42 ICTSI v.

FGU INSURANCE CORPORATION AUTHOR: LORENZO

G.R. No. 161539 | June 27, 2008 Notes:
TOPIC: Presentation of Policies
PONENTE: AUSTRIAMARTINEZ, J.
CASE LAW/ DOCTRINE: As a general rule, the marine insurance policy should be presented in evidence in order to
determine the extent of the coverage. However, it need not be presented when its existence is admitted; the cargo is lost
while in the shipper’s custody; and there are no issues with the provisions which would require its presentation for perusal.
Even though it was not offered in evidence, it still can be considered by the court as long as it has been properly identified
by testimony duly recorded and they have themselves been incorporated in the records of the case.
FACTS: This case concerns the liability for lost shipment by petitioner International Container Terminal Services, Inc.
(ICTSI). Petitioner's liability arose from a lost shipment of "14 Cardboards 400 kgs. of Silver Nitrate 63.53 FCT Analytically
Pure (purity 99.98 PCT)," shipped by Hapag-Lloyd AG through a vessel from Hamburg, Germany, with Manila, Philippines
as the port of discharge, and Republic Asahi Glass Corporation (RAGC) as consignee. Said shipment was insured by
FGU Insurance Corporation (FGU). When RAGC's customs broker, Desma Cargo Handlers, Inc., was claiming the
shipment, ICTSI, which was the arrastre contractor, could not find it in its storage area. At the behest of ICTSI, the NBI
conducted an investigation. The AAREMA Marine and Cargo Surveyors, Inc. also conducted an inquiry. Both found that
the shipment was lost while in the custody and responsibility of petitioner ICTSI. As insurer, FGU paid RAGC the amount
of P1,835,068.88. In turn, FGU sought reimbursement from ICTSI, but the latter refused. This constrained FGU to file with
the RTC which ordered ICTSI to pay FGU. Petitioner posits that its liability for the lost shipment should be limited to
P3,500.00 per package as provided in Philippine Ports Authority Administrative Order No. 10-81 (PPA AO 10-81), under
Article VI, Section 6.01 of which provides:
“the CONTRACTOR shall be solely responsible as an independent CONTRACTOR, and hereby agrees to accept liability
and to promptly pay to the shipping company consignees, consignors or other interested party or parties for the loss,
damage, or non-delivery of cargoes to the extent of the actual invoice value of each package which in no case shall be
more than THREE THOUSAND FIVE HUNDRED PESOS (P3,500.00) (for import cargo) x x x for each package unless
the value of the cargo importation is otherwise specified or manifested or communicated in writing together with the
declared bill of lading value and supported by a certified packing list to the CONTRACTOR by the interested party or
parties before the discharge x x x of the goods…”
The CA affirmed the lower court’s decision. It ruled that PPA AO 10-81 is not applicable to this case without laying out the
reasons therefor. Hence, ICTSI filed a petition with the SC.
ISSUE(S): Whether or not the liability of ICTSI should be limited to P3,500.00 and not the actual value of the shipment
due to the non-presentation of the marine insurance policy (Marine Open Policy No. MOP-12763)? NO.

RATIO: The extent of petitioner's liability should cover the actual value of the lost shipment and not the P3,500.00 limit per
package. In this case, the loss of the cargo occurred while in petitioner's custody. Moreover, there is no issue as regards
the provisions of Marine Open Policy No. MOP-12763, such that the presentation of the contract itself is necessary for
perusal, not to mention that its existence was already admitted by petitioner in open court. And even though it was not
offered in evidence, it still can be considered by the court as long as they have been properly identified by testimony duly
recorded and they have themselves been incorporated in the records of the case. The records show that when Desma
Cargo Handlers was negotiating for the discharge of the shipment, it presented Hapag-Lloyd's Bill of Lading, Degussa's
Commercial Invoice, which indicates that value of the shipment, including seafreight charges, and Degussa's Packing List,
which likewise notes that the value of the shipment. It is highly unlikely that petitioner was not made aware of the actual
value of the shipment, since it had to examine the pertinent documents for stripping purposes and, later on, for the
discharge of the shipment to the consignee or its representative. In fact, the NBI Report dated on the investigation
conducted by it regarding the loss of the shipment shows that the petitioner was shown the Bill of Lading by Desma
Brokerage's representative. Petitioner ICTSI also stated that another representative of Desma Brokerage went to their
office and furnished him a copy of the "processed papers of the fourteen cartons of Asahi Glass cargoes." By its own act
of not charging the corresponding arrastre fees based on the value of the shipment after it came to know of such declared
value from the marine insurance policy, petitioner cannot escape liability for the actual value of the shipment. The value of
the merchandise or shipment may be declared or stated not only in the bill of lading or shipping manifest, but also in other
documents required by law before the shipment is cleared from the piers. Petitioner insists that Marine Open Policy No.
MOP-12763 under which the shipment was insured was no longer in force at the time it was loaded on board the
Hannover Express on June 10, 1994, as provided in the Endorsement portion of the policy, which states: "IT IS HEREBY
DECLARED AND AGREED that effective June 10, 1994, this policy is deemed CANCELLED." FGU, on the other hand,
insists that it was under Marine Risk Note No. 9798, which was executed on May 26, 1994, that said shipment was
covered. It must be emphasized that a marine risk note is not an insurance policy. It is only an acknowledgment or
declaration of the insurer confirming the specific shipment covered by its marine open policy, the evaluation of the cargo
and the chargeable premium. It is the marine open policy which is the main insurance contract. In other words, the marine
open policy is the blanket insurance to be undertaken by FGU on all goods to be shipped by RAGC during the existence
of the contract, while the marine risk note specifies the particular goods/shipment insured by FGU on that specific
transaction, including the sum insured, the shipment particulars as well as the premium paid for such shipment. In any
event, as it stands, it is evident that even prior to the cancellation by FGU of Marine Open Policy No. MOP-12763 on June
10, 1994, it had already undertaken to insure the shipment of the 400 kgs. of silver nitrate, specially since RAGC had
already paid the premium on the insurance of said shipment. The marine insurance policy needs to be presented in
evidence before the trial court or even belatedly before the appellate court. The presentation of the marine insurance
policy is necessary, since the issues raised therein arose from the very existence of an insurance contract, even prior to
the loss of the shipment. The insurance contract must be presented in evidence in order to determine the extent of the
coverage. However, as in every general rule, there are admitted exceptions. In the presentation of the insurance policy is
not fatal because the loss of the cargo undoubtedly occurred while on board the petitioner's vessel, unlike in other cases
in which the cargo passed through several stages with different parties and it could not be determined when the damage
to the cargo occurred, such that the insurer should be liable for it. In this case, it is clear when the loss occurred.