a
passenger ship
HELD: NO. Grants Petition. CA set aside.
respective rights and duties of a shipper and the carrier depends not on
whether the carrier is public or private, but on whether the contract of
carriage:
bill of lading or equivalent shipping documents; or
charter party or similar contract on the other
Caltex and Vector entered into a contract of affreightment, also known
as a voyage charter
charter party

14 | P a g e
INSURANCE (Week 5)
contract by which an entire ship, or some principal part thereof, is let
by the owner to another person for a specified time or use
Charter parties fall into three main categories:
(1) Demise or bareboat
charterer mans the vessel with his own people and becomes, in effect,
the owner for the voyage or service stipulated, subject to liability for
damages caused by negligence
common carrier becomes private
contract of affreightment
one by which the owner of a ship or other vessel lets the whole or part
of her to a merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight
may be either:
(2)time charter - wherein the leased vessel is leased to the charterer for
a fixed period of time
(3) voyage charter - wherein the ship is leased for a single voyage
charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the
ship owner to supply the ship’s store, pay for the wages of the master
of the crew, and defray the expenses for the maintenance of the ship
charterer is free from liability to third persons in respect of the ship
does not convert the common carrier into a private carrier
Carriage of Goods by Sea Act :
Sec. 3. (1) The carrier shall be bound before and at the beginning of
the voyage to exercise due diligence to -
15 | P a g e
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness
of the ship. For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number of
competent officers and crew. The failure of a common carrier to
maintain in seaworthy condition the vessel involved in its contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the
Civil Code
a passenger or a shipper of goods is under no obligation to conduct an
inspection of the ship and its crew, the carrier being obliged by law to
impliedly warrant its seaworthiness
nature of the obligation of Caltex demands ordinary diligence like any
other shipper in shipping his cargoes
Caltex and Vector Shipping Corporation had been doing business since
1985, or for about two years before the tragic incident occurred in
1987. Past services rendered showed no reason for Caltex to observe a
higher degree of diligence.
Caltex had the right to presume that the ship was seaworthy as even
the Philippine Coast Guard itself was convinced of its seaworthiness
DELSAN TRANSPORT LINES, INC., vs. THE HON. COURT
OF APPEALS and AMERICAN HOME ASSURANCE
CORPORATION,
FACTS: The facts show that Caltex Philippines (Caltex for brevity)
entered into a contract of affreightment with the petitioner, Delsan
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Transport Lines, Inc., for a period of one year whereby the said
common carrier agreed to transport Caltex’s industrial fuel oil from the
Batangas-Bataan Refinery to different parts of the country. Under the
contract, petitioner took on board its vessel, MT Maysun 2,277.314
kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex
Oil Terminal in Zamboanga City. The shipment was insured with the
private respondent, American Home Assurance Corporation. During
the voyage, the vessel sank. The insurer paid Caltex and now seeks
recovery under the right of subrogation. The trial court found the
vessel seaworthy and the incident was caused by force majeure hence,
exempt from liability. CA reversed the trial court’s decision,
explaining that petitioner was liable as a common carrier due to lack of
manpower and absent any explanation why the vessel sank.
ISSUE: Whether or not there was an implied admission of
seaworthiness thus precluding the right of recovery by private
respondent as insurer.
Whether or not the non-presentation of the marine insurance policy
bars the complaint for recovery of sum of money for lack of cause of
action.
RULING: No. The payment made by the private respondent for the
insured’s value of the lost cargo operates as waiver of its (private
respondent) right to enforce the term of the implied warranty against
Caltex under the marine insurance policy. However, the same cannot
be validly interpreted as an automatic admission of the vessel’s
seaworthiness by the private respondent as to foreclose recourse
against the petitioner for any liability under its contractual obligation
as a common carrier. The fact of payment grants the private
respondent subrogatory right which enables it to exercise legal
remedies that would otherwise be available to Caltex as owner of the
lost cargo against the petitioner common carrier.
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From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of passengers transported
by them, according to all the circumstance of each case.In the event of
loss, destruction or deterioration of the insured goods, common
carriers shall be responsible unless the same is brought about, among
others, by flood, storm, earthquake, lightning or other natural disaster
or calamity. In all other cases, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed
extraordinary diligence. The said presumption was not overturned by
petitioner in this case. Hence, private respondent as insurer can
exercise its right of subrogation against petitioner.
Thus, as the appellate court correctly ruled, petitioner’s vessel, MT
Maysun, sank with its entire cargo for the reason that it was not
seaworthy. There was no squall or bad weather or extremely poor sea
condition in the vicinity when the said vessel sank.
Anent the second issue, it is our view and so hold that the presentation
in evidence of the marine insurance policy is not indispensable in this
case before the insurer may recover from the common carrier the
insured value of the lost cargo in the exercise of its subrogatory right.
The subrogation receipt, by itself, is sufficient to establish not only the
relationship of herein private respondent as insurer and Caltex, as the
assured shipper of the lost cargo of industrial fuel oil, but also the
amount paid to settle the insurance claim. The right of subrogation
accrues simply upon payment by the insurance company of the
insurance claim.
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Madrigal vs Hanson
Facts:
On 6 January 1948, for and in consideration of the sum of P1,750 to be
paid monthly as rental, a motor launch named "Isla Verde" owned by
the plaintiffs was chartered by the defendant for six months from the
date of actual delivery and acceptance, under and by virtue of a
contract which, among other terms, required delivery thereof on 20
January 1948, in seaworthy condition together with the necessary
documents to enable her to navigate. Delivery of the motor launch was
not made as agreed upon, because it was on 12 January 1948 only that
the motor launch was drydocked at Malabon to undergo repairs; and
on 28 January 1948 she was transferred to the dock of the defendant
near the Hospicio de San José of the Isla Convalesencia and there
some additional improvements were made on the motor launch. On the
29th, manned by a complement engaged by the defendant, the motor
launch was put to sea and at 5:00 o’clock a.m. of the following day she
sank off the coast of Limay, province of Bataan, becoming a total loss.
To recover P50,000, the estimated value of the motor launch with all
equipment and tackle and a monthly rental of P1,750, the plaintiffs
brought this action. The Rehabilitation Finance Corporation, successor
to the Agricultural & Industrial Bank, was allowed to intervene to
recover P10,745.06, together with a daily interest thereon of P1.77
from 18 January 1950 until the date of payment thereof, from the
plaintiffs, should they be successful in their claim against either the
defendant or the insurance company, against which an action was also
brought by the plaintiff to recover the amount for which the motor
launch was insured under a policy issued by the insurance company.
As the intervenor has not appealed from the judgment dismissing its
complaint, the same is no longer involved in these appeal
Issue:
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Whether or not the sinking of the motor launch off the coast of Limay,
Bataan, was due to her unseaworthiness and not to the incompetence
or negligence of the complement engaged by him (the defendant) to
man her.
Held:
With respect to the counterclaim of the defendant, the Court agrees
with the plaintiffs that the amount of P5,000 cannot be recovered for
being speculative. As to the amount of P2,500, the evidence disclosed
that it represents the purchase price of the equipment sold and
delivered by the plaintiffs to the defendant. Under the contract of
charter the defendant is not entitled to the refund of said amount. As to
the repairs made on old equipment and the acquisition of new ones, the
charter party being silent about the same, the defendant cannot recover
their cost from the plaintiffs.
We agree to this pronouncement of the trial court.
The finding that the motor launch was unseaworthy at the time she
sank precludes recovery by the plaintiffs of the amount for which the
motor launch was insured under the policy issued by the insurance
company (paragraph 7 of the Marine Hull Policy, Annex A to the
complaint filed in civil case No. 5756).
Roque v IAC (Insurance)
FACTS:
On February 19, 1972, the Manila Bay Lighterage Corporation
(Manila Bay), a common carrier, entered into a contract with the
petitioners whereby the former would load and carry on board its barge
Mable 10 about 422.18 cubic meters of logs from Malampaya Sound,
Palawan to North Harbor, Manila. The petitioners insured the logs
against loss for P100,000.00 with respondent Pioneer Insurance and
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Surety Corporation (Pioneer).
On February 29, 1972, the petitioners loaded on the barge, 811 pieces
of logs at Malampaya Sound, Palawan for carriage and delivery to
North Harbor, Port of Manila, but the shipment never reached its
destination because Mable 10 sank with the 811 pieces of logs
somewhere off Cabuli Point in Palawan on its way to Manila.
Hence, petitioners commenced Civil Case No. 86599 against Manila
Bay and respondent Pioneer.
DECISION OF LOWER COURTS:
(1) Trial Court: found in favor of petitioners.
(2) Intermediate Appellate Court: absolved the respondent insurance
company from liability on the grounds that the vessel carrying the
insured cargo was unseaworthy and the loss of said cargo was caused
not by the perils of the sea but by the perils of the ship
ISSUES:
I. THE INTERMEDIATE APPELLATE COURT ERRED IN
HOLDING THAT IN CASES OF MARINE CARGO INSURANCE,
THERE IS A WARRANTY OF SEAWORTHINESS BY THE
CARGO OWNER.
II. THE INTERMEDIATE APPELLATE COURT ERRED IN
HOLDING THAT THE LOSS OF THE CARGO IN THIS CASE
WAS CAUSED BY "PERILS OF THE SHIP" AND NOT BY
"PERILS OF THE SEA.”
RULING:
I. No. The IAC is correct.
The liability of the insurance company is governed by law. Section
113 of the Insurance Code provides:
In every marine insurance upon a ship or freight, or freightage, or upon
any thing that is the subject of marine insurance, a warranty is implied
18 | P a g e
that the ship is seaworthy.
Section 99 of the same Code also provides in part. Marine insurance
includes:
(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes,
merchandise, ...
From the above-quoted provisions, there can be no mistaking the fact
that the term "cargo" can be the subject of marine insurance and that
once it is so made, the implied warranty of seaworthiness immediately
attaches to whoever is insuring the cargo whether he be the shipowner
or not.
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. Or the cargo owner may
enter into a contract of insurance which specifically provides that the
insurer answers not only for the perils of the sea but also provides for
coverage of perils of the ship.
II. No, the IAC is correct.
In marine cases, the risks insured against are "perils of the sea"
A policy does not cover a loss or injury that must inevitably take place
in the ordinary course of things. There is no doubt that 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
INSURANCE (Week 5)

encounter. "Perils of the sea" has been said to include only such losses Sec. 124. A deviation is proper:
as are of extraordinary nature, encounter. "Perils of the sea" has been
(a) When caused by circumstances over which neither the master nor
said to include only such losses as are of extraordinary nature, or arise
the owner of the ship has any control;
from some overwhelming power, which cannot be guarded against by
the ordinary exertion of human skill and prudence. Damage done to a (b) When necessary to comply with a warranty, or to avoid a peril,
vessel by perils of the sea includes every species of damages done to a whether or not the peril is insured against;
vessel at sea, as distinguished from the ordinary wear and tear of the
voyage, and distinct from injuries suffered by the vessel in (c) When made in good faith, and upon reasonable grounds of belief in
its necessity to avoid a peril; or
consequence of her not being seaworthy at the outset of her voyage (as
in this case). It is also the general rule that everything which happens (d) When made in good faith, for the purpose of saving human life or
thru the inherent vice of the thing, or by the act of the owners, master relieving another vessel in distress.
or shipper, shall not be reputed a peril, if not otherwise borne in the
policy. Sec. 125. Every deviation not specified in the last section is improper.
It is quite unmistakable that the loss of the cargo was due to the perils Sec. 126. An insurer is not liable for any loss happening to the thing
of the ship rather than the perils of the sea. The facts clearly negate the insured subsequent to an improper deviation.
petitioners' claim under the insurance policy.
Sec. 127. A loss may be either total or partial.
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 Sec. 128. Every loss which is not total is partial.
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 result
from the perils of the sea.
Sec. 122. If the course of sailing is not fixed by mercantile usage, the
voyage insured by a marine insurance policy is that way between the
places specified, which to a master of ordinary skill and discretion,
would mean the most natural, direct and advantageous.
Sec. 123. Deviation is a departure from the course of the voyage
insured, mentioned in the last two sections, or an unreasonable delay in
pursuing the voyage or the commencement of an entirely different
voyage.
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