Filipino Merchants Insurance Co., Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Plaintiff, as consignee, insured a shipment of fishmeal under a marine insurance policy against "all risks." The shipment arrived in Manila with a portion of the cargo found to be in "bad order condition" as per survey reports. Plaintiff filed a claim with the defendant insurance company, which was refused. Plaintiff then filed an action to recover the damages. Procedural History: The Regional Trial Court (RTC) rendered judgment in favor of the plaintiff, ordering the defendant insurance company to pay the damages. The RTC also ordered third-party defendants (vessel and arrastre contractor) to reimburse the insurance company. The Court of Appeals (CA) affirmed the RTC's decision regarding the main complaint but modified the adjudication of the third-party complaint. The CA denied the motion for reconsideration. The Petition: The defendant insurance company filed a petition for review, assailing the CA's decision on the interpretation of the "all risks" clause, the existence of insurable interest, and alleged fraud by the private respondent.
Issue(s)
Whether the Court of Appeals erred in its interpretation and application of the "all risks" clause of the marine insurance policy. Whether the Court of Appeals erred in not holding that the private respondent had no insurable interest in the subject cargo. Whether the Court of Appeals erred in not holding that the private respondent was guilty of fraud.
Ruling
The petition is DENIED and the assailed decision of the Court of Appeals is AFFIRMED in toto.
Ratio Decidendi
On the "all risks" clause: The Court reiterated that an "all risks" policy should be read literally to cover all losses by an accidental cause of any kind, construing "accident" and "accidental" in their ordinary and common acceptance. The terms mean that which happens by chance or fortuitously, without intention and design, and which is unexpected, unusual and unforeseen. The "all risks" clause is meant to give broad protection, covering any loss other than a willful and fraudulent act of the insured. The burden is not on the insured to prove the precise cause of loss or damage; rather, after the insured proves the cargo was in good condition initially and damaged upon unloading, the burden shifts to the insurer to prove an exception to the coverage. In this case, there was no showing that the loss was caused by any of the excepted perils (delay or inherent vice/nature of the subject matter), thus the insurer is liable. The Court cited Paris-Manila Perfumery Co. vs. Phoenix Assurance Co., Ltd. for the principle that the insurance company has the burden of proving that the loss is caused by the risk excepted. On insurable interest: The Court affirmed the ruling that the private respondent, as consignee of goods in transit under a "C & F Manila" term, possesses insurable interest. Insurable interest is defined as every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured. Anyone deriving a benefit from the existence of property or suffering loss from its destruction has an insurable interest. The private respondent's interest is based on the perfected contract of sale, which vests in him an equitable title even before delivery or full performance of sale conditions. The Court also noted that the issue of lack of insurable interest was not raised in the lower court and could not be raised for the first time on appeal, citing the rule against changing theories on appeal. On fraud: As the issue of fraud was predicated on the alleged lack of insurable interest, and the Court found that insurable interest existed and that the issue was not properly raised, this assignment of error was rendered moot. The Court reiterated that the "all risks" policy covers all losses except those arising from the fraud of the insured, and in this case, no fraud was established.
Main Doctrine
Under an "all risks" marine insurance policy, the insured has the initial burden of proving that the cargo was in good condition when the policy attached and that it was damaged upon unloading; thereafter, the burden shifts to the insurer to prove an exception to the coverage. The insurer is liable if it fails to show that the loss was caused by an excepted peril.