TITLE 10. NOTICE OF LOSS Sec. 88.

In fire insurance, failure of insured/ assured to give notice of loss without unnecessary delay exonerates insurer Sec. 89. Preliminary proof of loss if required by policy need not be that required by a court of law; best evidence enough Condition that MUST be Complied with BEFORE loss occurs: Compliance with terms of the policy. The terms of the contract constitute the measure of the insurers liability & non-compliance therewith by the insured bars his right of recovery. Condition that MUST be Complied with AFTER loss occurs: 1.) Notice of loss must be given to insurer without delay (immediately given) 2.) When required by the policy, preliminary proof of loss (may be given later) These requirements are NOT exclusive. Certificate of attending physician as part of proof of death is required in some life & accident policies. Notice of loss: More or less formal notice given by the insured or claimant under a policy of the occurrence of the loss insured against. Purpose: To apprise the insurance company with the occurrence of the loss, so that it may gather info & make proper investigation while evidence is still fresh & take such action as may be necessary to protect its interest. In property insurance, it prevents further loss to the property. Effect if notice of loss not given: Insurer is exonerated. When notice of loss must be given: unnecessary delay; within reasonable time. Proof of loss: More or occurrence of loss given claimant under a policy the particulars thereof enable the company to amount thereof. Purpose: 1.) To give insurer info by which he may determine extent of his liability; 2.) To afford him a means of detecting any fraud that may have been practiced upon him; 3.) To operate as a check upon extravagant claims Form of notice and proof of loss: WALA! It may be given orally or in writing. However, its advisable to give it in writing for the protection of the insured or beneficiaries. Para its not your word against theirs. Sec. 90. Defects in notice or preliminary proof of loss waived if insurer omits to specify them as grounds of objections Sec 90 presupposes that notice of loss & proof of loss have already been given. It is the DUTY of the insurer to specify to the insured all defects in the notice of loss or in the preliminary proof as grounds for its objection without necessary delay. Otherwise, same shall be deemed WAIVED. Without

There is waiver when the insurer:

1.) Writes to the insured that he considers the policy null & void so that furnishing of notice or proof of loss would be useless 2.) Recognizes his liability to pay claim 3.) Denies liability under the policy 4.) Joins in the proceedings for determining amt of loss by arbitration without making objections to the notice & preliminary proof 5.) Makes no objections on any ground other than a formal defect in the preliminary proof General statement that proof is defective is NOT sufficient. Insurer must specify what those defects are in order that insured may remedy them. Malayan Insurance v. Arnaldo: Malayan denied liability on ground that the certification issued by the Integrated National Police given by Pinca (insured) was not a persuasive proof of the amount of loss. Was notice given sufficient? YES. Loss & its amount may be determined on the basis of such proof as may be offered by the insured, which need not be of such persuasiveness as is required in judicial proceedings. The certification was sufficient. Failure of insurer to specify defects of proof & w/o unnecessary delay is deemed waiver of all objections to notice and proof of loss. Pacific Bank v. CA: Letters were sent as notice of loss but the subsequent required written notice and pertinent docs had not been submitted as per the contract. Since the required claim together with the relevant docs which contains the necessary info to ascertain the amount of loss) had not been complied with, ins. co. cannot be deemed to have finally rejected insureds claim and therefore, no cause of action had yet arisen. Compliance is a requirement sine qua non to right to maintain action as prior thereto no violation of petitioners right can be attributable to the ins. co. Before final rejection, there is no real necessity for bringing suit. Action was premature. Sec. 91. Delay in notice or proof of loss waived if caused by insurer or if he fails to object promptly 2 cases of waiver by the insurer presentation of notice or proof of loss: 2.) Insurer omits to take objection specifically upon ground of delay of delay in

less formal evidence of the the company by the insured or of the occurrence of the loss, and the data necessary to determine its liability and the

1.) Delay is caused by an act of the insurer promptly &

Pacific Timber v. CA: No marine policy yet BUT cover note issued. Insured logs were lost. Pacific Timber immediately filed claim. Insurer requested an adjustment company to inspect & assess the loss BUT later denied the claim. Was notice given by Pacific Timber on time? YES. The defense of delay raised by insurer cannot be sustained. The law requires that this ground of delay be promptly & specifically

asserted when a claim on the insurance agreement is made. (1) Insurer had enough time to determine if Pacific was guilty of delay BUT failed to raise the issue. (2) Delay was never raised in the proceedings which took place with the Insurance Commissioner. Sec. 92. If required by policy as a preliminary proof of loss, the certificate or testimony of person other than insured satisfies it if insured used reasonable diligence to procure it; If person refuses to give it, then reasonable evidence to insurer enough provided refusal is not based on disbelief in facts Where the policy requires, by way of preliminary proof of loss, the certificate/testimony of a person other than the insured, the insured is merely required to exercise due diligence to procure it. If he fails to procure certificate BUT has exercised due diligence, he would be considered to have complied with the requirement. If the third person refuses: Insured must furnish reasonable evidence that the refusal was made NOT coz of disbelief on the part of the third person in the facts necessary to be certified BUT coz of other grounds. Title 11. Double Insurance Sec. 93. When double insurance exists: 1.) Person insured is the same; 2.) Interest insured is the same; 3.) Risk OR peril insured against is the same; 4.) Subject matter insured is the same; and 5.) Two or more insurers insure separately. Double insurance is NOT the same as over insurance. Double insurance There may be no over insurance as when the sum total of the amts of the policies issued does not exceed the insurable interest of the insured. Always Several insurers Over insurance Amount of insurance is beyond the insureds insurable interest

subsequently effected policies, otherwise, all benefits shall be forfeited. He procured another fire insurance policy for the same property with Federal Insurance WITHOUT notifying Pioneer. When the building burned down, Pioneer denied Yaps claim for violation of the notice requirement. Is Pioneer free from liability?

YES. By plain terms of the policy, other insurance effected without the consent of Pioneer would ipso facto avoid the contract. PURPOSE: to prevent over-insurance & thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a loss would be profitable to the insured. Geagonia v. CA: Geagonia obtained a fire insurance policy over its stock-in-trade from Country Bankers Insurance. The policy provided that (1) insurer be notified of other policies, otherwise, benefits shall be forfeited; (2) nullity shall only be to the extent exceeding P200T of the total policies obtained. Geagonia obtained a policy from Phil First Insurance without notice. He now filed a claim for P100T. Is Country Bankers Insurance liable? YES. #1 only refers to double insurance. There was no double insurance in this case coz the second insurance was procured by Geagonias creditor-mortgagee which has a distinct & separate insurable interest. Non-discloure of the former policies were NOT fatal to Geagonias right to recover on the policy. Country Bankers Insurance is also liable coz it was willing to assume the risk provided that the TOTAL insurance does not exceed P200T. Sec. 94. Consequences of over-insurance in case of double insurance: 1.) The insured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts; 2.) Where the policy under which the insured claims is a valued policy, the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the subject matter insured; 3.) Where the policy under which the insured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any policy; 4.) Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves; 5.) Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract.

May only be one insurer involved

Stipulation in policy that double insurance is prohibited & violation of stipulation will result in avoidance of the policy is VALID and reasonable. Purpose of prohibition against double insurance: To prevent over insurance & thus avert the perpetration of fraud. The public & insurer are interested in preventing the situation in which a loss would be profitable to the insured. Reason for prohibition of over insurance: An insurance contract is strictly a contract of indemnity & the insured cant profit. The hazard in this is that the insured may be tempted to cause the peril. Pioneer Ins. v. Yap: Yap took a fire insurance policy for his building from Pioneer Insurance which provided that notice shall be given to Pioneer of

Sec 94 applies only when there is over-insurance by double insurance, that is, the insurance is contained in several policies & the total amount of which is in excess of the insurable interest of the insured. Example: P6M house. Insured with: X: P4M Y: P2M Z: P6M 1.) Insured can collect payment from each insurer in such order as he may select, up to the amount for which each is liable under its contract. e.g. XYorZ, YXorZ, OR Z only. 2.) If insured already collects P4M from X, he must credit against the valuation of P6M for P4M already received by him without regard to his actual loss. He may recover the difference of P2M from Y or Z or from both so long as he does NOT recover more than P2M. If the insured is fully indemnified for his loss by one insurer, he cannot file subsequent claims against the others. 3.) In case of an open or unvalued policy, ascertain the value of loss by showing proof of the amount & extent of loss then follow same steps. Just remember that the insured cannot collect more than the value of the loss. 4.) Insurer is bound to contribute ratably to the loss in proportion to the amount for which he is liable under his contract. Formula: Amount of policy x Loss = Liability of insurer Total insurance Pro-rata Contribution: X: P4M x P6M = P2M P12M Y: P2M x P6M = P1M P12M Z: P4M x P6M = P3M P12M If the insured received P6M from Z, X & Y are liable to reimburse Z for their respective shares. However, if there is a pro-rata clause in the policy, where the insurer is liable only for his ratable proportion of the loss, the insured cannot exercise his right under the 1st policy & he may claim only such amt corresponding to his ratable proportion of the loss. If the insured collects more then the ratable liability of the insurer: The insured should hold the excess IN TRUST for the insurers. Formula to Pro-rate: EXCESS x pro-rata contribution Share of insurer from excess Title 12. Reinsurance Sec. 95. Reinsurance: contract whereby one party (reinsurer) agrees to indemnify another (reinsured/original insurer), either in whole or in part, against loss or liability which the latter (reinsured) may sustain or incur under a (fraction) =

separate & original contract of insurance with a third party (original insured).

Difference between Reinsurance and Double insurance Reinsurance Original insurer becomes an insured as far as the reinsurer is concerned SUBJECT: original insurers risk Insurance of different interest Original insured has no interest in the K of reinsurance which is independent of the original K of insurance Consent of original insured NOT necessary Double Insurance Original insurer remains an insurer SUBJECT: Property Insurance of SAME interest Insured is the party in interest in all the contract

Consent of original insured necessary

Reinsurance & surety risks shall be deducted in determining the risk retained. To relieve the insurer from liability under an insurance contract, the insurer must reinsure the risk with a reinsurance company. Read with Sec. 215 retention limits of non-life companies not exceeding 20% of net worth on any one risk. 20% of net worth= MAX liability for ONE subject of insurance EXCEPT life insurance companies Read with Sec. 222 life insurance company cannot reinsure whole risk on one life or all its insurance in force without consent of Ins. Commissioner Reinsurance Policy contract of indemnity one insurer makes with another to protect the 1st insurer from a risk it has already assumed. Reinsurance Treaty merely an agreement between two insurance companies whereby one agrees to cede & the other to accept reinsurance business pursuant to provisions specified in the treaty Contracts FOR insurance

Contracts OF insurance

Philamlife v. Auditor General: Philamlife & Airco entered into a reinsurance treaty with Airco as reinsurer of Philamlife. Central Bank collected forex margin from the reinsurance premiums. Philamlife contends that it is not liable for the tax since preexisting obligations were expressly exempt from margin fee. Is the reinsurance treaty a pre-existing obligation? NO. Philamlife is liable to pay the forex margin. Payment of premium is NOT a pre-existing obligation. NOTHING in the treaty obligates Philamlife to remit to

Airco a fixed & obligatory sum by way of reinsurance premiums. All that the reinsurance treaty provides is that Philamlife agrees to reinsure. The treaty speaks of a probability & not a reality. For without reinsurance, no premium is due. Sec. 96. Requirement when reinsurance: Communicate all 1.) Representations, 2.) Knowledge & 3.) Information he possesses that are material to the risk Things that insurer-reinsured must communicate to the reinsurer: 1.) All the insured; and representations of the original insurer obtains

the original insured has ABSOLUTELY no interest in the contract & is a total stranger to it.

2.) If the reinsurance contract contains a stipulation assigning the right of the insurer in favor of the insured, then the insured may go after the reinsurer as an assignee. But the insured-assignee will have no rights greater than that vested in the insurer-assignor. 3.) If the reinsurance K contains a provision whereby the reinsurer binds himself to pay the insured for any loss which the insurer may become obliged to pay under the original policy, then reinsurer becomes liable to a suit by the insured under the K of insurance. Insured may go against BOTH the insurer & reinsurer. Artex Dev. Corp. v. Wellington Insurance: Wellington issued an insurance policy over the buildings, stocks, & machinery of Artex. Later, Wellington reinsured the risk with Alexander & Alexander. When fire gutted the insured properties, Wellington paid Artex BUT left an unpaid balance. Artex then manifested that since Wellington was undergoing financial difficulties, it should be allowed to go after Alexander & Alexander for the balance. Can Artex recover from Alexander (reinsurer)? NO. Artex NOT being a party or privy to Wellingtons reinsurance contracts, could not directly demand enforcement of such reinsurance contracts. UNLESS there is a specific grant in or assignment of the reinsurance contract in favor of the insured or a manifest intention of the contracting parties to the reinsurance K to grant such benefit to the insured, the insured NOT being privy to the reinsurance K, has NO CAUSE OF ACTION against the reinsurer. The stipulation pour autrui MUST be clearly expressed. Artex right as insured to sue Wellington as insurer directly & solely should not be affected or curtailed in any way, by Wellingtons filing a third-party complaint or separate suit against its reinsurer. CHAPTER II CLASSES OF INSURANCE Title 1. Marine Insurance Subtitle 1-A. Definition Sec. 99. Marine insurance includes: 1.) Insurance against loss of or damage to: a.) Vessels, craft, aircraft, disbursements, profits, moneys, securities, choses in action, evidences of debt, 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 builders risks, and all personal property floater risks;

2.) All the knowledge and information he possesses, whether previously or subsequently acquired, which are material to the risk. Exception: treaty. In case of automatic reinsurance

Automatic reinsurance treaty: An agreement between 2 or more insurance companies that each will reinsure a part of any line of insurance taken by the other; such contract is selfexecuting and the obligation attaches automatically on acceptance of a risk by the reinsured. In this case, the obligation to communicate is not necessary due to the self-executing and the automatic feature of such reinsurance treaty. Sec. 97. Reinsurance presumed indemnity contract against liability and not merely against damage Nature of reinsurance contract: Reinsurer agrees to indemnify insurer NOT against actual payment but against liabilities incurred. Thus, it is by no means necessary that the insurer shall first have paid a loss accruing, as a condition precedent to his demanding payment of the reinsurer. Reason: SM of contract is the INSURERS RISK and NOT the property insured under the original policy. Sec. 98. Original insured (in insurance contract) has no interest in reinsurance contract Reinsurance contract: Contract between reinsured & reinsurer by which the later agrees to protect the former from risks already assumed. The insured, unless the contract so provides, has no concern with the contract of reinsurance & the reinsurer is NOT liable to the insured either as surety or otherwise. Liability of reinsurer to reinsured: Reinsurer is entitled to avail itself of every defense which the reinsured might urge in an action by the person originally insured. e.g. reinsurer not liable if reinsured not liable to original insured. Reinsurer liable only to the extent that reinsured is liable. Liability of reinsurer to original insured: 1.) If the K is only between the insurer & reinsurer, contemplating only an indemnity to the insurer against losses suffered by reason of the policies carried by him

b.) Person or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss or for damage arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of insurance; c.) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise; d.) Bridges, tunnels and other instrumentalities of transportation and communication; piers, wharves, docks and slips, and other aids of navigation and transportation; 2.) Marine protection and indemnity insurance, meaning insurance against legal liability of the insured for loss, damage or expense incident to ownership, operation, chartering, maintenance, use, repair or construction of any vessel, craft or instrumentality in use in ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person. 2 major divisions of transportation insurance: 1.) Ocean marine insurance; and 2.) Inland marine insurance. Scope of ocean marine insurance: Protection for: 1.) Ships or hulls; 2.) Goods or cargoes; 3.) Earning such as freight, commissions, or profits; and passage money,

The insurer does NOT undertake to insure against perils of the ship BUT only perils of the sea. Insured can hold insurer liable only for perils of the sea. For perils of the ship, the injured party must look to the ship owner for redress. For the insurer to be liable, perils of the sea must be the proximate cause of the loss. Scope of Inland Marine Insurance: Risk must involve an element of transportation. 4 classes of inland marine insurance: 1.) Property in transit: Insurance provides protection for property frequently exposed to loss while it is in transport from one location to another 2.) Bailee liability: Insurance provides protection to persons who have temporary custody of goods (carriers, laundrymen, warehousemen, & garage keepers) 3.) Fixed transportation property: Insurance covers bridges, tunnels, & other instrumentalities of transpo & communication. They are insured coz they are held to be an essential part of the transpo system.

4.) floater: Provides insurance to follow the insured property wherever it may be located, subject to territorial limits of the K. Floater policies may be issued for items like jewelry, fur, works of art, contractors equipment, theoretical property, salesmen samples & others. Although floaters are issued on the basis of the transportation or movement of good, they have also been issued to properties seldom moved. Go Tiaco v. Union Insurance: Go Tiaco insured a cargo of rice with Union Insurance. The rice was damaged BUT Union Insurance refused to pay alleging that the ship was unseaworthy. Is Union Insurance liable? NO. Seaworthiness as to the ship is different as to seaworthiness as to the cargo. In this case, the vessel may be seaworthy as to the ship BUT it is not seaworthy as to the cargo. The entrance of sea water into the ships hold thru the defective pipe already described was not due to any accident which happened during the voyage BUT to the failure of the ships owner to repair a defect the existence of which he was appraised. Filipino Merchants Ins. v. CA: Choa Tiek Seng is the consignee of a shipment of fishmeal insured by Filipino Merchants. When the shipment was damaged, Filipino Merchants refused to pay as the all risks policy excluded accidents. Is FM liable? YES. FM failed to discharge the burden of proof that the cause of the loss was not an insured peril. Subtitle 1-B. Insurable Interest Sec. 100. Insurable interest of shipowner when ship chartered. Insurable interest of owner of the ship: On the vessel to the extent of its value. He continues to have insurable interest even if he mortgaged or chartered the vessel to a third person who agrees to pay him its value in case of loss. However, the insurer is only liable only for the part of the loss which the insured cannot recover from the charterer.

4.) Liability incurred by the owner or any party interested in or responsible for the insured property by reason of maritime perils. Perils of the sea: Casualties due to unusual violence OR extraordinary action of wind & wave OR to other extraordinary causes connected with navigation. Embraces all kinds of marine casualty such as shipwreck, foundering, stranding, collision & every specie of damage done to ship or goods at sea by violent action of the wind & waves or losses occasioned by jettisoning the cargo if it is made for the purpose of saving a vessel rendered unworthy during the voyage, NOT thru the fault of the captain. Not covered: Losses resulting from ordinary wear & tear OR other damage usually incident to the voyage are not included. Mere fact that the injury is due to the violence of some marine force does NOT necessarily bring it w/in the protection of the policy of such violence NOT unusual or unexpected. Perils of the ship: Loss which in the ordinary course of events, results 1.) From natural & inevitable action of the sea 2.) From wear & tear of the ship 3.) From negligent failure of the ship owner to provide vessel with proper equipment to convey cargo under ordinary conditions (Go Tiaco v. Union Insurance Society of Canton)

insurable interest of owner of the ship IF CHARTERED: To the extent that he cant recover from the charterer Sec. 101. Insurable interest of shipowner if hypothecated by bottomry: Excess of its value over amount of bottomry loan. Insurable interest of lender: To the extent of the loan. Loan on bottomry: Payable only if vessel is given as security for the loan completes in safety the contemplated voyage. Lender is entitled to high rate of interest to compensate him from the risk of losing his loan. Owner of the vessel receives in case of loss no indemnity BUT he does secure immunity from payment of the loan. Respondentia loan: Loan on goods Sec. 102. Meaning of freightage in marine insurance: ALL benefit which is to accrue to the owner of the vessel from its use in the voyage contemplated or the benefit derived from the employment of the ship Sources of freightage: 1.) Chartering of ship 2.) Employment of ship for carriage of owners goods 3.) Employment of ship for carriage of anothers goods Sec. 103. Insurable interest of shipowner in expected freightage: The shipowner has an insurable interest in expected freightage which according to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage. Sec. 104. When insurable interest in freightage of charter party exists: When the ship has broken ground on the chartered voyage. If a price is to be paid for the carriage of goods, it exists when: 1.) They are actually on board; or 2.) There is some contract for putting them on board, and both the ship and goods are ready for the specified voyage. Sec. 105. Insurable interest in profits. One who has an interest in the thing from which profits are expected to proceed has an insurable interest in the profits. To give an insurable interest in expected freightage, the insured must have an inchoate right to freight. He must be in such position with regard to freight that nothing could prevent him from ultimately having a perfect right to it but the intervention of the perils insured against. Sec. 106. Insurable interest of charterer of ship: To the extent that he is liable to be damnified by its loss. Insurable interest of a charterer: 1.) Value of ship IF charter stipulates charterer to pay ships value in case of loss

2.) Profit he expects to earn by carrying goods, in excess of the charter hired 3.) Up to the extent that he is liable to be damnified by its loss. Different types of charter parties: 1.) Contracts of affreightment: use of shipping space on vessels leased by the ship owner in part or as a whole, to carry goods for others a.) Time charter: vessel is leased to charterer for fixed period of time b.) Voyage charter: ship is leased for a single voyage 2.) Charter by demise or bareboat charter: by the terms of which the whole vessel is let to the charterer with a transfer to him of its entire command & possession & consequent control over its navigation including the master & crew who are its servants Subtitle 1-C. Concealment Sec. 107. What information (other than that required in section 28) each party in marine insurance is bound to communicate to the other: All the information he possesses, material to the risk, except such as is mentioned in Sec. 30, and to state the exact and whole truth in relation to all matters that he represents, or upon inquiry discloses or assumes to disclose. Concealment: Failure to disclose any material fact or circumstance which in fact or law is within OR which ought to be within the knowledge of one party & for which the other has no actual of presumptive knowledge. Sec. 108. In marine insurance, info of belief or expectation of 3rd party with respect to a material fact is material In marine insurance, the rule is STRICTER coz the insured is bound to communicate to the insurer not only (1) facts BUT also (2) beliefs or opinions of 3 rd persons OR (3) expectations of 3rd persons. Thus, there is concealment where the insured at the time of application for insurance did not disclose the opinion of marine experts who inspected the vessel insured that it was unseaworthy. Sec. 109. Presumption of knowledge of prior loss Sec 109 establishes a rebuttable presumption of knowledge of a prior loss on the part of the insured if the info might possibly have reached him in the usual mode of transmission at the usual rate of communication. Reason: Quickness in transmission of news by means of modern communications Sec. 110. Concealment in marine insurance does not vitiate entire contract but merely exonerates insurer with respect to matters enumerated 1.) National character of the insured; 2.) Liability of the thing insured to capture and detention;

3.) Liability to seizure from breach of foreign laws of trade; 4.) Want of necessary documents; 5.) Use of false and simulated papers. General Rule: Concealment of material fact entitles the injured party to rescind the entire contract of insurance. Exception: Under this Section, concealment of any of the matters enumerated does NOT avoid the policy ab initio. If the vessel is lost by any of the causes in 110 which was concealed, insurer is NOT liable. If vessel is lost by other perils of the sea like a storm, the insurer is liable. Subtitle 1-D. Representation Sec. 111. Marine insurer entitled to rescind contract if representation is intentionally false in any material aspect Compare with essential Sec. 45 where intent is not

1.) Seaworthiness at inception of voyage (Sec. 113); 2.) Carry proper documents expressly warranted (Sec. 120); 4.) Not an illegal venture (Vance). if nationality

3.) No improper deviation (Secs. 123-125); Madrigal v. Hanson: Isla Verde, owned by Madrigal, was chartered by Mabanta & insured by Hanson. The vessel sank. Hanson denies liability as the vessel was unseaworthy. Was the vessel not sea worthy, thus, making Hanson liable? NO. The vessel was unseaworthy coz (1) no typhoon at time it sank; (2) waves were not rough; (3) launch did not touch bottom or hit anything during her cruise; (4) water was bubbling in the engine room. Unseaworthiness of the vessel, thus, precludes recovery. Roque v. IAC: Roque insured its logs with Pioneer Insurance. The logs were loaded on Mla Bay Lighterage Corporations barge which sank. Pioneer Insurance denied liability as the ship was not seaworthy. Was the ship seaworthy? NO. Seaworthiness as to the ship is different as to seaworthiness as to the cargo. In this case, the vessel was seaworthy as to the ship BUT NOT seaworthy as to the cargo. Cargo can be the subject of marine insurance & once it is contracted, the implied warranty of seaworthiness immediately attaches to whoever is insuring the cargo, w/r he be the owner or not. Cargo owner has the obligation to choose a common carrier that takes care of its ships. While the cargo owner has no control over the ship itself & its seaworthiness, he has control over the choice of shipping company to use. The cause of the loss was perils of the ship & NOT perils of the sea. An insurer is only liable for perils of the sea. Sec. 114. Meaning of seaworthiness: Reasonably fit to perform the service, and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy. Sec. 115. Seaworthiness satisfied if ship seaworthy at start of voyage; Exceptions: 1.) In the case of a time policy: The ship must be seaworthy at the commencement of EVERY voyage she may undertake; 2.) In the case of cargo policy: each vessel upon which the cargo is shipped or transshipped must be seaworthy at the commencement of EAC PARTICULAR voyage; 3.) In the case of a voyage policy contemplating a voyage in different stages, the ship must be seaworthy at the commencement of EACH PORTION. Sec. 116. Seaworthiness of ship means it must be properly laden and refers not only to body of vessel but also to crew and equipment

Sec. 112. Falsity of representation as to expectation in absence of fraud does not avoid contract Effect of False Representation of FACT in Marine Insurance: 1.) If made with FRAUDULENT intent: avoids policy 2.) NOT intentional BUT material: insurer may also rescind Effect of Falsity of Representation as to EXPECTATIONS REPRESENTATIONS OF EXPECTATION: Statements of future facts or events which are in their nature contingent & which the insurer is bound to know that the insured could not have intended to state as known facts, but as intentions or expectations merely. MUST be made with fraudulent intent to be a ground for rescission. Examples: 1.) Vessel will sail or is expected to sail 2.) Nature of cargo to be shipped 3.) Amt of profits expected 4.) Destination of vessel 5.) Statement that the insured has no doubt that he can get insurance effected for a certain premium Note: Fraudulent intent as ground for rescission is material only in marine policies. For other insurance contracts, intent is immaterial & the insurer has a right to rescind in case of misrepresentation or concealment. Subtitle 1-E. Implied Warranties Sec. 113. Seaworthiness of ship an implied warranty in marine insurance Warranty: Stipulation, either expressed or implied, forming part of the policy as to some fact, conditions, or circumstance relating to the risk. Implied Warranties:

Sec. 117. Where different portions of voyage are contemplated in the policy, a ship must be seaworthy at start of every portion Sec. 118. Unseaworthiness during the voyage must be attended to by shipowner or captain without reasonable delay, otherwise insurer exonerated from loss Sec. 119. Seaworthiness of vessel for hull insurance is not necessarily seaworthiness for purposes of cargo insurance Seaworthiness: Relative term depending upon the nature of the ship, the voyage, and the service in which she is at the time engaged. Nature of ship: Vessel must be in a fit state as to: 1.) Repair 2.) Equipment 3.) Crew 4.) All other respects to perform the voyage insured & to encounter the ordinary perils of navigation 5.) Suitable condition to carry the cargo to be put on board or intended to be put on board 6.) NOT necessary that cargo itself shall be seaworthy Nature of the voyage: What is reasonable fitness to encounter perils expected to arise in the curse of the voyage vary naturally with the character of the voyage. Nature of service: Reasonably capable carrying the cargo to its port of destination. of safely

d.) Properly loaded, stowed, dunnaged, & secured so as not to imperil navigation of vessel OR cause injury to vessel or cargo

Ship becomes unseaworthy during voyage: Duty of the master as the ship owners representative to exercise due diligence to make it seaworthy again & if LOSS should occur coz of negligence in repairing the defect, the insurer is relieved of liability. Philamgen v. CA: Coca cola loaded bottles on MV Asilda owned by Felman. Shipment insured by Philamgen. Vessel sank. Unseaworthy as to cargo. Top-heavy. Carrying deck cargo raises presumption of unseaworthiness. Sec. 120. Express warranty on nationality or neutrality of vessel implies requisite documents are carried on board (Implied warranty to carry required documents) If you EXPRESSLY WARRANT the nationality or neutrality of the ship or cargo, you impliedly warrant that you will carry the documents showing or proving such nationality or neutrality. Subtitle 1-F. The Voyage & Deviation Sec. 121. Voyage contemplated by marine insurance policy with points of departure and ending refers to route fixed by mercantile usage Sec. 122. If sailing route is not fixed by mercantile usage, the voyage insured is that to which a master of ordinary skill and discretion would be most natural, direct and advantageous Sec. 123. Deviation is: 1.) A departure from the course of the voyage 2.) Unreasonable delay in pursuing voyage 3.) The commencement of an entirely different voyage Deviation: Unexcused departure from the regular course or route of the insured voyage OR any other act which substantially alters the risk 4 cases of deviation: 1.) Departure from course of sailing fixed by mercantile usage 2.) NOT FIXED BY MERCANTILE USAGE: departure from most natural, direct, & advantageous route 3.) Unreasonable delay in pursuing voyage 4.) Commencement of entirely different voyage In case of proper deviation, the effect is as if there was no deviation at all. Hence, it is not that the insurer is exonerated from liability, BUT that the INSURER WAS NEVER LIABLE. Sec. 124. Instances when deviation is proper: 1.) When caused by circumstances over which neither the master nor the owner of the ship has any control;

Seaworthiness does not mean you need to have a perfect vessel. Only that which is sufficient for the kind of vessels insured & the service in which they are employed. Compliance of Seaworthiness: General Rule: Complied with if the ship be seaworthy at time of commencement of the risk. Prior or subsequent seaworthiness is not a breach of the warranty; nor is it material that the vessel arrives in safety at the end of her voyage. There is no implied warranty that the vessel will remain in seaworthy condition throughout the life of the policy. Exceptions: 1.) TIME POLICY: seaworthy at commencement of EVERY voyage she may undertake 2.) CARGO POLICY: seaworthy at commencement of EACH PARTICULAR VOYAGE 3.) VOYAGE POLICY: contemplating a voyage in different stages, seaworthy at commencement of EACH PORTION. Scope of Seaworthiness: 1.) Vessel: a.) Equipment & appliances appropriate to voyage in which it is engaged & cargo it carries b.) Sufficient fuel, stores, & provisions to last for the entire voyage c.) Sufficient number of competent officers & men

2.) When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured against; 3.) When made in good faith, and upon reasonable grounds of belief in its necessity to avoid peril; or 4.) When made in good faith, for the purpose of saving human life or relieving another vessel in distress. Sec. 125. Deviation not specified in Sec. 124 is improper Sec. 126. Insurer not liable if loss occurred after an improper deviation Kinds of deviation: 1.) Proper deviation; 2.) Improper deviation. Effect of improper deviation: Insurer becomes immediately absolved from further liability under the policy for losses occurring SUBSEQUENT to (NOT before!) the deviation, notwithstanding the fact that the deviation did not increase the risk not in any wise contribute to the loss. Subtitle 1-G. Loss Sec. 127. Loss is either total or partial Sec. 128. When loss not total, it is partial Sec. 129. Total loss is either actual or constructive Sec. 130. Actual loss and causes thereof Kinds of losses: 1.) Total a.) Actual b.) Constructive 2.) Partial Effect of total loss: Underwriter is liable for the WHOLE AMOUNT INSURED Actual Total Loss: SM of insurance is wholly destroyed or lost or when it is so damaged as no longer to exist in its original character. Complete physical destruction is not essential to constitute actual total loss. Causes: 1.) Total destruction of the thing insured 2.) The irretrievable loss of the thing by sinking OR by being broken up 3.) Any damage to the thing which renders it valueless to the owner for the PURPOSE for which he held it 4.) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured. PMC v. Union Insurance: PMC was the owner of a lighter. Union Ins. issued it a policy for absolute total loss of the lighter. Typhoon, it sunk, salvaged, cost of repairs = cost of ship. Union Ins. refuses to pay saying that hindi sya absolute total loss since they salvaged the wreck and put it back into operation.

Hello?!! Syempre absolute total loss sya. Nagsink nga yung ship, eh! PMC had to spend more than the original cost of the vessel when repairing it. Union Ins. must pay up. Malayan v. CA: TKC Mktg insured its soya bean meal with Malayan Ins. Co. While docked in Durban, South Africa, shipment arrested and detained. Malayan liable for loss. Arrest caused by ordinary judicial process included among the covered risks. There was a constructive total loss over the cargo. Sec. 131. Constructive total loss or technical total loss is one which gives insured the right to abandon under Sec. 139 Constructive total loss: One in which the loss, although not actually total, is of such a character that the insured is entitled, if he thinks fit, to treat it as a total loss by abandonment. In cases of actual total loss, no abandonment is necessary, but if the loss is merely constructively total, an abandonment becomes necessary in order to recover as for a total loss. Sec. 132. Presumption of actual loss arises from continued absence of ship without being heard from; length of time depends on circumstances Presumption: Where a vessel is not heard of at all within a reasonable time after sailing, or for a reasonable time after she was last seen, she will be presumed to have been lost from a peril insured against. Sec. 133. Liability of insurer continues during reshipment if ship is prevented from completing voyage by a peril insured against Type of Cargo. insurance contemplated under 133:

It is well-settled that if the original ship be disabled, and the master. Acting with wise discretion forwards the cargo in another ship, such necessary and justifiable change of ship will not discharge the underwriter on the goods from liability for any loss which may take place on goods subsequent to such reshipment. In any case however, the insurer may always require an additional premium if the hazard is increased by the extension of liability. Sec. 134. Marine insurer also liable for damages, expenses for discharging, storage, reshipment, extra freightage and other expenses in saving cargo reshipped but only up to amount insured Expenses contemplated in 134: Those necessary to complete the transportation of cargo reshipped under Sec. 133. The insurer is liable for them in addition to paying for any loss or damage which may take lace on the goods, due to the perils insured against. The liability however of the insurer under Sec. 134 cannot exceed the amount of the insurance.

Sec. 135. Insured entitled to payment in actual total loss; no need of abandonment In case of actual total loss, the right of the insured to claim the whole insurance is absolute. Hence, he need not give notice of abandonment nor formally abandon to the insurer anything that may remain of the insured property. Pan Malayan Ins. v. CA: FAO transported its rice seeds to Vietnam. Barge sank in the China Sea. Some bags of seed were recovered. Still an absolute total loss. All bags were rendered valueless for their purposes since when they got wet, they started to germinate. Since absolute total loss, no need for notice of abandonment. Sec. 136. Free from particular average (FPA) coverage does not cover particular or simple average losses unless loss is total; but insurer liable for general or gross average loss Average: Any extraordinary or accidental expense incurred during the voyage for the preservation of the vessel, cargo or both; and all damages to the vessel and cargo from the time it is loaded and the voyage commenced, until it ends and the cargo is unloaded (Art. 806, Code of Commerce) Kinds of Average: 1.) Gross or general average: 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 or known risk. A general average loss must be borne equally by all of the interests concerned in the venture (Sec. 812, Code of Commerce). 2.) Simple or particular averages: Includes all damages and expenses caused to the vessel or to her cargo which have not inured to the common benefit and profit of all the persons interested in the vessel and cargo. They refer to those losses which occur under such circumstances as do not entitle the owners to receive contribution from other owners concerned in the venture. It is suffered by and borne alone by the owner of the cargo or of the vessel, as the case may be (Sec. 808, Code of Commerce). Principle behind general average: Principle of customary law, independent of contract, whereby when it is decided by the master of a vessel, acting for all the interests concerned, to sacrifice any part of a venture exposed to a common and imminent peril in order to save the rest, the interests so saved are compelled to contribute ratably to the owner of the interest sacrificed, so that the cost of the sacrifice shall fall equally upon all. Requisites to the right to claim general average contribution: 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 mustnt be caused by any fault of the party asking for contribution; 6.) It must be successful, i.e. it resulted in the saving of the vessel and/or the cargo; and 7.) It must be necessary. Example: Jettisoning of goods to lighten the vessel. Jettison: Intentional casting overboard of any part of a venture exposed to a peril in the hope of saving the rest of the venture.

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Liability of insurer for general average: His proportion. He is placed on same footing as other persons who have an interest in the vessel, or the cargo therein, at the time of the occurrence of the general average and who are compelled to contribute. Formula for computing liability of insurer: Loss x Amount insured = Contribution Value Liability of insurer for particular average: If the parties stipulate that the insurer will be liable for general average only he will not be liable for particular average 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. Sec. 137. Insurance covering actual total loss does not include constructive total loss. However, it includes deprivation of possession of thing insured at port of destination Subtitle 1-H. Abandonment Sec. 138. Abandonment is act of insured after a constructive total loss in relinquishing to insurer his interest in thing insured Abandonment: The act of an insured in notifying the insurer that owing to damage done to the subject of the insurance, he elects to take the amount of insurance in the place of the subject thereof, the remnant of which he cedes to the insurer. Requisites for a valid abandonment: 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 is neither partial nor conditional. 4.) The abandonment must be made within a reasonable time after receipt of reliable information of the loss. 5.) It must be factual. 6.) It must be by giving notice thereof to the insurer which may be done orally or in writing.

7.) The notice of abandonment must be explicit and must specify the particular cause of the abandonment. Sec. 139. Abandonment may be done when more than of value will be suffered by insured to recover thing insured or its equivalent When the insured may abandon the thing insured: When the loss or damage is more than three-fourths of its value. Rule when the insurance is divisible: Any particular portion of the thing insured separately valued by the policy may be separately abandoned as it is deemed separately insured. See also Sec. abandonment 146 for consequences of

2.) When the thing insured was so far restored when the abandonment was made that there was in fact no total loss. Information required in order for the insured to abandon: Need not be direct or positive. A newspaper report, a letter from an agent or a notice from the master is sufficient. As long as the information is of facts and circumstances that renders it highly probable that a constructive loss has occurred, that is enough. Sec. 143. Notice of abandonment to insurer may be oral or written, if oral, written notice must be submitted within 7 days Form of notice: Written or oral. But if oral, must give written notice within 7 days. It need not be made by insured himself. Can be made by an authorized agent. Sec. 144. Notice of abandonment must be explicit, specifying particular cause; Probable cause not enough, no need of proof of interest or loss Sec. 145. Abandonment sustained only upon specified cause in notice Meaning: If the cause you specified in the notice is non-existent, you will not be allowed to adduce evidence to prove other causes for abandonment which you did not so specify. Sec. 146. Abandonment equivalent to transfer of interest from insured to insurer

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Oriental Assurance Corp. v. CA: Logs insured for total loss only. They were loaded onto 2 barges. 1 of the barges was damaged due to rough seas and strong winds and so most of the logs on that barge were lost. Was there constructive total loss? NO. Contract indivisible. No Constructive loss. The logs, although placed on 2 different barges, were not separately valued by the policy, nor separately insured. 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. 2/3 requirement not met. Pan Malayan Ins. v. CA: Barge on which FAO rice seed on the way to Vietnam was sank in China Sea. Total loss due to germination. No need to go into issue of validity of abandonment since in actual total loss, a person is entitled to payment without notice of abandonment. Sec. 140. Abandonment must not be partial nor conditional The abandonment must be entire and absolute and cover the whole interest insured. It must be unconditional and unfettered by contingencies and limitations. Sec. 141. Abandonment must be made within reasonable time from receipt of information of loss When abandonment must be made: When the insured has received notice of a loss, he must elect within a reasonable time whether he will abandon to the insurer, and if he so elects, he must give notice thereof within a reasonable time. This is in order that the insurer may not be prejudiced by the delay, and may take immediate steps for the preservation of such property insured as may remain in existence. Sec. 142. If basis for abandonment is incorrect then it is ineffectual When the loss must exist: At the time of abandonment. When abandonment is ineffectual: 1.) When the information upon which an abandonment has been made proves incorrect; and

Effect of valid abandonment: It transfers to the underwriter the interests in the subject matter covered by the policy subject to the rights and interests, if any, of third persons. The underwriter acquires thereby the entire interest insured, together with all its incidents, including rights of action which the insured has against third persons for injury. In other words, the insurer becomes entitled to all the rights which the insured possessed in the thing insured. Sec. 147. If marine insurer pays for loss as if actual total loss, the he is entitled to remainder of thing insured, proceeds, or salvage as if abandoned When formal abandonment constructive loss. necessary: Only in

Situation contemplated by this article: There is a constructive loss but without waiting for a formal abandonment, the insurer (magnanimously) pays the insured as if the loss were actual and total. The law then steps in and says that since the insurer paid and the insured accepted, we will consider that as an offer and acceptance of abandonment. Hence, from that time on, the insurer is entitled to whatever may remain of the thing insured, or its proceeds or salvage. Sec. 148. Upon abandonment, acts done in good faith by agents of insured after loss are at risk of insurer and for his benefit (agent of the insured becomes agent of the insurer. The captain or master of the ship continues to be agent of the insured until abandonment, but from moment of a valid abandonment, the master of vessel and the agents of the insured become the the the the

agents of the underwriter, and the underwriter becomes responsible for all their acts in connection with the insured property and for all the expenses and liabilities in respect thereto. The abandonment when made relates back to the time of the loss and of effectual, the title of the underwriter becomes vested as of that date and he is responsible for the reasonable expenses incurred by the master after the date in an attempt to save the vessel. The insurer is likewise liable for the wages of the seamen earned subsequent to the loss. Sec. 149. When notice of abandonment is properly given, insured is not prejudiced by insurers refusal to accept it Effect on the insureds rights if the insurer refuses to accept the abandonment: Acceptance is in no case necessary if the abandonment is properly made. In this case, the insureds right cannot be prejudiced by the refusal of the insurer to accept. Sec. 150. Acceptance of abandonment is express, or implied from insurers conduct. Mere silence of insurer for an unreasonable length of time after notice deemed acceptance Form of abandonment: Any. It may be express or implied from the acts of the insurer. The silence must be for an unreasonable length of time. Sec. 151. Express or implied acceptance of an abandonment is conclusive between parties, admits loss and sufficiency of abandonment Sec. 152. Abandonment is irrevocable unless ground is unfounded Effect of acceptance of abandonment: 1.) Insurer becomes at once liable for the whole amount of the insurance; 2.) Insurer becomes entitled to all rights which the insured possessed in the thing insured; 3.) Fixes the rights of the parties. It is conclusive upon them and is irrevocable. Therefore, the acceptance of an abandonment estops the underwriter from relying on any insufficiency in the form, time or right of abandonment. Except: when the ground upon which the abandonment is made proves to be unfounded. Sec. 153. In an accepted abandonment of ship, freightage before loss belongs to insurer of freightage; freightage after belongs to insurer of ship Right to freightage of insurer of ship: When abandonment is validly made, the interest of the insured in the thing covered passes to the insurer. The insurer of the ship becomes the owner thereof after an abandonment, and his title becomes vested as of the time of the loss. Hence, freightage earned subsequent to the loss belongs to the insurer of the ship. Right to freightage of insurer of freightage: The insurer of the freightage is subrogated to the

rights of the insured at the time of the loss hence any freightage earned previous to the time of loss rightfully belongs to him. Sec. 154. If insurer refuses to accept valid abandonment, he is liable for actual total loss less proceeds from thing insured in hands of insured Effect on the insurers liability if he refuses to accept valid abandonment: He is liable as upon an actual loss less any proceeds the insured may have received on account of the damaged property as when the insured succeeds in selling the property as damaged. Formula: Liability of insurer = Actual loss Any Proceeds Received by the Insured.

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If abandonment was improper, the insured may nevertheless recover to the extent of the damage proved. Sec. 155. If insured does not abandon, he can recover actual loss Effect of insureds failure to abandon: The insured has an election to abandon or not, and he cannot be compelled to abandon although abandonment is proper. He may await the final event, and recover accordingly for a total or partial loss, as the case may be. Subtitle 1-I. Measure of Indemnity Sec. 156. Valuation in an marine policy (valued policy) is conclusive between parties; exception: hypothecation by bottomry or respondentia before insurance; fraudulent valuation entitles insurer to rescind Object of valuation: It may happen that when a vessel is insured for a long time or for a long voyage, her value at the end of the voyage may not be the same as at the beginning. Hence, we resort to valuation in order to fix in advance the value of the property ands thus, avoid the necessity of proving its actual value in case of loss. Insured value: That stated in the policy. It is conclusive upon the parties provided that the insured has some interest at risk, and there is no fraud on his part. In case of fraud on part of insured in stating the value: Insurer may rescind the contract. In a valued marine policy, when the thing insured is lost, neither party is permitted to give evidence of the real value of the thing. Reason: There was already a conclusive value given to it by the parties in the policy. Exception: If the thing has been hypothecated by bottomry or respondentia before it was insured, and such hypothecation is WITHOUT the knowledge of the person who procured the insurance, the real value of the thing MAY BE SHOWN by the insurer. See Sec. 161 for marine open policies Sec. 157. In a marine policy in case of partial loss the insurer is liable only for a proportion of the amount insured as it bears to the interest insured (principle of co-insurance)

Meaning: In every marine insurance, the insured is expected to cover by insurance the full value of the property insured. However, there are instances when people insure for less than their interest. So if the value of the insureds interest exceeds the amount of insurance, the insured is considered a co-insurer for an amount determined by the difference between the insurance taken out and the value of the property. Formula: Partial Loss x Amt of = Amt of Value of thing insured Insurance Recovery Circumstances in which Section 157 will apply: 1.) Loss is partial; and 2.) Amount of insurance is less than the insureds entire insurable interest in the property insured Compare with Sec. 172 (fire insurance) no coinsurance in fire insurance unless stipulated Sec. 158. Where profits are separately insured, the insured is entitled to a proportion of profits lost, equivalent to proportion of property lost bears to value of whole Formula: Value of Property lost x Amt of = Amt of Value of whole property insured Profits Recovery Sec. 159. In a valued marine policy of freightage or cargo, if part of subject is exposed to risk, valuation applies in proportion to such part Meaning: When cargo is insured under a valued policy but only a portion of the cargo is actually carried by the vessel at the time of loss, the valuation will be reduced proportionately. The insurer is bound to return such portion of the premium as corresponds with the portion of the cargo which had not been exposed to the risk. Sec. 160. When profits valued, loss is conclusively presumed from loss of property from which they arise and valuation fixes their amount Meaning: If the property is totally lost, then consequently, the total profits are also lost. Such loss of profits are conclusively presumed from the loss of the property and the valuation agreed upon in the policy fixes the amount of recovery. Sec. 161. Rules in estimating loss in a marine open policy regarding values of: 1.) Ship Value at the beginning of the risk. 2.) Cargo Its actual cost to the insured, when laden on board, or where that cost cannot be ascertained, its market value at the time and place of lading. 3.) Freightage Gross freightage, exclusive of primage, without reference to the cost of earning it. 4.) Cost of insurance added to value estimated In determining the loss under an open policy of marine insurance, the real value of the thing insured must be proved by the insured in each

case. Section 161 lays down the rules in ascertaining the value to be used for indemnity purposes.

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Sec. 162. Rule when cargo insured against partial loss arrives in damaged condition; loss is deemed in same proportion as market price of damaged goods bears to market price of goods in sound condition in port of destination Section 162 applies if: 1.) The cargo is insured against partial loss; and 2.) It suffers damage as a result of which its market value at the port of destination is reduced. Formula: Market price _ Market price = Depreciation In sound state in damaged state Depreciation x Amt of = Amt of Market price in sound state Insurance Recovery Sec. 163. Sue and Labor Clause (if stipulated): Insurer liable for expense incurred by insured in recovering the property in addition to total loss if it occurs later As a general rule, a marine insurer is not liable for more than the amount of the policy. Under Section 163, however, expenses incurred in repairing damages suffered by a vessel because of perils insured against and expenses incurred for saving the vessel from such perils are items to be borne by the insurer in addition to a total loss if that afterwards takes place. Such expenses are known as Port of Refuge Expenses. Sec. 164. Marine insurer liable for general average loss contribution in proportion to what insured value bears to contributing value of thing insured See also Arts. 811-812, Code of Commerce (rules on general average loss) Jarque v. Smith Bell: Jarque owned the motorboat Pandan which he insured with Natl Union Fire Ins. Co. for absolute total loss only. Due to very heavy sea, they had to jettison cargo. Ins. co. liable to contribute? YES. Liability for contribution in general average is not based on express terms of policy, but rests upon the theory that from the relation of the parties and for their benefit, a quasi-contract is implied by law. Art. 859 of Code of Commerce is mandatory. Insurers are bound to contribute to indemnity of the general average. This simply places the insurer on the same footing as other persons who have an interest in the vessel, or the cargo therein. The jettison was as much to the benefit of the underwriter as to the owner, if jettison had not taken place and the ship foundered, insurer would have had to pay a lot more money. Sec. 165. Marine insurer is liable for general average loss and is subrogated to insureds right to general average contribution, but shall not be liable 1.) When insurer is made liable after separation of interests liable to contribution;

2.) When insured neglected or waived the right to demand contribution from others Rights of the insured in case of general average: The insurer is liable for any general average loss where it is payable or has been paid by the insured in consequence of a peril insured against. The insured may either hold the insurer directly liable for the whole of the insured value of the property sacrificed for the general benefit, subrogating him to his own right of contribution, or demand contribution from the other interested parties as soon as the vessel arrives at her destination. In other words, the insured need not wait for an adjustment of the average. There can be no recovery for general average against the insurer: 1.) After the separation of the interests liable to contribution, or rather, after the cargo liable for contribution has been removed from the vessel; or 2.) When the insured has neglected or waived his right to contribution. Limit as to the liability of the insurer: It is limited to the proportion of contribution attaching to his policy value where this is less than the contributing value of the thing insured. In other words, the liability of the insurer shall be less than the proportion of the general average loss assessed upon the thing insured where its contributing value is more than the amount of the insurance. In such case, the insured is liable to contribute ratably with the insurer to the indemnity of the general average. Formula: Amount of insurance x Proportion of gen. = Limit of Value of thing insured ave. loss assessed liability of upon thing insured insurer See Art. 2207, Civil Code Insurer subrogated to rights of the insured against wrongdoers Sec. 166. Partial loss of ship or equipment old materials to be applied to payment of new. Unless stipulated, marine insurer liable for only 2/3 of remaining costs of repairs but anchors to be paid in full Liability of the insurer in case of partial loss of the ship or its equipment: 2/3 cost of repairs. 1/3 new for old on the theory that the new materials render the ship more valuable than it was before the loss.

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