INSURANCE

1.) Ano ung covered ng marine insurance?

Sec. 99. Marine Insurance includes:
1.Insurance against loss of or damage to:
a. Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements,
profits, moneys, securities, choses in action, evidences 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, transshipment, or
reshipment incident thereto, including war risks, marine builder's risks, and all personal property
floater risks;
b. 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);
c. Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise;
d. 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.
Cargo can be the subject of marine insurance, and once it is entered into, the implied warranty of
seaworthiness immediately attaches to whoever is insuring the cargo, whether he be the ship owner or
not (Roque v. IAC, G.R. No. L-66935, November 11, 1985).
2.) Kailangan ba nasa vessel yung precious stones etc para ma-cover ng insurance policy?
a.

No. Precious stones, jewels, jewelry, precious metals, whether in course of transportation or
otherwise;

3.) Perils of the sea vs. Perils of the ship

Risk Insured Against
It is only perils of the sea which may be insured against unless perils of the ship are covered by an allrisk policy.

Perils of the Sea

Perils of the Ship

Includes only those casualties due to the:

A loss which in the ordinary course of events,
1.
Unusual violence; or
results from the:
2.
Extraordinary action of wind and wave;
or
1.
Natural and inevitable action of the sea;
3.
Other extraordinary causes connected 2.
Ordinary wear and tear of the ship; or
with navigation.
3.
Negligent failure of the ships owner to
provide the vessel with proper equipment to
convey the cargo under ordinary conditions.

4.) La Razon Case

La Razon Social "Go Tiaoco y Hermanos" vs. Union Insurance Society of Canton Ltd. [GR 13983,1
September 1919]
Facts:
A cargo of rice belonging to the Go Tiaoco Brothers, was transported in the early days of May, 1915, 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. The loss so resulting to the owners of rice, after proper deduction had been
made for the portion saved, was P3,875. 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." It was found out that the drainpipe which served as a discharge from
the water closet passed down through the compartment where the rice in question was stowed and
thence out to sea through the wall of the compartment, which was a part of the wall of the ship. The
joint or elbow where the pipe changed its direction was of cast iron; and in course of time it had
become corroded and abraded until a longitudinal opening had appeared in the pipe about one inch in
length. This hole had been in existence before the voyage was begun, and an attempt had been made
to repair it by filling with cement and bolting over it a strip of iron. The effect of loading the boat was to
submerge the vent, or orifice, of the pipe until it was about 18 inches or 2 feet below the level of the
sea. 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. 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 (ejusdem generis) with the particular risks which are enumerated
in the preceding part of the same clause of the contract. According to the ordinary rules of
construction these words must be interpreted with reference to the words which immediately precede
them. They were no doubt inserted in order to prevent disputes founded on nice distinctions. Their
office is to cover in terms what evermay be within the spirit of the cases previously enumerated, and
so they have a greater or less effect as a narrower or broader view is taken of those cases. For
example, if the expression "perils of the seas" is given its widest sense the general words have little or
no effect as applied to that case. If on the other hand that expression is to receive a limited
construction and loss by perils of the seas is to be confined to loss ex marine tempestatis discrimine,
the general words become most important. But still, when they first became the subject of judicial
construction, they have always been held or assumed to be restricted to cases "akin to" or

"resembling" or "of the same kind as" those specially mentioned. I see no reason for departing from
this settled rule. In marine insurance it is above all things necessary to abide by settled rules and
to avoid anything like novel refinements or a new departure. 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. There must, in order to make the insurer liable, be "some casualty, something which could not be
foreseen as one of the necessary incidents of the adventure. The purpose of the policy is to secure an
indemnity against accidents which may happen, not against events which must happen. "Herein, the
entrance of the sea water into the ship's hold through the defective pipe already described was no
tdue 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).

5.) Sa all-risk insurance, yung peril of the ship, covered ba ng policy?

yes
6.) Burden of proving in an all-risk insurance?
The insured 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
shifts to the insurer to show the exception to the coverage (Filipino Merchants Insurance v. CA, G.R.
No. 85141, November 28, 1989).
7.) Insurable interest over the vessel
If the insured secured the policy, the beneficiary need not have insurable interest over the life of the
insured; if secured by the beneficiary, the latter must have insurable interest in the life of the insured.

8.) Insurable interest of the charterer

1.
a.
b.
c.

Charterer
Over the amount he is liable to the ship owner, if the ship is lost or damaged during the
voyage (Sec. 106, Insurance Code);
Over his expected profits or freightage if he accepts cargoes from other persons for a fee;
Over his own cargo or his clients cargo.

9.) Section 101

a.

Difference between the value of vessel or goods and the amount of loan (Sec. 101,
Insurance Code).

Sec. 101 of the Insurance Code provides that 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.

10.) Why is it in bottomry ang pwede lang i-insure yung difference sa value?
Since a loan on bottomry partakes of the nature of an insurance coverage to the extent of the loan
accommodation. The same rule would apply to the hypothecation of the cargo by respondentia

11.) Bakit in charter party ang insurable interest ng owner ay yung full volume ng vessel pero un
bottomry bakit yung difference lang?

It depends, on the type of charter party. In a bareboat or demise charter, it involves the transfer of full
possession and control of the vessel for the period covered by the contract, the character obtaining the
right to use the vessel and carry whatever cargo it chooses, while maintaining and maintaining the
vessel as well. Liable for damages:
charterer (acts as a private carrier)

2. Time charter it is a contract to use the vessel for a particular period of time, the character
obtaining the right to direct the movements of the vessel during the chartering period, although the
owner retains
possession. It is considered a contract of affreightment. (acts as a common carrier)
3. Voyage charter it is a contract for the hire of a vessel for one or a series of voyages usually for
the purpose of transporting goods for the charterer. The voyage charter is a contract of affreightment
and is considered a private carriage. In a contract of affreightment the ship owner is the one liable for
damages. (acts as a common carrier)
OWNER PRO HAC VICE demise charterer to whom the owner of the vessel has completely and
exclusively relinquished possession, command and navigation of the vessel. In this kind of charter, the
charterer mans and equips the vessel and assumes all responsibility for its navigation, management
and
operation. He thus acts as the owner of the vessel in all important aspects during the duration of the
charter.
A CHARTER PARTY a contract by which an entire ship or some principal part thereof is let by the owner
to another person for a specified time or use.

12.) Who has insurable interest in freightage?

Ship owner over expected freightage, Charterer if he accepts cargo for a fee

13.) What is freightage?

Carriage of goods in bulk for a fee

14.) Exceptions in concealment (Section 110)

Sec. 110. 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;
(e) The use of false and simulated papers.

15.) What is the effect if insured concealed these facts and such concealment is the cause of the loss?
It exonerates the insurer from a loss resulting from the risk concealed

16.) What are the implied warranties under Marine insurance? (Page 345)
1.
2.
3.
4.
5.

Seaworthiness of the ship at the inception of the insurance (Sec. 113, Insurance Code);
Against improper deviation (Sec. 123, 124, 125, Insurance Code);
Against illegal venture;
Warranty of neutrality: The ship will carry the requisite documents of nationality or neutrality of
the ship or cargo where such nationality or neutrality is expressly warranted (Sec. 120, Insurance
Code); and
Presence of insurable interest.
17.) Can these implied warranties be waived?
While the payment by the insurer for the insured value of the lost cargo operates as a waiver of the
insurers right to enforce the term of the implied warranty against the insured under the marine
insurance policy, the same cannot be validly interpreted as an automatic admission of the vessels
seaworthiness by the insurer as to foreclose recourse against the common carrier for any liability
under the contractual obligation as such common carrier (Delsan Transportation Lines v. CA, G.R. No.
127897, November 15, 2001).

18.) When is the implied warranty of seaworthiness satisfied?

Implied warranty of seaworthiness applied to cargo owner It becomes the obligation of a
cargo owner to look for a reliable common carrier, which keeps its vessels in seaworthy conditions.
The shipper may have no control over the vessel but he has control in the choice of the common
carrier that will transport his goods (Roque v. IAC, G.R. No. L-66935, Ibid).
19.) When do you determine that the seaworthiness has been complied with?
The warranty of seaworthiness is complied with if the ship be seaworthy at the time of the
commencement of the risk.

20.) Recknong point of seaworthiness

Inception of the contract

21.) Pano kung during the voyage naging unseaworthy yung vessel?
General Rule: The warranty of seaworthiness is complied with if the ship be seaworthy at the time of
the commencement of the risk. Prior or subsequent unseaworthiness is not a breach of the warranty
nor is it material that the vessel arrives in safety at the end of her voyage.

22.) If ship becomes unseaworthy, pero seaworthy nung commencement of voyage, tapos nagkaroon
ng loss, liable ba insurer?

23.) What is deviation? (Page 356)

Deviation
Departure from the course of the voyage insured, or an unreasonable delay in pursuing the voyage, or
the commencement of an entirely different voyage (Sec.123, Insurance Code).
24.) When is there proper deviation? (Section 124)
a.
b.
c.
d.

When caused by circumstances outside the control of the ship captain or ship owner;
When necessary to comply with a warranty or to avoid a peril (real peril);
When made in good faith to avoid a peril (non-existing/ assumed peril);
When made in good faith to save human life or to relieve another vessel in distress (Sec. 124,
Insurance Code).

In case of loss, the insurer is still liable.

25.) Effects of improper deviation
In case of loss or damage subsequent to an improper deviation, the insurer is not liable (Sec. 126,
Insurance Code).
26.) When is there actual loss? (Section 130, page 359)
1.
a.
b.
c.
d.

Actual
Total destruction;
Irretrievable loss by sinking or by being broken up;
Damage rendering the thing valueless to the owner for the purpose for which he held it; or
Other event which effectively deprives the owner of the possession, at the port of destination, of
the thing insured (Sec. 130, Insurance Code).

27.) Ship lumubog, tapos may nasalvage na 1/4 or 1/6 of the value of the vessel. Is there actual loss?
No.
28.) Even if the insured was able to recover scrap metals and sold the same, actual loss pa din?
29.) When is there constructive loss? (page 263)
1.

Constructive one which gives to a person insured a right to abandon:

20.) Instances of constructive total loss?

a.
b.
c.

Actual loss of more than of the value of the object;

Damage reducing, by more than , the value of the vessel and of cargo; and
Expense of transshipment exceeds of value of cargo (Sec. 131, in relation to Sec. 139,
Insurance Code).

31.) What are the options of the insured pag may constructive total loss?
In case of constructive total loss, insured may:
Abandon goods or vessel to the insurer and claim for whole insured value (Sec. 139, Insurance
Code); or
b. Without abandoning vessel, claim for partial actual loss (Sec. 155, Insurance Code).
a.

32.) Requisites of abandonment (page 370)

Abandonment
Act of the insured by which, after a constructive total loss, he declared the relinquishment to the
insurer of his interest in the thing insured (Sec. 138, Insurance Code).

Requisites for validity (PEN FACT):

1.
2.
3.
4.
5.
6.
7.

There must be an actual relinquishment by the person insured of his interest in the thing insured
(Sec. 138, Insurance Code);
There must be a constructive total loss (Sec. 139, Insurance Code);
The abandonment must be neither partial nor conditional (Sec. 140, Insurance Code);
It must be made within a reasonable time after receipt of reliable information of the loss (Sec. 141,
Insurance Code);
It must be factual (Sec. 142, Insurance Code);
It must be made by giving notice thereof to the insurer which may be done orally or in writing
(Sec. 143, Insurance Code); and
The notice of abandonment must be explicit and must specify the particular cause of the
abandonment (Sec. 144, Insurance Code).
33.) Pag may proper abandonment, may the insurer refuse to pay the insurance?
No.
34.) Pag improper yung abandonment?
yes

35.) What is co-insurance?

Co-Insurance
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 (Sec. 157,
Insurance Code).

36.) When does co-insurance arise?

When the property is insured for less than its value, the insured is considered a co-insurer of the
difference between the amount of insurance and the value of the property.

37.) Before there may be co-insurance, what must be the nature of the insurance?
1.
2.
3.

Co-insurance applies only to marine insurance

Logically, there cannot be co-insurance in life insurance;
Co-insurance applies in fire insurance ONLY when expressly stipulated
by the parties.
38.) Requisites of co-insurance, what must be the nature of the insurance?

1.
2.

The loss is partial;

The amount of insurance is less than the value of the property insured.
39.) Is there an insurance in marine insurance wherein the goods are not injured pero liable pa din
yung insurer?

40.) What is general average?

1.General or Gross Average Includes all the damage and expenses which are deliberately caused in
order to save the vessel, its cargo or both, from real and known risks. Liability of insurer is his
portion.
41.) Liable ba yung insurer for particular average? (page 365)
2.Includes all expenses and damages caused to the vessel or cargo which have not inured to the
common benefit of all persons interested in the vessel or cargo. Insurer has no liability if the parties
stipulated that his liability is for general average only. Unless such particular average loss has the
effect of depriving the insured of the possession at the port of destination of the whole of the thing
insured.
42.) Mere stipulation in the policy makes the insurer liable in particular average?

43.) Ano yung covered ng fire insurance?

1.
2.
a.
b.
c.

Direct losses
Indirect or Consequential losses:
Physical damages
Loss of Earnings
Extra Expenses
Note: Only if expressly covered by the policy

3.

Business Interruption Insurance Loss suffered consisting of loss of earnings

comprising of the net profits that could have been realized had the business continued and expenses that continue
despite the interruption of the business
4.
Extra Expense Insurance Covers extraordinary expenses that may be
incurred in an effort to avoid any interruption of service
5.
Rent Insurance Protects the insured from loss of rental income
44.) What do you mean by hostile fire? (page 282)

Hostile Fire

Friendly Fire

One that escapes from the place where it was

intended to burn and ought to be.

One that burns in a place where it was intended to burn

and ought to be

Insurer is liable

Insurer is not liable

45.) Friendly fire? (page 281)

46.) Building for residential tapos a portion of which is for the storage of firecrackers na binebenta,
pwede ba irescind ng insurer?

Yes. There is alteration.

Alteration as a special ground for rescission by insurer
Requisites:
1.
The use or condition of the thing is specifically limited or stipulated in the policy;
2.
Such use or condition as limited by the policy is altered;
3.
The alteration is made without the consent of the insurer;
4.
The alteration is made by means within the control of the insured;
5.
The alteration increases the risk (Sec. 168, Insurance Code); and
6.
There must be a violation of a policy provision (Sec. 170, Insurance Code).
47.) Residential property pero may zoning ordinance converting the property to a commercial property
tapos ginawang store ng firecrackers, pwede ba irescind ng insurer?
No. Alteration is not within the control of the insured.

48.) How do you measure the indemnity in fire insurance? (page 401)

Measure of Indemnity
Open policy Only the expense necessary to replace the thing lost or injured in the condition it was at the time
of the injury
2.
Valued policy The parties are bound by the valuation, in the absence of fraud or mistake
1.

49.) Pag open policy? Valued policy?

50.) House in 2005 - P5,000,000

House present - P5,500,000
Nasunog. Ano ang liablity ng insurer? Pag open? (P5.5M) Pag valued? (P5M)
51.) Pano pag may partial loss tapos open policy?
Same example tapos 1/5 yung na-destory?

52.) What is co-insurance?

Coinsurance

A provision of an insurance policy that provides that the insurance company and the insured will apportion
between them any loss covered by the policy according to a fixed percentage of the value for which the
property, or the person, is insured.

53.) Co-insurance in fire insurance (page 403)

Applies to fire insurance ONLY if expressly agreed upon

54.) If A insured his house worth P3,000,000 pero yung insured ay P2,000,000 lang tapos may nasunog
worth 1.5m. Liablity ng insurer pag may co-insurance?
55.) ^ Same example. totally nasunog. Magkano liability ng insurer pag may co-insurance?
56.) Ong Gua Case
57.) Pano pag yung insured yung namili? Pwede ba sabihin ng insurer na magbayad or ibuild na lang?