August 9, 1991
Ponente: Melencio-Herrera,
J.
FACTS:
·
Sometime in January 1986, private respondent
Panama Sawmill bought in Palawan 1,208 pieces of apitong logs, with a total
volume of 2,000 cubic meters. It hired Transpacific Towage, Inc. to transport
the logs by sea to Manila and insured it against loss for P1M with petitioner
Oriental Assurance Corporation. There is a claim by Panama, however, that the
insurance coverage should have been for P3M were it not for the fraudulent act
of one Benito Sy Lee Long to whom it had entrusted the amount of P6,000 for the
payment of the premium for a P3M policy.
·
Oriental Assurance issued a Marine Insurance Policy,
which stipulated under clauses, endorsements, special conditions and warranties
that the insurance is against total loss only, subject to the Civil Code Art.
1250 waiver clause, typhoon warranty clause, and omnibus clause.
·
The logs were loaded on two barges. On January
28, 1986, the two barges were towed by one tugboat, the MT Seminole. But during
the voyage, rough seas and strong winds caused damage to one of the barges,
resulting in the loss of 497 pieces of logs out of the 598 pieces loaded thereon.
·
Panama demanded payment for the loss but
Oriental Assurance refused on the ground that its contracted liability was for
“total loss only”. The rejection was upon the recommendation of the Tan Gatue
Adjustment Company. Thereafter, Panama filed a complaint for damages against
Ever Insurance Agency (allegedly also liable, Benito Sy Lee Yong and Oriental
Assurance, before the RTC of Caloocan.
·
After trial on the merit, the RTC rendered its
decision ordering Oriental Assurance to pay Panama the amount of P415,000 as
insurance indemnity with interest at the rate of 12% per annum computed from
the date of the filing of the complaint, and dismissing the complaint against
Benito Sy Lee Yong, while ordering the Panama to pay Yong the amount of P20,000
as attorney’s fee and another amount of P20,000 as moral damages.
·
Both Courts shared the view 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 such that the loss sustained by the shipment in one of them
may be considered as constructive total loss‰ and correspondingly compensable.
·
On appeal by both parties, CA affirmed the
RTC’s judgment in all respects except for the rate of interest, which was
reduced from 12% to 6% per annum.
RULING:
Whether or
not Oriental Assurance can be held liable under its marine insurance policy
based on the theory of a divisible contract of insurance, and consequently, a
constructive total loss – NO.
·
The terms of the contract constitute the
measure of the insurer’s liability and compliance therewith is a condition
precedent to the insured’s right to recovery from the insurer.
·
Whether a contract is entire or severable is a
question of intention to be determined by the language employed by the parties.
The policy in question shows that the subject matter insured was the entire
shipment of 2,000 cubic meters of apitong logs The fact that the logs were
loaded on 2 different barges did not make the contract several and divisible as
to the items insured. The logs on the 2 barges were not separately valued or
separately insured as only 1 premium was paif for the entire shipment, making
for only 1 cause or consideration. The insurance contract must, therefore, be
considered indivisible.
·
More importantly, the insurer’s liability was
for “total loss only”. A total loss may be either actual or constructive (Sec.
129, Insurance Code). 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 130, Insurance Code)
·
CA erred in treating the loss as a
constructive total loss by considering the cargo in one barge as separate from
the logs in the other barge, for the purpose of computing the more than ¾ value
of the logs actually lost.
·
The requirements for the application of Sec.
139 of the Insurance Code have not been met. The logs involved, although placed
in 2 barges, were not separately valued by the policy, nor separately insured.
Resultantly, the logs lost in one of the barges in relation to the total number
of logs loaded on the same barge cannot be made the basis for determining
constructive total loss. The logs having been insured as one inseparable unit,
the correct basis for determining the existence of constructive total loss is
the totality of the shipment of logs.
·
Computation: Of the entirety of 1,208 pcs of
logs, only 497 pieces thereof were lost = 41.45% of the entire shipment <
75% of the value of all pieces of logs,
which means the shipment cannot be said to have sustained a constructive
total loss under Sec. 139 (a) of the Insurance Code.