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Marine Insurance
1. Definition and coverage, Section 101
SEC. 101. 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 builders 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
(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.

2. Perils of the sea vs. perils of the ship

Roque vs. IAC, G.R. No. L-66935

Facts: 1. Isabela Roque (Roque of Isabela Roque Timber Enterprises) hired the Manila Bay Lighterage Corp. (Manila Bay)
to load and carry its logs from Palawan to North Harbor, Manila. The logs were insured with Pioneer Insurance and
Surety Corp. (Pioneer).

2. The logs never reached Manila due to certain circumstances (as alleged by Roque and found by the appellate court),
such as the fact that the barge was not seaworthy that it developed a leak, that one of the hatches were left open
causing water to enter, and the absence of the necessary cover of tarpaulin causing more water to enter the barge.
3. When Roque demanded payment from Pioneer, but the latter refused on the ground that its liability depended upon
the Total Loss by Total Loss of Vessel Only.

4. The trial court ruled in favor of Roque in the civil complaint filed by the latter against Pioneer, but the decision was
reversed by the appellate court.

Issue: 1. WON in cases of marine insurance, there is a warranty of seaworthiness by the cargo owner
2. WON the loss of the cargo was due to perils of the sea, not perils of the ship.

Held: 1. Yes, there is. The liability of the insurance company is governed by law. Section 113 of the Insurance Code
provides that In every marine insurance upon a ship or freight, or freightage, or upon anything which is the subject of
marine insurance, a warranty is implied that the ship is seaworthy. Hence, 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 ship-owner or not. 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 insurance policy.
2. By applying Sec. 113 of the Insurance Code, 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; it is 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. t 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 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 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 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. Neither
barratry can be used as a ground by Roque. Barratry as defined in American Insurance Law is "any willful misconduct on
the part of 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 necessarily requires a willful and intentional act in its commission. No
honest error of judgment or mere negligence, unless criminally gross, can be barratry. In the case at bar, there is no
finding that the loss was occasioned by the willful or fraudulent acts of the vessel's crew. There was only simple
negligence or lack of skill.

La Razon vs. Union Insurance, G.R. No. 13983

Facts: A cargo of rice belonging to the Go Tiaoco Brothers, was transported on the steamship Hondagua from the port of
Saigon to Cebu. On discharging the rice from one of the compartments in the after hold, upon arrival at Cebu, it was
discovered that 1,473 sacks had been damaged by sea water.

2. The policy of insurance, covering the shipment, was signed upon a form long in use among companies engaged in
maritime insurance. It purports to insure 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."

3. It was found out that the hole in the drain pipe which served as a discharge from the water. As a consequence the sea
water rose in the pipe. Navigation under these conditions resulted in the washing out of the cement-filling from the
action of the sea water, thus permitting the continued flow of the salt water into the compartment of rice.

3. An action on a policy of marine insurance issued by the Union Insurance Society of Canton, Ltd., upon the cargo of rice
belonging to the Go Tiaoco Brothers was filed. The trial court found that the inflow of the sea water during the voyage
was due to a defect in one of the drain pipes of the ship and concluded that the loss was not covered by the policy of
insurance. Judgment was accordingly entered in favor of Union Insurance and Go Tiaoco Brothers appealed.

Issue [1]: Whether perils of the sea includes entrance of water into the ships hold through a defective pipe.
Held [1]: NO. It is determined that the words "all other perils, losses, and misfortunes" are to be interpreted as covering
risks which are of like kind with the particular risks which are enumerated in the preceding part of the same clause of
the contract. 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.

Issue [2]: Whether there is an implied warranty on the seaworthy of the vessel in every marine insurance contract.
Held [2]: YES. 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. This rule is
accepted in our own Insurance Law (Act No. 2427, sec. 106). It is also well settled that 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 (Act No. 2427,
sec. 106).
3. Special marine insurance contracts
Insurance against all risks

Filipino Merchants Insurance vs. CA, G.R. No. 85141

1. Choa Tiek Seng bought fishmeal products from Bangkok and had it delivered to the port of Manila. He entered into an
insurance contract with FilMerchant.

2. Upon arrival at Manila, E. Razon, Inc. and FMICI's surveyor found 227 bags in bad order condition. Because of this loss,
buyer formally claimed from FilMerchant but the said insurance company refused to pay. He brought suit.

3. Trial court ruled for him and against FilMerchant

4. CAaffirmed trial court hence this petition.

5. FilMerchant argues:(1) CA erred in the interpretation and application of the all risk clause of maritime insurance
policy. It says it should not be held liable for partial loss notwithstanding the clear absence of proof of some
fortuitous event, casualty, or accidental cause to which the loss is attributable.

(2) Respondent had no insurable interest in the subject cargo. The shipment reveals that it is a C& F
contract of shipment. The seller, not the consignee, paid for the shipment. As there was yet no delivery to the
consignee, ownership (and interest) does not yet pass to him.

Issues: 1. W/N CA was correct in its interpretation of the all risk clause in the maritime insurance contract.

2. W/N the insured had insurable interest over the property insured. (for next case)

1. All risks policy has no technical meaning.

The clause in question reproduced:

5. This insurance is against all risks of loss or damage to the subject-matter insured but shall in no case be
deemed toextend 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 accidentalcause
of any kind. The very nature of the term "all risks" must be given a broad and comprehensive meaning as coveringany
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.

Burden of proof shifts to the insurer.

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;
thereafter, the burden then shifts tothe insurer to show the exception to the coverage.

2. )Vendee/Consignee has insurable interest

SC: The shipment contract being that of cost and freight (C&F) is immaterial in the determination of insurable interest.
The perfected contract of sale vests in the vendee an equitable title, an interest sufficient enough to be insurable.
Further, Art. 1523 NCC 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, whether named by the buyer or not, for, the purpose of
transmission to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said rule not obtaining
in the present case. 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 therisks of loss of the goods and paid
the insurance premium covering them.

4. Insurable interest in marine insurance

a. Shipowner, Sections 102 to 108

SEC. 102. The owner of a ship has in all cases an insurable interest in it, even when it has been chartered by one who
covenants to pay him its value in case of loss: Provided, That in this case the insurer shall be liable for only that part of
the loss which the insured cannot recover from the charterer.

SEC. 103. The insurable interest of the owner of the ship hypothecated by bottomry is only the excess of its value over
the amount secured by bottomry.

SEC. 104. 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. 105. 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. 106. 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 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. 107. One who has an interest in the thing from which profits are expected to proceed has an insurable interest in
the profits.

SEC. 108. The charterer of a ship has an insurable interest in it, to the extent that he is liable to be damnified by its loss.

Filipino Merchants Insurance vs. CA, supra (only on the insurable interest issue)

b. Cargo owner, Section 15 and Section 107

SEC. 15. A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his
liability but not to exceed the value thereof.

SEC. 107. One who has an interest in the thing from which profits are expected to proceed has an insurable interest in
the profits.

c. Charter parties, Section 108

SEC. 108. The charterer of a ship has an insurable interest in it, to the extent that he is liable to be damnified by its loss.

Coastwise vs. CA, G.R. No. 114167

1. Pag-asa Sales Inc. entered into a contract to transport molasses from the province of Negros to Manila with
Coastwise Lighterage Corp., using the latters dumb barges. The barges were towed in tandem by the tugboat MT
Marica, which is likewise owned by Coastwise.

2. Upon reaching Manila Bay, while approaching Pier 18, one of the barges, Coastwise 9, struck an unknown sunken
object. The forward buoyancy compartment was damaged, and water gushed in through a hole 2 inches wide and 22
inches long. As a consequence, the molasses at the cargo tanks were contaminated and rendered unfit for the use it
was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the shipment of molasses as a total loss.
3. Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo, Philippine General Insurance Company
(PhilGen) and against the carrier, Coastwise Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which
paid the consignee, Pag-asa Sales the amount representing the value of the damaged cargo of molasses.

4. PhilGen then filed an action against Coastwise Lighterage before the RTC of Manila,seeking to recover the amount of
it paid to Pag-asa Sales for the latters lost cargo. PhilGen now claims to be subrogated to all the contractual rights and
claims which the consignee may have against the carrier, which is presumed to have violated the contract of carriage.

5. RTC ruled in favor of PhilGen

6. Coastwise Lighterages appeal to the Court of Appeals.

Issue: WON Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of affreightment
which it entered into with the consignee, Pag-asa Sales, Inc.

Held: No. The charter party contract is one of affreightment over the whole vessel, rather than a demise. As such, the
liability of the shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation. Pag-
asa Sales, Inc. only leased three of petitioner's vessels, in order to carry cargo from one point to another, but the
possession, command and navigation of the vessels remained with petitioner Coastwise Lighterage.

Lea Mer Industries vs. Malayan Insurance, G.R. No. 161745

Facts: 1. Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries for the shipment of silica sand
valued at P565,000. It was Consigned to Vulcan Industrial and Mining Corporation, the cargo was to be transported from
Palawan to Manila. On October 25, 1991, the silica sand was placed on board Judy VII, a barge leased by Lea Mer.
During the voyage, the vessel sank, resulting in the loss of the cargo.

2. Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. Malayan demanded reimbursement
from Lea Mer, which refused to comply. Consequently, Malayan instituted a Complaint for the collection of P565,000.

3. Trial Court: dismissed the Complaint, upon finding that the cause of the loss was a fortuitous event; the vessel had
sunk because of the bad weather condition brought about by Typhoon Trining. The court ruled that petitioner had no
advance knowledge of the incoming typhoon, and that the vessel had been cleared by the Philippine Coast Guard to

4. CA: REVERSED; held that the vessel was not seaworthy when it sailed for Manila. Thus, the loss of the cargo was
occasioned by petitioners fault, not by a fortuitous event.

Issue: Whether petitioner is liable for the loss of the cargo.

Held: YES. Lea Mer is liable to pay Malayan Insurance.

Petitioner is clearly a common carrier, because it offers to the public its business of transporting goods through its
vessels. Thus, the Court corrects the trial courts finding that petitioner became a private carrier when Vulcan chartered
Note: Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are distinguished as

Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage
or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac vice
(for this occasion; for this event; literally, for this turn), subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command
and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time
or voyage charter party) or not a charter party at all.
5. Concealment and representation
a. Defined, Section 109 in relation to Section 28
SEC. 109. In marine insurance, each party is bound to communicate, in addition to what is required by Section 28, all
the information which he possesses, material to the risk, except such as is mentioned in Section 30, and to state the
exact and whole truth in relation to all matters that he represents, or upon inquiry discloses or assumes to disclose.

-Opinions or expectations of third persons is material, Section 110

SEC. 110. In marine insurance, information of the belief or expectation of a third person, in reference to a material fact,
is material.

-Presumptive knowledge or loss, Section 111

SEC. 111. 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.

b. Effects of concealment
- When concealment does not vitiate the entire contract, Section 112
SEC. 112. 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:
(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; and
(e) The use of false and simulated papers.

-Effect of false representation, Section 114

SEC. 114. The eventual falsity of a representation as to expectation does not, in the absence of fraud, avoid a contract
of marine insurance.

6. Implied warranties
a. Seaworthiness, Sections 115 to 122
SEC. 115. 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. 116. 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. 117. 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.

SEC. 118. 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. 119. 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 the commencement of each
portion, the ship is seaworthy with reference to that portion.

SEC. 120. 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 shipowners interest from liability from any loss arising

SEC. 121. 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 insurance upon the cargo.

SEC. 122. 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.

Roque, et al. vs. IAC, supra

Philippine American General Insurance vs. CA and Feldman Shipping Lines, G.R. No. 116940
Facts: 1. Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent
Felman Shipping Lines, 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from Zamboanga City to Cebu
City. The shipment was insured with petitioner Philippine American General Insurance Co., Inc., under Marine Open.

2. The vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo with her including the subject
7,500 cases of 1-liter CocaCola softdrink bottles. on 29 November 1983 PHILAMGEN sued the shipowner for sum of
money and damages. On 15 February 1985 FELMAN filed a motion to dismiss based on the affirmative defense that
FELMAN had abandoned all its rights, interests and ownership over "MV Asilda" together with her freight and
appurtenances for the purpose of limiting and extinguishing its liability under Art. 587 of the Code of Commerce.

ISSUE: WON the limited liability under Art. 587 of the Code of Commerce should apply

DECISION: Art. 587 of the Code of Commerce is NOT applicable to the case at bar. The ship agent is liable for the
negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through
abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional
circumstances wherein the ship agent could still be held answerable despite the abandonment, as where the loss or
injury was due to the fault of the shipowner and the captain. The international rule is to the effect that the right of
abandonment of vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or
average was occasioned by the shipowner'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 shipowner is likewise to be
blamed, Art. 587 will not apply.

It was already established at the outset that the sinking of "MV Asilda" was due to its unseaworthiness even at the time
of its departure from the port of Zamboanga. Closer supervision on the part of the shipowner could have prevented this
fatal miscalculation. As such, FELMAN was equally negligent. It cannot therefore escape liability through the expedient
of filing a notice of abandonment of the vessel by virtue of Art. 587 of the Code of Commerce.

b. That vessel will not deviate from agreed voyage, Sections 123 to 126
SEC. 123. When the voyage contemplated by a marine insurance policy is described by the places of beginning and
ending, the voyage insured is one which conforms to the course of sailing fixed by mercantile usage between those

SEC. 124. 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. 125. 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.

SEC. 126. A deviation is proper:

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

c. Where nationality or neutrality of a ship or cargo is expressly warranted, Section 122

SEC. 122. 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.

7. Loss, kinds of losses, Section 129

SEC. 129. A loss may be either total or partial.

a. Total Section 131

SEC. 131. A total loss may be either actual or constructive.
-Actual, Sections 131,132 and 133
SEC. 131. A total loss may be either actual or constructive.
SEC. 132. 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
SEC. 133. A constructive total loss is one which gives to a person insured a right to abandon, under Section 141.

Code of Commerce, Book III, Articles 587, 590 and 837 (limited liability rule)
ART. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from
the conduct of the captain in the vigilance over the goods which the vessel carried; but he may exempt himself
therefrom by abandoning the vessel with all her equipment and the freight he may have earned during the voyage.
xxx xxx xxx

ART. 590. The co-owners of the vessel shall be civilly liable in the proportion of their contribution to the common
fund for the results of the acts of the captain, referred to in Article 587.

Each co-owner may exempt himself from this liability by the abandonment, before a notary, of that part of the vessel
belonging to him.
xxx xxx xxx

ART. 837. The civil liability incurred by the shipowners in the cases prescribed in this section, shall be understood
as limited to the value of the vessel with all her appurtenances and freight earned during the voyage.

Aboitiz Shipping vs. CA, G.R. No. 121833

Facts: On October 28, 1980, M/V P/ Aboitiz took on board in Hong Kong for shipment to Manila one twenty-footer
container holding 281 rolls of goods and one twenty-footer container holding 447 rolls, 10 bulk and 95 carbons of goods
for apparel covered by bill of lading No. 575-M. Both shipment were consigned to the Philippines Apparel, Inc an insured
with the general Accident Fire and Life Assurance Corporation, Ltd (GAFLAC). The vessel is owned aned operated to
manila, the vessel sank and it was declared lost wit all its cargoes. CAFLAC was subrogated to all the rights, interests of
action of the consignee against Aboitiz, it filed an action for damages against Abiotiz in the RTC of Manila alleging that
the loss was due to the fault or negligence of Aboitiz and the master and crew of its vessel in that they did not observe
extraordinary diligence required by law as regards to common carrier.

Issue:Whether or not the loss was due to fortuitous event.

Held: The trial court and the appellee court found that the sinking of M/V P.Aboitiz was not due to waves caused by
tropical storm Yooning but due to the fault and negligence of petitioner, its master and crew.

Oriental Assurance vs. CA, G.R. No. 94052

Facts: Panama Sawmill Co bought apitong logs to be shipped from Palawan to Manila. These logs were insured against
loss with Oriental Assurance corporation. The logs were loaded on two barges. On the way to Manila, one of the barges
was damages causing the loss of 497 out of the 598 logs loaded on it. When Panama demanded payment for the loss,
Oriental refused to pay since not all the shipment were lost (as stipulated in their insurance contract).

Both the RTC and CA ruled in favor of Panama saying that the insurance contract should be liberally construed in order
to avoid a denial of substantial justice and that the logs loaded in the two barges should be treated separately.

Issue: W/N Oriental Assurance can be held liable under its marine insurance policy based on the theory of divisible
contract of insurance and a constructive total loss.

Held. SC reversed the decision saying that liability does not attach since the loss is not total loss as contemplated in the
insurance code.

Based on the facts one can see that the intention is to have an indivisible contract of insurance: (1)
subject matter insured was the entire shipment of 2,000 cubic meters of apitong logs logs being loaded on two
different barges did not make the contract several and divisible as to the items insured,
(2)logs on the two barges were not separately valued or separately insured only one premium was paid for the entire
shipment, making for only one cause or consideration.

-Constructive, Section 131

SEC. 131. A total loss may be either actual or constructive.

b. Abandonment
-Definition, Section 140
SEC. 140. Abandonment, in marine insurance, 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.

-Requirements of valid abandonment, Section 141

SEC. 141. 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 () thereof in value is actually lost, or would have to be expended to recover it from the
(b) If it is injured to such an extent as to reduce its value more than three-fourths ();
(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 () 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.
-Effects of valid abandonment, Section 148
SEC. 148. An abandonment is equivalent to a transfer by the insured of his interest to the insurer, with all the chances
of recovery and indemnity.

-Rights of marine insurer who pays for a loss as if it were an actual total loss, Section 149
SEC. 149. If a marine insurer pays for a loss as if it were an actual total loss, he is entitled to whatever may remain of
the thing insured, or its proceeds or salvage, as if there had been a formal abandonment.

-Insurer liable for acts of insureds agents, Section 150

SEC. 150. Upon an abandonment, acts done in good faith by those who were agents of the insured in respect to the
thing insured, subsequent to the loss, are at the risk of the insurer, and for his benefit.

-Refusal of insurer to accept abandonment, Section 151

SEC. 151. Where notice of abandonment is properly given, the rights of the insured are not prejudiced by the fact that
the insurer refuses to accept the abandonment.

-Form and effect of acceptance of abandonment, Sections 152 to 154

SEC. 152. The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The
mere silence of the insurer for an unreasonable length of time after notice shall be construed as an acceptance.

SEC. 153. The acceptance of an abandonment, whether express or implied, is conclusive upon the parties, and admits
the loss and the sufficiency of the abandonment.

SEC. 154. An abandonment once made and accepted is irrevocable, unless the ground upon which it was made proves
to be unfounded.

-Effect of refusal to accept valid abandonment, Section 156

SEC. 156. If an insurer refuses to accept a valid abandonment, he is liable as upon an actual total loss, deducting from
the amount any proceeds of the thing insured which may have come to the hands of the insured.

-Recovery of actual loss upon omission to abandon, Section 157

SEC. 157. If a person insured omits to abandon, he may nevertheless recover his actual loss.

8. Measure of indemnity
-Valued policy, Section 158
SEC. 158. A valuation in a policy of marine insurance is conclusive between the parties thereto in the adjustment of
either a partial or total loss, if the insured has some interest at risk, and there is no fraud on his part; except that when a
thing has been hypothecated by bottomry or respondentia, before its insurance, and without the knowledge of the
person actually procuring the insurance, he may show the real value. But a valuation fraudulent in fact, entitles the
insurer to rescind the contract.

-Insured co-insurer, Section 159

SEC. 159. A marine insurer is liable upon a partial loss, only for such proportion of the amount insured by him as the
loss bears to the value of the whole interest of the insured in the property insured.

-Where profits are separately insured, Section 160

SEC. 160. Where profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in
case of loss, a proportion of such profits equivalent to the proportion which the value of the property lost bears to the
value of the whole.

-Where only part of cargo exposed to risk, Section 161

SEC. 161. In case of a valued policy of marine insurance on freightage or cargo, if a part only of the subject is exposed to
risk, the valuation applies only in proportion to such part.
-Presumption of loss of profits, Section 162
SEC. 162. When profits are valued and insured by a contract of marine insurance, a loss of them is conclusively
presumed from a loss of the property out of which they are expected to arise, and the valuation fixes their amount.

-Rules in estimating a loss under an open policy, Section 163

SEC. 163. In estimating a loss under an open policy of marine insurance the following rules are to be observed:

(a) The value of a ship is its value at the beginning of the risk, including all articles or charges which add to its
permanent value or which are necessary to prepare it for the voyage insured;
(b) The value of the cargo is its actual cost to the insured, when laden on board, or where the cost cannot be
ascertained, its market value at the time and place of lading, adding the charges incurred in purchasing and placing it on
board, but without reference to any loss incurred in raising money for its purchase, or to any drawback on its
exportation, or to the fluctuation of the market at the port of destination, or to expenses incurred on the way or on
(c) The value of freightage is the gross freightage, exclusive of primage, without reference to the cost of earning it; and
(d) The cost of insurance is in each case to be added to the value thus estimated.

-Where cargo insured against partial loss, Section 164

SEC. 164. If cargo insured against partial loss arrives at the port of destination in a damaged condition, the loss of the
insured is deemed to be the same proportion of the value which the market price at that port, of the thing so damaged,
bears to the market price it would have brought if sound.

-Liability of insurer for expenses of repair and recovery, Section 165

SEC. 165. A marine insurer is liable for all the expenses attendant upon a loss which forces the ship into port to be
repaired; and where it is stipulated in the policy that the insured shall labor for the recovery of the property, the insurer
is liable for the expense incurred thereby, such expense, in either case, being in addition to a total loss, if that afterwards

-Rights of insured in case of general average loss, Section 166

SEC. 166. A marine insurer is liable for a loss falling upon the insured, through a contribution in respect to the thing
insured, required to be made by him towards a general average loss called for by a peril insured against: Provided, That
the liability of the insurer shall be limited to the proportion of contribution attaching to his policy value where this is less
than the contributing value of the thing insured.

-Rights of insured to claim whole loss from insurer, Section 167

SEC. 167. When a person insured by a contract of marine insurance has a demand against others for contribution, he
may claim the whole loss from the insurer, subrogating him to his own right to contribution. But no such claim can be
made upon the insurer after the separation of the interests liable to contribution, nor when the insured, having the right
and opportunity to enforce contribution from others, has neglected or waived the exercise of that right.

-Liability of insurer in case of partial loss of ship or its equipment, Section 168
SEC. 168. In the case of a partial loss of ship or its equipment, the old materials are to be applied towards payment for
the new. Unless otherwise stipulated in the policy, a marine insurer is liable for only two-thirds (2/3) of the remaining
cost of repairs after such deduction, except that anchors must be paid in full.