Marine Insurance includes:

"(a) Insurance against loss of or damage to:

"(1) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits,
moneys, securities, choses in action, instruments of debts, valuable papers, bottomry, and respondentia
interests and all other kinds of property and interests therein, in respect to, appertaining to or in connection
with any and all risks or perils of navigation, transit or transportation, or while being assembled, packed,
crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any
delays, storage, transhipment, or reshipment incident thereto, including war risks, marine builder’s risks,
and all personal property floater risks;

"(2) Person or property in connection with or appertaining to a marine, inland marine, transit or
transportation insurance, including liability for loss of or damage arising out of or in connection with the
construction, repair, operation, maintenance or use of the subject matter of such insurance (but not
including life insurance or surety bonds nor insurance against loss by reason of bodily injury to any person
arising out of ownership, maintenance, or use of automobiles);

"(3) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise; and

"(4) Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings,
their furniture and furnishings, fixed contents and supplies held in storage); piers, wharves, docks and slips,
and other aids to navigation and transportation, including dry docks and marine railways, dams and
appurtenant facilities for the control of waterways.

"(b) Marine protection and indemnity insurance, meaning insurance against, or against legal liability of the
insured for loss, damage, or expense incident to ownership, operation, chartering, maintenance, use, repair,
or construction of any vessel, craft or instrumentality in use of ocean or inland waterways, including liability
of the insured for personal injury, illness or death or for loss of or damage to the property of another person.
(Section 101 Insurance Code of the Philippines)

A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in
manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine
adventure. (Section 1, Marine Insurance Act of England 1906)

What is Marine Adventure?

There is a marine adventure where--

1. Any ship goods or other moveables are exposed to maritime perils. Such property is in this Act
referred to as “insurable property”;
2. The earning or acquisition of any freight, passage money, commission, profit, or other pecuniary
benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of
insurable property to maritime perils;
3. Any liability to a third party may be incurred by the owner of, or other person interested in or
responsible for, insurable property, by reason of maritime perils
4. “Maritime perils” means the perils consequent on, or incidental to, the navigation of the sea, that is to
say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seisures, restraints, and
detainments of princes and peoples, jettisons, barratry, and any other perils, either of the like kind or
which may be designated by the policy. (Section 3, Marine Insurance Act of UK 1906)

What are the kinds of Marine Insurance according to type of policy?

They are as follows:

1. Voyage Policy
2. Open Policy

What are the kinds of Marine Insurance according to subject matter?

They are as follows:

1. Cargo Insurance. It is further classified into the following: a. Ocean Marine Insurance and b. Inland
Marine Insurance
2. Hull Insurance
3. Liability Insurance

Enumerate the 3 Institute Cargo Clauses and their difference in terms of cover?

There are 3 main cargo clauses in international transactions, namely: Institute Cargo Clauses A, B and C.
Institute Cargo Clause A is the broadest and is also known as an all-risk policy while Institute Cargo Clause
C offers the least protection.

What is general average?

It is a contribution by the several interests engaged in the maritime venture to make good the loss
of one of them for the voluntary sacrifice of a part of the ship or cargo to save the residue of the
property and the lives of those on board, or for extraordinary expenses necessarily incurred for the
common benefit and safety of all (California Canneries Co. v. Canton Ins. Office 25 Cal. App. 303,
143 p. 549-553).

The following are the requisites of a General Average:

1. There must be common danger
2. For the common safety, part of the vessel or of the cargo or both is sacrificed deliberately.
3. From the expenses and damages caused follows the successful saving of the vessel and cargo
4. The expenses of damages should have been incurred or inflicted after taking proper legal steps and
authority. (A Magsaysay, Inc vs Agan, 96 Phil 504)

What is jettison?

It is the intentional throwing overboard of part of the cargo or some piece of the ship in order to
save the ship or its cargo.

What are the implied warranties in Marine Insurance? (2000 Bar Exams)

They are as follows:

1. Warranty of Seaworthiness. In every marine insurance upon a ship or freight, or freightage, or upon
any thing which is the subject of marine insurance, a warranty is implied that the ship is seaworthy. A
ship is seaworthy when reasonably fit to perform the service and to encounter the ordinary perils of
the voyage contemplated by the parties to the policy. (Sections 115-116, Insurance Code of the
Philippines)
 2. Warranty that the ship has the documents of neutrality or nationality. Where the nationality or
neutrality of a ship or cargo is expressly warranted, it is implied that the ship will carry the requisite
documents to show such nationality or neutrality and that it will not carry any documents which cast
reasonable suspicion thereon. (Section 122, Insurance Code of the Philippines).
3. Warranty against improper deviation. Deviation is a departure from the course of the voyage insured,
mentioned in the last two (2) sections, or an unreasonable delay in pursuing the voyage or the
commencement of an entirely different voyage.

When is deviation deemed proper?

It is deemed proper if the following are present:

1. When caused by circumstances over which neither the master nor the owner of the ship has any
control;
2. When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured
against;
3. When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or
4. When made in good faith, for the purpose of saving human life or relieving another vessel in
distress. (Section 126, Insurance Code of the Philippines)

Define seaworthiness and when is a ship deemed seaworthy?

A ship is seaworthy when reasonably fit to perform the service and to encounter the ordinary perils of the
voyage contemplated by the parties to the policy.

An implied warranty of seaworthiness is complied with if the ship be seaworthy at the time of the
commencement of the risk, except in the following cases:
"(a) When the insurance is made for a specified length of time, the implied warranty is not complied with unless
the ship be seaworthy at the commencement of every voyage it undertakes during that time;
"(b) When the insurance is upon the cargo which, by the terms of the policy, description of the voyage, or
established custom of the trade, is to be transhipped at an intermediate port, the implied warranty is not
complied with unless each vessel upon which the cargo is shipped, or transhipped, be seaworthy at the
commencement of each particular voyage. (Section 116-117, Insurance Code of the Philippines)

Is the warranty of seaworthiness applicable to the cargo owner too aside from the shipowner?

Since the law provides for an implied warranty of seaworthiness in every contract of ordinary marine
insurance, it becomes the obligation of a cargo owner to look for a reliable common carrier which keeps its
vessels in seaworthy condition. The shipper of cargo may have no control over the vessel but he has full
control in the choice of the common carrier that will transport his goods. (Isabela Roque vs Intermediate
Appellate Court and Pioneer Insurance and Surety Corporation, (G.R. No. L-66935 November 11, 1985)

What is Perils of the Ship?

A loss, which, in the ordinary course of events, results (1) from the natural and inevitable action of the sea (2)
from the ordinary wear and tear of the ship, (3) from the negligent failure of the shipowner to provide vessel
with proper equipment to convey the cargo under ordinary conditions. (Hector De Leon, The Law on Insurance
with Insolvency Law)

The insurer does not insure against peril of the ship. The purpose of an ocean marine insurance is to secure
indemnity against accidents which may happen not against events which must happen. (Go Tiaco vs Union
Insurance Society of Canton, 40 Phil 40)

T Shipping, Co. insured all of its vessels with R Insurance, Co. The insurance policies stated that the insurer shall
answer for all damages due to perils of the sea. One of the insured's ship, the MV Dona Priscilla, ran aground in the
Panama Canal when its engine pipes leaked and the oil seeped into the cargo compartment. The leakage was caused
by the extensive mileage that the ship had accumulated. May the insurer be made to answer for the damage to the
cargo and the ship? (2011 Bar Exams)

(A) Yes, because the insurance policy covered any or all damage arising from perils of the sea.
(B) Yes, since there appears to have been no fault on the part of the shipowner and shipcaptain.
(C) No, since the proximate cause of the damage was the breach of warranty of seaworthiness of the ship.
(D) No, since the proximate cause of the damage was due to ordinary usage of the ship, and thus not due to a
peril of the sea.

What is Perils of the Sea?

It refers to fortuitous accidents or casualties of the seas. It embraces all kinds of marine casualty such as
shipwreck, foundering, stranding, collision and every specie of damage done to the ship or goods at sea by
the violent action of the wind or waves (45 CJS 934)

The term 'perils of the sea' extends only to losses caused by sea damage, or by the violence of the elements,
and does not embrace all losses happening at sea. They insure against losses from extraordinary
occurrences only, such as stress of weather, winds and waves, lightning, tempests, rocks and the like. These
are understood to be the "perils of the sea" referred in the policy, and not those ordinary perils which every
vessel must encounter. "Perils of the sea" has been said to include only such losses as are
of extraordinary nature, or arise from some overwhelming power, which cannot be guarded against by the
ordinary exertion of human skill and prudence. Damage done to a vessel by perils of the sea includes every
species of damages done to a vessel at sea, as distinguished from the ordinary wear and tear of the voyage,
and distinct from injuries suffered by the vessel in consequence of her not being seaworthy at the outset of
her voyage. (Isabela Roque vs Intermediate Appellate Court and Pioneer Insurance and Surety Corporation,
(G.R. No. L-66935 November 11, 1985)
A certain policy of marine insurance upon cargo stipulated that the insurer shall be liable for losses incident to "perils
of the sea". During the voyage, sea water entered the compartment where the cargo was stored due to a defective
drain pipe. The insured brings action on the policy.

Is the insurer liable for damages caused to the cargo? Explain your answer briefly. (1960 Bar Exams)

No. Insurer is not liable for damages caused. The defective drain pipe is not a peril of the sea. Rather it is a
peril of the ship. The insurer is therefore not liable.

Is rusting of the steel pipes in the course of voyage a peril of the sea?

Yes. The rusting of steel pipes in the course of a voyage is a "peril of the sea" in view of the toll on the cargo
of wind, water, and salt conditions. Rust is not an inherent vice of the steel pipes without interference of
external factors. (Cathay Insurance vs Court of Appeals, 151 SCRA 710)

What is barratry?

It is the willful misconduct on the part of the master or crew in pursuance of some unlawful or fraudulent
purpose without the consent of the owners, and to the prejudice of the owner's interest. Barratry requires a
willful and intentional act in its commission. No honest error or judgement or mere negligence, unless
criminally gross, can be barratry.

What is a common carrier?

Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to
the public.

Common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case. (Articles 1732-33)

What is the test for determining whether a party is a common carrier of goods or not?

The following elements must be satisfied:

1. He must be engaged in the business of carrying goods for others as a public employment, and must
hold himself out as ready to engage in the transportation of goods for person generally as a business
and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and
 4. The transportation must be for hire. (First Philippine Industrial Corporation vs Court of Appeals, [G.R.
No. 125948 December 29, 1998] citing Agbayani, Commercial Laws of the Phil., 1983 Ed., Vol. 4, p. 5.)

Based on the foregoing, First Philippine Industrial Corporation is a common carrier because "it is engaged in
the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and
transports the goods by land and for compensation."

Will the fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier?

Art. 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying
of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 . . . avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services
to the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1877 deliberately
refrained from making such distinctions.

The concept of "common carrier" under Article 1732 may be seen to coincide neatly with the notion of "public
service," under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially
supplements the law on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes: every person that now or hereafter may own, operate. manage,
or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed
route and whatever may be its classification, freight or carrier service of any class, express service, steamboat,
or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system
gas, electric light heat and power, water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other similar public services. (De
Guzman vs. Court of Appeals, [168 SCRA 617-618, 1988])

Is a carrier under under a charter party a common carrier?

Charter party is contract between a shipowner and a merchant, by which a ship is let or hired for the
conveyance of goods on a specified voyage, or for a defined period. A vessel might also be chartered to carry
passengers on a journey. (Wikipedia)

Generally, private carriage is undertaken by special agreement and the carrier does not hold himself out to
carry goods for the general public. The most typical, although not the only form of private carriage, is the
charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the use
and service of all or some part of a ship for a period of time or a voyage or voyages. (Hernandez and Peñasales,
Philippine Admiralty and Maritime Law, p. p. 243; citing Schoenbaum & Yiannopoulos, p. 364.)

It is a hornbook doctrine that:

In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that
the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the carrier's
custody does not put the burden of proof on the carrier.

Since . . . a private carrier is not an insurer but undertakes only to exercise due care in the protection of the
goods committed to its care, the burden of proving negligence or a breach of that duty rests on plaintiff and
proof of loss of, or damage to, cargo while in the carrier's possession does not cast on it the burden of proving
proper care and diligence on its part or that the loss occurred from an excepted cause in the contract or bill of
lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of the presumptions and
inferences by which the law aids the bailor in an action against a bailee, and since the carrier is in a better
position to know the cause of the loss and that it was not one involving its liability, the law requires that it
come forward with the information available to it, and its failure to do so warrants an inference or presumption
of its liability. However, such inferences and presumptions, while they may affect the burden of coming forward
with evidence, do not alter the burden of proof which remains on plaintiff, and, where the carrier comes forward
with evidence explaining the loss or damage, the burden of going forward with the evidence is again on
plaintiff.

Where the action is based on the shipowner's warranty of seaworthiness, the burden of proving a breach
thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the
goods were lost or damaged while in the carrier's possession does not cast on it the burden of proving
seaworthiness. . . . Where the contract of carriage exempts the carrier from liability for unseaworthiness not
discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due diligence
to make the vessel seaworthy. (Vlasons Shipping Inc vs Court of Appeals and National Steel Corporation, G.R.
No. 112350 [December 12, 1997])

Types of Losses

What are the types of losses in Marine Insurance?

1. Partial Loss
2. Constructive Total Loss
3. Actual Total Loss

What is a partial loss?

Funny but this is true. The law defines it in this manner - "Every loss which is not total is partial." (Section 130,
Insurance Code of the Philippines)
What is an actual loss?

An actual total loss is caused by:

"(a) A total destruction of the thing insured;
"(b) The irretrievable loss of the thing by sinking, or by being broken up;
"(c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or
"(d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the
thing insured. (Section 132, Insurance Code of the Philippines)

RC Corporation purchased rice from Thailand, which it intended to sell locally. Due to stormy weather, the ship carrying
the rice became submerged in sea water, and with it the rice cargo. When the cargo arrived in Manila, RC filed a claim
for total loss with the insurer, because the rice was no longer fit for human consumption. Admittedly, the rice could still
be used as animal feed. Is RC’s claim for total loss justified? Explain.

Yes, RC’s claim for total loss is justified. The rice, which was imported from Thailand for sale locally, is
obviously intended for consumption by the public. Thecomplete physical destruction of the rice is not
essential to constitute an actual total loss. Such a loss exists in this case since the rice, having been soaked
in sea water and thereby rendered unfit for human consumption, has become totally useless for the purpose
for which it was imported (Pan Malayan Ins Co vs CA GR No. 95070 [Sep 5, 1991])

What is a constructive total loss?

It is sometimes referred to as a technical total loss. As a consequence, it gives the insured a right to abandon.
Abandonment is necessary in order to recover for a total loss.

A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion
thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof,
when the cause of the loss is a peril insured against:
"(a) If more than three-fourths (¾) thereof in value is actually lost, or would have to be expended to recover it
from the peril;
"(b) If it is injured to such an extent as to reduce its value more than three-fourths (¾);
"(c) If the thing insured is a ship, and the contemplated voyage cannot be lawfully performed without incurring
either an expense to the insured of more than three-fourths (¾) the value of the thing abandoned or a risk
which a prudent man would not take under the circumstances; or
"(d) If the thing insured, being cargo or freightage, and the voyage cannot be performed, nor another ship
procured by the master, within a reasonable time and with reasonable diligence, to forward the cargo, without
incurring the like expense or risk mentioned in the preceding subparagraph. But freightage cannot in any case
be abandoned unless the ship is also abandoned. (Section 141, Insurance Code of the Philippines)

An insurance company issued a marine insurance policy covering a shipment by sea from Mindoro to Batangas of 1,000
pieces of Mindoro garden stones against “total lossonly.” The stones were loaded in two lighters, the first with 600
pieces and the second with 400 pieces. Because of rough seas, damage was caused the second lighter resulting in
the loss of 325 out of the 400 pieces. The owner of the shipment filed claims against the insurance company on the
ground of constructive total loss inasmuch as more than ¾ of the value of the stones had been lost in one of the
lighters. Is the insurance company liable under its policy? Why? (1992 Bar Exams)

The insurance company is not liable under its policy covering against “total loss only” the shipment of 1,000
pieces of Mindoro garden stones. While the same was carried in two barges, it was insured under a single
policy. There is no constructive total loss that can claimed since the ¾ rule is to be computed on the total 1,000
pieces of Mindoro garden. The loss of 325 pieces of garden stones is definitely less than 3/4 of 1,000 pieces of
garden stones. (Section 139, Insurance Code, cited in Oriental Assurance v. Court of Appeals and Panama Saw
Mill, G.R. No. 94052 [August 9, 1991])

M/V Pearly Shells, a passenger and cargo vessel, was insured for P40,000,000.00 against “constructive total loss.”
Due to a typhoon, it sank near Palawan. Luckily, there were no casualties, only injured passengers. The ship owner
sent a notice of abandonment of his interest over the vessel to the insurance company which then hired professionals
to afloat the vessel for P900,000.00. When re-floated, the vessel needed repairs estimated at P2,000,000.00. The
insurance company refused to pay the claim of the ship owner, stating that there was “no constructive total loss.”
a) Was there “constructive total loss” to entitle the ship owner to recover from the insurance company? Explain.

No, there was no "constructive total loss" because the vessel was refloated and the costs of refloating plus
the needed repairs (P 2.9 Million) will not be more than three-fourths of the value of the vessel. A constructive
total loss is one which gives to a person insured a right to abandon. (Sec, 131, Insurance Code) There would
have been a constructive total loss had the vessel MN Pearly Shells suffer loss or needed refloating and
repairs of more than the required three-fourths of its value, i.e., more than P30.0 Million. (Sec. 139, Insurance
Code, cited in Oriental Assurance v. Court of Appeals and Panama Saw Mill, G.R. No. 94052 [August 9, 1991])

However, the insurance company shall pay for the total costs of refloating and needed repairs (P2.9 Million).

b) Was it proper for the ship owner to send a notice of abandonment to the insurance company? Explain.

No, it was not proper for the ship owner to send a notice of abandonment to the insurance company because
abandonment can only be availed of when, in a marine insurance contract, the amount to be expended to
recover the vessel would have been more than three-fourths of its value. Vessel MN Pearly Shells needed only
P2.9 Million, which does not meet the required three-fourths of its value to merit abandonment. (Section 139,
Insurance Code, cited in Oriental Assurance v. Court of Appeals and Panama Saw Mill, G.R. No. 94052 [August
9, 1991])

What is abandonment?

Abandonment is the act of the insured by which, after a constructive total loss, he declares the relinquishment
to the insurer of his interest in the thing insured. It must satisfy the following:
 1. An abandonment must be made within a reasonable time after receipt of reliable information of the
loss, but where the information is of a doubtful character, the insured is entitled to a reasonable time
to make inquiry.
2. An abandonment must be neither partial nor conditional.
3. Abandonment is made by giving notice thereof to the insurer, which may be done orally, or in
writing: Provided, That if the notice be done orally, a written notice of such abandonment shall be
submitted within seven (7) days from such oral notice.
4. A notice of abandonment must be explicit, and must specify the particular cause of the abandonment,
but need state only enough to show that there is probable cause therefor, and need not be
accompanied with proof of interest or of loss. (Sections 142-146, Insurance Code of the Philippines)

What is deviation in marine insurance policy? (1985 Bar Exams)

Deviation is departure of the vessel from the course of voyage, or unreasonable delay in pursuing the voyage
or the commencement of an entirely different voyage.
If the deviation is proper, the contract remains valid. If improper, the insurer is not liable.

A deviation is proper in the following cases:

1. If due to circumstances outside of the control of the captain or shipowner

2. If done to comply with warranty
3. If made in good faith to avoid a peril
4. If made to save human life or another distressed vessel (Jorge Miravite, Bar Review Materials in
Commercial Law, 1998 Edition, p183-184)

T, the captain of MV Don Alan, while asleep in his cabin, dreamt of an Intensity 8 earthquake along the path of his ship.
On waking up, he immediately ordered the ship to return to port. True enough, the earthquake and tsunami struck three
days later and his ship was saved. Was the deviation proper?

(A) Yes, because the deviation was made in good faith and on a reasonable ground for believing that it was
necessary to avoid a peril.
(B) No, because no reasonable ground for avoiding a peril existed at the time of the deviation.
(C) No, because T relied merely on his supposed gift of prophecy.
(D) Yes, because the deviation took place based on a reasonable belief of the captain.

What are the standard exclusions under the Institute Cargo Clauses A to C?

They are as follows:

1. loss, damage or expense attributable to wilful misconduct of the Assured

 2. loss due to ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the
subject-matter insured
3. loss, damage or expense caused by insufficiency or unsuitability of packing or preparation of the
subject-matter insured
4. "packing" shall be deemed to include stowage in a container or liftvan but only when such stowage is
carried out prior to attachment of this insurance or by the Assured or their servants)
5. loss, damage or expense caused by inherent vice or nature of the subject-matter insured
6. loss, damage or expense proximately caused by delay, even though the delay be caused by a risk
insured against
7. loss, damage or expense arising from insolvency or financial default of the owners managers
charterers or operators of the vessel
8. loss, damage or expense arising from the use of any weapon of war employing atomic or nuclear
fission and/or fusion or other like reaction or radioactive force or matter.
9. loss, damage or expense arising from unseaworthiness of vessel or craft, unfitness of vessel craft
conveyance container or liftvan for the safe carriage of the subject-matter insured, where the Assured
or their servants are privy to such unseaworthiness or unfitness, at the time the subject-matter insured
is loaded therein.
10. loss, damage or expense due to war civil war revolution rebellion insurrection, or civil strife arising
therefrom, or any hostile act by or against a belligerent power
11. loss, damage or expense due tocapture seizure arrest restraint or detainment (piracy excepted), and
the consequences thereof or any attempt thereat
12. loss, damage or expense due to derelict mines torpedoes bombs or other derelict weapons of war.
13. loss, damage or expense due to caused by strikers, locked-out workmen, or persons taking part in
labour disturbances, riots or civil commotions
14. loss, damage or expense due to resulting from strikes, lock-outs, labour disturbances, riots or civil
commotions
15. loss, damage or expense due to caused by any terrorist or any person acting from a political motive

Define inherent vice.

The “inherent vice” exclusion is also used to describe a loss that, due to the manner in which the cargo is
shipped, is regarded as inevitable. For example, fresh eggs shipped without any packing or protection are
likely to sustain damage no matter how carefully they are handled. Chocolates shipped in an ordinary
container in the summer are bound to melt. Damage that occurs in the course of ordinary handling and
transportation of cargos, without the intervention of fortuity, is due to inherent vice and must be excluded
from coverage. (Kim A. Wigmore & Michael D. Silva. (July 01, 2005). Inherent Vice & Fortuitous Events in
Marine "All Risks" Policies. Retrieved from: http://www.whitelawtwining.com/news-articles/articles-
publications/transportation/marine/05-07-
01/Inherent_Vice_Fortuitous_Events_in_Marine_All_Risks_Policies.aspx)

What is the meant by an All Risk Marine Policy?

An insurance "against all risk" has a technical meaning in marine insurance. Under an "all risk" marine
policy, there must be a general rule be a fortuitous event in order to impose liability on the insurer; losses
occasioned by ordinary circumstances or wear and tear are not covered, thus, while an "all risk" marine
policy purports to cover losses from casualties at sea, it does not cover losses occasioned by the ordinary
circumstances of a voyage, but only those resulting from extra and fortuitous events.

It has been held that damage to a cargo by high seas and other weather is not covered by an "all risk" marine
policy, since it is not fortuitous, particularly where the bad weather occurs at a place where it could be
expected at the time in question. (Choa Tiek Seng vs Court of Appeals and Filipino Merchants Insurance
Company, Inc. [G.R. No. 84507 March 15, 1990])

In Gloren Inc. vs. Filipinas Cia. de Seguros, it was held that an all risk insurance policy insures against all
causes of conceivable loss or damage, except as otherwise excluded in the policy or due to fraud or
intentional misconduct on the part of the insured. (65 O.G. 3392; see also 45 C.J.S. 941.)

What is the prescription period to file a suit against the carrier and ship under Carriage of Goods by Sea Act
(COGSA)?

The carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or the date when the goods should have been delivered:
Provided, That if a notice of loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the
delivery of the goods or the date when the goods should have been delivered. (Section 7 of Commonwealth
Act No. 65)

Is there exception to the preceding question?

Yes. In case there is an express agreement between the parties. The agreement shall be the law between
them. (Phoenix Assurance Co. Ltd vs United Stated Lines, [22 SCRA 674], Baluyot vs Venegas, [22 SCRA
412], Lazo vs Republic Surety and Insurance Co., Inc., [31 SCRA 329], Philippine American General Insurance
Co., Inc vs Mutuc, [61 SCRA 22-23]).

Is the one-year prescription period applicable to insurers as well?

Yes. Otherwise, what COGSA intends to to prohibit after the lapse of the one-year prescriptive period can be
done indirectly by the shipper or owner by simply filing a claim against the insurer even after the lapse of
one year. (Filipino Merchants Insurance Co., Inc vs Hon. Jose Alejandro and Frota Oceanica, [GR No. L-
51440, October 14, 1986, Yek Ton Fire and Marine Insurance Co., Ltd vs American President Lines, Inc. [103
Phil 2225-26])

The case applies only if the suit is filed against the carrier either by the shipper, the consignee or the insurer.
The prescription shall not apply in case the shipper is pursuing a claim against the insurer. The basis of
liability of the insurer is the insurance contract and not the contract of carriage. (See Mayer Steel Pipe
Corporation and Hong Kong Government Department vs Court of Appeals, South Sea Surety and Insurance
Co., Inc and Charter Insurance Corporation,[274 SCRA 432])

Is the one year prescription period applicable in case of misdelivery or conversion?

No. As a consequence, the prescription period of 10 years shall apply for breach of a written contract or 4
years in case of quasi-delict. (Ang vs. American Steamship Agencies, Inc. [19 SCRA 123])

What are the defenses of the common carrier in case of loss, destruction, or deterioration of the goods under their
custody?

1. The common carrier must prove that the loss, destruction, or deterioration of the goods are caused
by the following: (a) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (b) Act
of the public enemy in war, whether international or civil; (c) Act or omission of the shipper or owner
of the goods; (d) The character of the goods or defects in the packing or in the containers; (d) Order
or act of competent public authority. (Article 1733, New Civil Code)
2. If the goods are lost, destroyed or deteriorated, common carriers by causes outside of the above
list, common carrier must prove that they observed extraordinary diligence. Note that common
carriers are presumed to have been at fault or to have acted negligently in case of a loss. (Articles
1734, New Civil Code).

Fire is not a natural disaster or calamity. (Eastern Shipping Lines, Inc. vs The Nisshin Fire and Marine
Insurance Co. and Dowa Fire and Marine Insurance Co., Ltd. (GR No. L71478, May 29, 1987)

Is the stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss,
destruction, or deterioration of the goods to a degree less than extraordinary diligence valid?

Yes, provided the following must concur:

1. In writing, signed by the shipper or owner;

2. Supported by a valuable consideration other than the service rendered by the common carrier; and
3. Reasonable, just and not contrary to public policy. (Article 1744, New Civil Code)
Is the stipulation that the common carrier's liability is limited to the value of the good appearing in the Bill of Lading
valid?

Yes. Unless the shipper or owner declares a greater value. (See Article 1749, New Civil Code)

Jacob, the owner of the barge, offered to transport the logs of Essau from Palawan to Manila. Essau accepted the
offer not knowing that the barge would be managed by irresponsible crew with deep-seated resentments against
Jacob, their employer.

Essau insured his cargo of logs against both perils of the sea and barratry.

The logs were improperly loaded on one side thereby causing the barge to tilt and to navigated on an uneven keel.
When the strong winds and high water, normal for the season, started to pound the barge, the crew took advantage
of the situation and unbolted the sea valves of the barge causing sea water to come in. The barge sank.

When Essau tried to collect from the insurance firm, the latter stated it could not be held responsible considering the
unseaworthiness of both the barge and its crew. Essau countered that he was not the owner of the barge and he
could not be held responsible for conditions about which he is innocent.

Is the insurance company liable? Decide with reasons (1986 Bar Exams)

No, the insurance company is not liable. The shipper of the cargo may have no control over the vessel, but
he has full control in the choice of the common carrier that will transport his goods. The shipper's choice of
the vessel which turns out to be unseaworthy will free the insurer from liability under the insurance contract.
(Jorge Miravite, Bar Review Materials in Commercial Law, 1998 Edition, p183)

A shipped 100 pieces of plywood from Davao City to Manila. He took a marine insurance policy to insure the
shipment against loss or damage due to "perils of the sea, barratry, fire, jettison, pirates and other such perils"

When the ship left the port of Davao, the shipman in charge forgot to secure on the portholes thru which sea water
seeped during the voyage, damaging the plywood. A filed a claim against the insurance company which refused to
pay on the ground that the loss was not due to peril of the sea or any of the risk covered under the policy. It was
admitted that the sea was reasonably calm during the voyage and that no strong winds or waves were encountered
by the vessel.

How would you decide the case? Explain. (1983 Bar Exams)

Recovery under the policy will not prosper. The policy enumerates the perils insured against: perils of the
sea, fire, jettison, pirates and other such perils. The last phrase "and other perils" must necessarily have
common characteristics as the first five mentioned. Immediately noticeable is that the five does not cover
losses due to the fault or negligence of the members of the crew, like the failure to secure one of the
portholes of the vessels.

Hence, A cannot recover the damage to his goods from the insurer. (Jorge Miravite, Bar Review Materials in
Commercial Law, 1998 Edition, p183-184)

Marine insurance for a sugar shipment was procured by a shipper-consignee on the basis of a sales invoice
of the supplier stating that the sugar is in waterproof plastic bags. The insurer, relying on the sales invoice,
did not examine the shipment, and issued the covering policy forthwith. Later, the ship carrying the sugar
shipment sank at the sea due to a fire of unknown origin. May the shipper-consignee recover on the policy?
(1974 Bar Exams)

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