Conclusiones parciales

 Bottomry loan is a loan that is obtained for the value of the vessel on a voyage and the lender is repaid only if the vessel subject of the loan arrives safely at its destination. The insurable interest of a ship owner on its bottomed boat is the difference between the amount of the loan and the value of the boat. Thus, if the amount of the loan does not cover the total value of the boat, the owner can still insured the boat.

 Respondentia loan is a loan that is obtained as security for the value of the cargo to be transported and the lender is repaid only if the cargo arrives safely at its destination.

RISKS

PERILS OF THE SEA

 Ocean marine insurance protects ships at sea and the cargo or freight on such ships from standard “perils of the sea” or “perils of navigation” which includes casualties arising from the violent action of the elements and does not cover ordinary wear and tear or other damage usually incident to the voyage. The mere fact that an injury is due to violence of some marine force does not necessarily bring it within the protection of the policy if such violence was not unusual or unexpected.

 Perils of the sea or perils of navigation include only those casualties due to the unusual violence or extraordinary causes connected with navigation. It has been 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 or prudence, as distinguished from the ordinary wear and tear of the voyage and from injuries suffered by the vessel in consequence of her not being unseaworthy [Sundiang and Aquino, Reviewer on Commercial Law (2013)].

 The phrase also extends to barratry which refers to the willful and intentional act on the part of the master or the crew, in pursuance of

some unlawful or fraudulent purpose, without the consent of the owner, and to the prejudice of his interest (e.g., burning the ship, unlawfully selling the cargo).

 No honest error of judgment or mere negligence, unless criminally gross, can be barratry [Roque v. IAC (1985)].

PERILS OF THE SHIP

Perils of the ship are those which cause a loss which in the ordinary course of events, results:

(1) From the ordinary, natural and inevitable action of the sea;

(2) From ordinary wear and tear of the ship; and (3) From the negligent failure of the ship’s

owner to provide the vessel with the proper equipment to convey the cargo under ordinary conditions.

 In the absence of stipulation, the risks insured against are only perils of the sea [Go Tiaco y Hermanos v. Union Ins. Society of Canton (1919)].

 However, in an all risk policy, all risks are covered unless expressly excepted. The burden rests on the insurer to prove that the loss is caused by a risk that is excluded [Filipino Merchants Ins. Co. v. CA (1989)].

LOSS

Loss may be total or partial. Total loss may be actual or constructive.

(1) Actual total loss is the irretrievable loss of the thing or any damage which renders the thing valueless to the owner for the purpose for which he held it. It can be presumed from the continued absence of the ship without being heard of for a period of time depending on the circumstances of the case.

(2) Constructive total loss or “technical total loss” is one in which the loss, although not actually total, is of such character that the insured is entitled, if he thinks fit, to treat it as total by abandonment.

As to when a constructive total loss exists, three rules exist:

(1) English rule, which states that there is constructive total loss when the subject matter of the insurance, while still existent in

specie, is so damaged as not to be worth, when repaired, the cost of the repairs;

(2) American rule, which states that there is constructive total loss when it is so damaged that the costs of repairs would exceed one-half of the value of the thing as acquired;

also known as the “fifty percent rule;”

(3) Philippine rule, which states that the insured may not abandon the thing insured unless the loss or damage is more than three-fourths of its value.

Thus, under Section 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:

(1) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril;

(2) If it is injured to such an extent as to reduce its value more than three-fourths;

(3) 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

(4) 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 either an expense to the insured of more than three-fourths the value of the thin abandoned or a risk which a prudent man would not take under the circumstances. But freightage cannot in any case be abandoned unless the ship is also abandoned.

ABANDONMENT

DEFINITION

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 [Section 140].

CONDITIONS

Aside from the requirement under Section 141 already mentioned:

(1) An abandonment must be neither partial nor conditional [Section 142];

(2) An abandonment must be made within a reasonable time after receipt of reliable information of the loss, but where the information is of a doubtful character, the insured is entitled to a reasonable time to make inquiry [Section 142];

(3) Abandonment is made by giving notice thereof to the insurer, which may be done orally, or in writing: Provided, That if the notice be done orally, a written notice of such abandonment shall be submitted within seven days from such oral notice [Section 145];

(4) Abandonment must be absolute and total.

 No notice of abandonment is required for recovery of loss in cases of actual total loss.

 Where the information upon which an abandonment has been made proves incorrect, or the thing insured was so far restored when the abandonment was made that there was in fact no total loss, the abandonment becomes ineffectual.

CHARACTERISTICS

Thus, a valid abandonment has the following characteristics:

(1) There must be an actual relinquishment by the person insured of his interest in the thing insured;

(2) There must be a constructive total loss;

(3) The abandonment be neither partial nor conditional;

(4) It must be made within a reasonable time after receipt of reliable information of the loss;

(5) It must be factual;

(6) It must be made by giving notice thereof to the insurer which may be done orally or in writing; and

(7) The notice of abandonment must be explicit and must specify the particular cause of the abandonment.

EFFECTS

(1) An abandonment is equivalent to a transfer by the insured of his interest to the insurer,

with all the chances of recovery and indemnity [Section 148];

(2) 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 [Section 149];

(3) 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 [Section 150].

AVERAGE

Average is defined as the extraordinary or accidental expense incurred during the voyage for the preservation of the vessel, cargo or both and all the damages to the vessel and cargo from the time it is loaded and the voyage commenced until it ends and the cargo is unloaded.

There are two kinds of averages:

(1) Gross or general averages; and (2) Simple or particular averages.

Gross averages include damages and expenses which are deliberately caused by the master of the vessel or upon his authority, in order to save the vessel, her cargo, or both at the same time from a real and known risk. This must be borne equally by all of the interests concerned in the venture.

To claim general average contributions, the requisites are:

(1) There must be a common danger to the vessel or cargo;

(2) Part of the vessel or cargo was sacrificed deliberately;

(3) The sacrifice must be for the common safety or for the benefit of all;

(4) It must be made by the master or upon his authority;

(5) It must not be caused by any fault of the party asking contribution;

(6) It must be successful (i.e., resulted in the saving of the vessel and/or cargo)

(7) It must be necessary.

Particular averages include damages and expenses caused to the vessel or her cargo,

which have not inured to the common benefit and profit of all the persons interested in the vessel and her cargo. A particular average loss is suffered by and borne alone by the owner of the cargo or of the vessel, as the case must be.