INSURANCE LAW

Loss; Actual Total Loss

1996

Bar Question:

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.

Suggested Answer:

Yes, RC’s claim for total loss is justified.

In a case decided by the Supreme Court, the complete physical destruction of

the rice is not essential to constitute an actual total loss. Loss exists when the
thing insured has become totally useless for the purpose for which it was
intended.

Here, the rice, which was imported from Thailand for sale locally, is obviously
intended for consumption by the public. The complete physical destruction of
the rice is not essential to constitute an actual total loss. Such a loss exists in
this case since the rice, having been soaked in sea water and thereby
rendered unfit for human consumption, has become totally useless for the
purpose for which it was imported (Pan Malayan Ins Co v CA gr 95070 Sep 5,
1991)