G.R. No.

L-66935 November 11, 1985 WON implied warranty of seaworthiness is limited to the determination that the ship is fit to make the
contemplated voyage (no)
ISABELA ROQUE, doing busines under the name and style of Isabela Roque Timber
Enterprises and ONG CHIONG, petitioners,  WON what transpired is a peril of the sea or peril of the ship. (it is perils of the ship)
vs. HON. INTERMEDIATE APPELATE COURT and PIONEER INSURANCE AND SURETY
CORPORATION, respondent. Ruling:

GUTIERREZ, JR., J.: There is no dispute over the liability of the common carrier Manila Bay. In fact, it did not bother to
appeal the questioned decision. However, the petitioners state that Manila Bay has ceased operating as
Facts: a firm and nothing may be recovered from it. They are, therefore, trying to recover their losses from
the insurer.
This petition for certiorari asks for the review of the decision of the Intermediate Appellate Court
which absolved the respondent insurance company from liability on the grounds that the vessel The liability of the insurance company is governed by law. Section 113 of the Insurance Code
carrying the insured cargo was unseaworthy and the loss of said cargo was caused not by the perils of provides:In every marine insurance upon a ship or freight, or freightage, or upon any thing which is
the sea but by the perils of the ship. the subject of marine insurance, a warranty is implied that the ship is seaworthy.

the Manila Bay Lighterage Corporation (Manila Bay), a common carrier, entered into a contract with Section 99 of the same Code also provides in part.
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 Marine insurance includes:
insured the logs against loss for P100,000.00 with respondent Pioneer Insurance and Surety
Corporation (Pioneer).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 (1) Insurance against loss of or damage to:
destination because Mable 10 sank with the 811 pieces of logs somewhere off Cabuli Point in Palawan
on its way to Manila. As alleged by the petitioners in their complaint, the barge where the logs were (a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, ...
loaded was not seaworthy such that it developed a leak. The appellate court further found that one of
the hatches was left open causing water to enter the barge and because the barge was not provided From the above-quoted provisions, there can be no mistaking the fact that the term "cargo" can be the
with the necessary cover or tarpaulin, the ordinary splash of sea waves brought more water inside it. subject of marine insurance and that once it is so made, the implied warranty of seaworthiness
petitioners wrote a letter to Manila Bay demanding payment of P150,000.00 for the loss of the immediately attaches to whoever is insuring the cargo whether he be the shipowner or not.
shipment plus P100,000.00 as unrealized profits but the latter ignored the demand. petitioners
commenced Civil Case No. 86599 against Manila Bay and respondent [Link] trial court found in
favor of the petitioners. Respondent Pioneer appealed to the Intermediate Appellate Court. the The same conclusion must be reached if the question be discussed with reference to the seaworthiness
appellate court modified the trial court's decision and absolved Pioneer from liability after finding that of the ship. It is universally accepted that in every contract of insurance upon anything which is the
there was a breach of implied warranty of seaworthiness on the part of the petitioners and that the loss subject of marine insurance, a warranty is implied that the ship shall be seaworthy at the time of the
of the insured cargo was caused by the "perils of the ship" and not by the "perils of the sea". It ruled inception of the voyage.
that the loss is not covered by the marine insurance policy. After the appellate court denied their
motion for reconsideration, the petitioners filed this petition Moreover, the fact that the unseaworthiness of the ship was unknown to the insured is immaterial in
ordinary marine insurance and may not be used by him as a defense in order to recover on the marine
issue: insurance policy.

Page 1 of 6
 marine cases, the risks insured against are "perils of the sea" The purpose of such to that which directly results from simple unseaworthiness than to that which
insurance is protection against contingencies and against possible damages and result from the perils of the sea.
such a policy does not cover a loss or injury which must inevitably take place in
the ordinary course of things. There is no doubt that the term 'perils of the sea' Neither can petitioners allege barratry on the basis of the findings showing negligence on the part of
extends only to losses caused by sea damage, or by the violence of the elements, the vessel's [Link] as defined in American Insurance Law is "any willful misconduct on the
and does not embrace all losses happening at sea. They insure against losses part of master or crew in pursuance of some unlawful or fraudulent purpose without the consent of the
from extraordinary occurrences only, such as stress of weather, winds and waves, owners, and to the prejudice of the owner's interest." Barratry necessarily requires a willful and
lightning, tempests, rocks and the like. These are understood to be the "perils of intentional act in its commission. No honest error of judgment or mere negligence, unless criminally
the sea" referred in the policy, and not those ordinary perils which every vessel gross, can be barratry. In the case at bar, there is no finding that the loss was occasioned by the willful
must encounter. "Perils of the sea" has been said to include only such losses as are or fraudulent acts of the vessel's crew. There was only simple negligence or lack of skill. Hence, the
of extraordinary nature, or arise from some overwhelming power, which cannot be second assignment of error must likewise be dismissed.
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, WHEREFORE, the decision appealed from is AFFIRMED with the modification that the amount of
and distinct from injuries suffered by the vessel in consequence of her not being P8,000.00 representing the value of the salvaged logs which was ordered to be deposited in the Manila
seaworthy at the outset of her voyage (as in this case). It is also the general rule Banking Corporation in the name of Civil Case No. 86599 is hereby awarded and ordered paid to the
that everything which happens thru the inherent vice of the thing, or by the act of petitioners. The liability adjudged against Manila Bay Lighterage Corporation in the decision of the
the owners, master or shipper, shall not be reputed a peril, if not otherwise borne trial court is accordingly reduced by the same amount.
in the policy.

2. The SC ruled that what happened is a peril of the ship. (insurer is not liable) With regard to the
second assignment of error, petitioners maintain, that the loss of the cargo was caused by the perils of G.R. No. 85141 November 28, 1989
the sea, not by the perils of the ship because as found by the trial court, the barge was turned loose
from the tugboat east of Cabuli Point "where it was buffeted by storm and waves."
FILIPINO MERCHANTS INSURANCE CO., INC., petitioner, 
vs. COURT OF APPEALS and CHOA TIEK SENG, respondents.
It is quite unmistakable that the loss of the cargo was due to the perils of the ship rather than the perils
of the [Link] must be considered to be settled, furthermore, that a loss which, in the ordinary course of
events, results from the natural and inevitable action of the sea, from the ordinary wear and tear of the REGALADO, J.:
ship, or from the negligent failure of the ship's owner to provide the vessel with proper equipment to
convey the cargo under ordinary conditions, is not a peril of the sea. Such a loss is rather due to what Facts:
has been aptly called the "peril of the ship." The insurer undertakes to insure against perils of the sea
and similar perils, not against perils of the ship. in order to make the insurer liable, there must be some
casualty, something which could not be foreseen as one of the necessary incidents of the adventure. This is an action brought by the consignee of the shipment of fishmeal loaded on board the
The purpose of the policy is to secure an indemnity against accidents which may happen, not against vessel SS Bougainville and unloaded at the Port of Manila and seeks to recover from the
events which must happen. defendant insurance company the amount of P51,568.62 representing damages to said
shipment which has been insured by the defendant insurance company under Policy No. M-
In the present case the entrance of the sea water into the ship's hold through the 2678. The defendant brought a third party complaint against third party defendants
defective pipe already described was not due to any accident which happened Compagnie Maritime Des Chargeurs Reunis and/or E. Razon, Inc. seeking judgment against
during the voyage, but to the failure of the ship's owner properly to repair a defect the third (sic) defendants in case Judgment is rendered against the third party plaintiff.
of the existence of which he was apprised. The loss was therefore more analogous plaintiff insured said shipment with defendant insurance company under said cargo Policy

Page 2 of 6
No. M-2678 for the sum of P267,653.59 for the goods described as 600 metric tons of where difficulties of logical explanation or some mystery surround the loss or damage to
fishmeal in new gunny bags of 90 kilos eachfrom Bangkok, Thailand to Manila against all property. 8 
risks under warehouse to warehouse terms. what was imported was 59.940 metric tons not
600 tons. The fishmeal in 666 new gunny bags were unloaded from the ship at Manila unto Generally, the burden of proof is upon the insured to show that a loss arose from a covered
the arrastre contractor E. Razon, Inc. condition of the bad order was reflected in the turn peril, but under an "all risks" policy the burden is not on the insured to prove the precise
over survey report of Bad Order cargoes Nos. 120320 to 120322, as Exhibit C-4 consisting cause of loss or damage for which it seeks compensation. The insured under an "all risks
of three (3) pages which are also Exhibits 4, 5 and 6- Razon. plaintiff made a formal claim insurance policy" has the initial burden of proving that the cargo was in good condition
against the defendant Filipino Merchants Insurance Company. A formal claim statement when the policy attached and that the cargo was damaged when unloaded from the vessel;
was also presented by the plaintiff against the vessel but the defendant Filipino Merchants thereafter, the burden then shifts to the insurer to show the exception to the coverage. 10  A
Insurance Company refused to pay the claim plaintiff brought an action against said marine insurance policy providing that the insurance was to be "against all risks" must be
defendant against the vessel and the arrastre contractor. the trial court rendered judgment in construed as creating a special insurance and extending to other risks than are usually
favor of private respondent. On appeal, the respondent court affirmed the decision of the contemplated, and covers all losses except such as arise from the fraud of the insured. 13 The
lower court. A motion for reconsideration of the aforesaid decision was denied, hence this burden of the insured, therefore, is to prove merely that the goods he transported have been
petition lost, destroyed or deteriorated. Thereafter, the burden is shifted to the insurer to prove that
the loss was due to excepted perils. To impose on the insured the burden of proving the
precise cause of the loss or damage would be inconsistent with the broad protective purpose
of "all risks" [Link] the present case, there being no showing that the loss was caused
Issue: WON “all rsiks” clause of marine insurance policy held the petitioner liable to private by any of the excepted perils, the insurer is liable under the policy.
respondent for partial loss of cargo, regardless of proof of cause to which the said loss is
attributable. (as to insurable interest) Anent the issue of insurable interest, we uphold the ruling of the
respondent court that private respondent, as consignee of the goods in transit under an
Ruling:
invoice containing the terms under "C & F Manila," has insurable interest in said
Yes. The SC ruled that An "all risks policy" should be read literally as meaning all risks [Link] 13 of the Insurance Code defines insurable interest in property as every
whatsoever and covering all losses by an accidental cause of any kind. The terms "accident" interest in property, whether real or personal, or any relation thereto, or liability in respect
and "accidental", as used in insurance contracts, have not acquired any technical meaning. thereof, of such nature that a contemplated peril might directly damnify the insured. In
principle, anyone has an insurable interest in property who derives a benefit from its
They are construed by the courts in their ordinary and common acceptance. Thus, the terms
existence or would suffer loss from its destruction whether he has or has not any title in, or
have been taken to mean that which happens by chance or fortuitously, without intention lien upon or possession of the property y. 16 Insurable interest in property may consist in (a)
and design, and which is unexpected, unusual and unforeseen. An accident is an event that an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an
takes place without one's foresight or expectation; an event that proceeds from an unknown expectancy, coupled with an existing interest in that out of which the expectancy arises. 17
cause, or is an unusual effect of a known cause and, therefore, not expected. 6
Herein private respondent, as vendee/consignee of the goods in transit has such existing
The very nature of the term "all risks" must be given a broad and comprehensive meaning as interest therein as may be the subject of a valid contract of insurance. His interest over the
covering any loss other than a willful and fraudulent act of the insured. 7 This is pursuant to goods is based on the perfected contract of [Link] SC denied the petition.
the very purpose of an "all risks" insurance to give protection to the insured in those cases

Page 3 of 6
CHOA TIEK SENG, doing business under the name and style of SENG'S COMMERCIAL of the winds or waves. They do not embrace all loses happening on the sea. A peril whose only
ENTERPRISES, petitioner,  connection with the sea is that it arises aboard ship is not necessarily a peril of the sea; the peril must
vs. be of the sea and not merely one accruing on the sea. There must, in order to make the insurer liable be
HON. COURT OF APPEALS, FILIPINO MERCHANTS' INSURANCE COMPANY, INC., "some casualty," something which could not be foreseen as one of the necessary incidents of the
BEN LINES CONTAINER, LTD. AND E. RAZON, INC., respondents. GANCAYCO, J.: adventure. The purpose of the policy is to secure an indemnity against accidents which may happen,
not against events which must happen. Moreover, the cargo in question was insured in an "against all
petitioner imported some lactose crystals from Holland. The importation involved fifteen (15) metric risk policy." an all risk insurance policy insures against all causes of conceivable loss or damage,
tons packed in paper bags. The goods were loaded at the port at Rotterdam in sea vans on board the except as otherwise excluded in the policy or due to fraud or intentional misconduct on the part of the
vessel "MS Benalder' as the mother vessel, and thereafter aboard the feeder vessel "Wesser Broker V- insured. It covers all losses during the voyage whether arising from a marine peril or not, including
25" of respondent Ben Lines Container, Ltd. (Ben Lines for short). The goods were insured by the pilferage losses during the [Link] the present case, the "all risks" clause of the policy sued upon reads
respondent Filipino Merchants' Insurance Co., Inc. (insurance company for short) for the sum of as follows5. This insurance is against all risks of loss or damage to the subject matter insured but shall
P98,882.35, the equivalent of US$8,765.00 plus 50% mark-up or US$13,147.50, against all risks in no case be deemed to extend to cover loss, damage, or expense proximately caused by delay or
under the terms of the insurance cargo policy. Upon arrival at the port of Manila, the cargo was inherent vice or nature of the subject matter insured. Claims recoverable hereunder shall be payable
discharged into the custody of the operator respondent E. Razon, Inc. (broker for short), prior to the irrespective of percentage.  The terms of the policy are so clear and require no interpretation. The
delivery to petitioner through his broker. Of the 600 bags delivered to petitioner, 403 were in bad insurance policy covers all loss or damage to the cargo except those caused by delay or inherent vice
order. Petitioner filed a claim for said loss against respondent insurance company. Respondent or nature of the cargo insured. It is the duty of the respondent insurance company to establish that said
insurance company rejected the claim alleging that assuming that spillage took place while the goods loss or damage falls within the exceptions provided for by law, otherwise it is liable therefor.
were in transit, petitioner and his agent failed to avert or minimize the loss by failing to recover
spillage from the sea van, thus violating the terms of the insurance [Link] filed the in the An "all risks" provision of a marine policy creates a special type of insurance which extends coverage
Regional Trial Court. respondent insurance company filed a third-party complaint against respondents to risks not usually contemplated and avoids putting upon the insured the burden of establishing that
Ben Lines and broker. Respondent broker filed its answer to the third-party complaint denying liability the loss was due to peril falling within the policy's coverage. The insurer can avoid coverage upon
and arguing, among others, that the petitioner has no valid cause of action against it. Similarly, Ben demonstrating that a specific provision expressly excludes the loss from coverage.  In this case, the
Lines filed its answer denying any liability and a special defense arguing that respondent insurance damage caused to the cargo has not been attributed to any of the exceptions provided for nor is there
company was not the proper party in interest and has no connection whatsoever with Ben Lines any pretension to this effect. Thus, the liability of respondent insurance company is clear. The SC
Containers, LtdOn the RTC dismissed the complaint. On appeal, the CA affirmed the trial court. granted the petition.
Hence, this case.

Issue: WON RESPONDENT COURT ERRED IN HOLDING THAT AN "ALL RISKS"

COVERAGE COVERS ONLY LOSSES OCCASIONED BY OR RESULTING FROM "EXTRA [G.R. No. 127897. November 15, 2001]DELSAN TRANSPORT LINES,
AND FORTUITOUS EVENTS" DESPITE THE CLEAR AND UNEQUIVOCAL DEFINITION OF INC., petitioner, vs. THE HON. COURT OF APPEALS and AMERICAN HOME
THE TERM MADE AND CONTAINED IN THE POLICY SUED UPON.
ASSURANCE CORPORATION, respondents.
Ruling:

Yes. The Supreme Court ruled that In the case at bar, appellant failed to prove that the alleged DE LEON, JR., J.:
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 Facts: The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of
or perils of navigation embrace all kinds of marine casualties, such as shipwreck, foundering, affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year
stranding, collision and every specie of damage done to the ship or goods at sea by the violent action whereby the said common carrier agreed to transport Caltexs industrial fuel oil from the

Page 4 of 6
Batangas-Bataan Refinery to different parts of the country.  petitioner took on board its against the petitioner for any liability under its contractual obligation as a common
vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the carrier. The fact of payment grants the private respondent subrogatory right which
Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private enables it to exercise legal remedies that would otherwise be available to Caltex as
respondent, American Home Assurance Corporation. MT Maysun set sail from Batangas for owner of the lost cargo against the petitioner common carrier [8]Article 2207 of the
Zamboanga City. Unfortunately, the vessel sank in the early morning of August near Panay New Civil Code provides that:Art. 2207. If the plaintiffs property has been insured,
Gulf in the Visayas taking with it the entire cargo of fuel oil/. Subsequently, private and he has received indemnity from the insurance company for the injury or loss
respondent paid Caltex the sum of (P5,096,635.57) representing the insured value of the lost arising out of the wrong or breach of contract complained of, the insurance
cargo. Exercising its right of subrogation under Article 2207 of the New Civil Code, the company shall be subrogated to the rights of the insured against the wrongdoer or
private respondent demanded of the petitioner the same amount it paid to Caltex. the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be
Due to its failure to collect from the petitioner despite prior demand, private respondent entitled to recover the deficiency from the person causing the loss or injury.
filed a complaint with the Regional Trial Court for collection of a sum of money. The trial
court dismissed the complaint against herein petitioner. The decision of the trial court, The right of subrogation has its roots in equity. It is designed to promote and to
however, was reversed, on appeal, by the Court of Appeals. The appellate court gave accomplish justice and is the mode which equity adopts to compel the ultimate payment of a
credence to the weather report issued by the Philippine Atmospheric, Geophysical and debt by one who in justice and good conscience ought to pay.[9] It is not dependent upon, nor
Astronomical Services Administration (PAGASA for brevity) which showed that from 2:00 does it grow out of, any privity of contract or upon written assignment of claim.  It accrues
oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed remained at 10 to simply upon payment by the insurance company of the insurance claim.[10] Consequently,
20 knots per hour where the subject vessel sank. Hence, this petition. the payment made by the private respondent (insurer) to Caltex (assured) operates as an
equitable assignment to the former of all the remedies which the latter may have against the
Issues: petitioner.

1. Whether or not the payment made by the private respondent to Caltex for the In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex,
insured value of the lost cargo amounted to an admission that the vessel was petitioner attributes the sinking of MT Maysun to fortuitous event or force majeure. 
seaworthy (no)
2. Whether or not the non-presentation of the marine insurance policy bars the At the time of dry-docking and inspection, the ship may have appeared fit.  The certificates
complaint for recovery of sum of money for lack of cause of action. (no) issued, however, do not negate the presumption of unseaworthiness triggered by an
unexplained sinking. Of certificates issued in this regard, authorities are likewise clear as to
their probative value, (thus):

Ruling: Seaworthiness relates to a vessels actual condition. Neither the granting of classification or

the issuance of certificates establishes seaworthiness. (2-A Benedict on Admiralty, 7-3, Sec.
62)
1. [Link] SC ruled that The payment made by the private respondent for the insured
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 2. The SC ruled that the presentation in evidence of the marine insurance policy is not
policy. However, the same cannot be validly interpreted as an automatic admission indispensable in this case before the insurer may recover from the common carrier
of the vessels seaworthiness by the private respondent as to foreclose recourse the insured value of the lost cargo in the exercise of its subrogatory right. The

Page 5 of 6
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[The SC denied the petition.

Page 6 of 6