6. La Razon V. Union Insurance [insurance Digest]

LA RAZON SOCIAL “GO TIACO Y HERMANOS v. UNION INSURANCE SOCIETY OF CANTON LTD. G.R. 13983, 1 September 1919 J. Street, Ponente 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 drain pipe which served as a discharge from the water closet passed down through the compartment where the rice in question was stowed and then drained 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 or not perils of the sea includes “entrance of water into the ship’s hold through a defective pipe”? ISSUE (2): Whether or not there is an implied warranty on the seaworthy of the vessel in every marine insurance contract?

*UNFAMILIAR TERMS [Black’s Law Dictionary; Merriam Webster Dictionary] Peril(s) of the sea(s) - An action of the elements at sea of such force as to overcome the strength of a wellfounded ship and the normal precautions of good marine practice; A peril of the sea may relieve a carrier from liability for the resulting losses; Also termed danger of navigation; marine peril; marine risk; danger of the sea. [BLD] "Of the marine periIs, by far the most important are those 'of the seas'. What is covered is not any loss that may happen on the sea, but fortuitous losses occurring through extraordinary action of the elements at sea, or any accident or mishap in navigation. By far the greatest number of claims for marine loss, and of the insurance problems connected with other topics treated in this book arise under this clause. Extraordinary action of the wind and waves is a sea peril. Collision, foundering, stranding, striking on rocks and icebergs, are all covered under these words. Even a swell from a passing ship may be a 'peril of the sea'. On the other hand, ordinary wear and tear are not included under the coverage of this or any other phrase in the clause, nor are losses which are anticipatable as regular incidents of sea carriage in general or of navigation in a particular part of the world." Grant Gilmore & Charles L. Black Jr., The Law of Admiralty § 2-9, at 72-73 (2d ed. 1975). Long form (Policy of marine insurance) – An insurance policy that expressly contains all the terms of the insurance contract [BLD] Men of war – An armed sailing ship [MWD] Rover - A sea robber; Pirate [MWD] Jettisons (Maritime law) - The act of voluntarily throwing cargo overboard to lighten or stabilize a ship that is in immediate danger. Also termed equitable jettison; jactura; jactus mercium navis levandae causa BLD] "The goods must not be swept away by the violence of the waves, for then the loss falls entirely upon the merchant or his insurer, but they must be intentionally sacrificed by the mind and agency of man, for the safety of the ship and the residue of the cargo. The jettison must be made for sufficient cause, and not from groundless timidity. It must be made in a case of extremity, when the ship is in danger of perishing by the fury of a storm, or is laboring upon rocks or shallows, or is closely pursued by pirates or enemies; and then if the ship and the residue of the cargo be saved by means of the sacrifice, nothing can be more reasonable than that the property saved should bear its proportion of the loss," 3 James Kent, Commentaries on American Law *232-33 (George Comstock ed., 11th ed. 1866). Barratry - Vexatious incitement to litigation, esp. by soliciting potential legal clients; Barratry is a crime in most jurisdictions. [BLD] RATIO/HOLDING: [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 whatever may 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 (arising out of a ‘tempest’ or “violent storm”, Merriam Webster), 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 not due 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. [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). Source: Mendiola, Michael Vernon Guerrero, Narratives - Insurance Law (Commercial), 2006. Additional research by FAL Acedillo. Black’s Law Dictionary (6th edition). Merriam-Webster Dictionary.