MARINE INSURANCE PERILS OF THE SEA, PERILS OF THE SHIP

G.R. No. 124050

MAYER STEEL v CA
PUNO, J.

Summarized by Ira Agting

Hongkong Govt Supplies contracted Mayer Steel for the supply of steel pipes and
Fittings. The two parties insured the goods with South Sea and Charter Insurance. When the
goods reached Hongkong, there was substantial damage. Hongkong and Mayer filed an
insurance claim, which RTC granted. However, CA dismissed the claim for prescription under
Section 3(6) of the Carriage of Goods by Sea Act, which states that a suit against a carrier must
be brought within 1 year (case was filed 2 years from the delivery). CA held that this provision
also applies to the insurer. SC: CA is wrong. The provision does not apply to the insurer
because an insurers liability is not based on the contract of carriage, but the contract of
insurance. Carriage of Goods by Sea act defines the obligations of the carrier under the
contract of carriage. It does not, however, affect the relationship between the shipper and the
insurer, which is governed by the Insurance Code.

IMPORTANT PEOPLE
Insured: Hongkong Government Supplies Department, Mayer Steel Pipe Corp
Insurers: South Sea Surety and Insurance Co, Charter Insurance Corp

FACTS
Hongkong Government Supplies Department contracted Mayer Steel Pipe Corp to
manufacture and supply steel pipes and fittings.

Prior to the shipping, Mayer insured the pipes and fittings against all risks, with
South Sea Surety and Insurance Co and Charter Insurance Corp
South Sea insured pipes and fittings worth US$ 212,772
Charter insured worth US$ 149,470

Mayer and Hongkong jointly appointed Industrial Inspection International Inc as third
party inspector to examine whether the pipes and fittings are manufactured in
accordance with the specifications in the contract
All pipes and fittings were certified to be in good order condition before they
were loaded on the vessel
HOWEVER, WHEN THE GOODS REACHED HONGKONG, A SUBSTANTIAL
PORTION WAS DAMAGED

Mayer and Hongkong filed a case against South Sea and Charter for indemnity
under the insurance contract. Charter paid Hongkong HK$64,904.75. Mayer and
Hongkong, however, demanded payment of a balance of HK$299,345.30, but South
Sea and Charter refused to pay because insurance surveyor's report allegedly
showed that the damage is a factory defect.

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RTC IN FAVOR OF Mayer and Hongkong
Damage to the goods was not due to factory defects
Insurance contracts are all risk policies, which insure against all causes of
conceivable loss or damage

CA dismissed because of prescription

Damage is not a due to factory defect and it was covered by the all risk
insurance policies
BUT case should be dismissed on the ground of prescription
o Section 3(6) Carriage of Goods by Sea Act: "the carrier and the
ship shall be discharged from all liability in respect of loss or damage
unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered."
o The case was filed more than 2 years from the time the goods were
unloaded.
o The provision applies not only to the carrier, but to the insurer
as well (Filipino Merchants v Alejandro)

ISSUE
W/N CA erred in applying Sec 3(6) of the Carriage of Goods by Sea Act -- YES
W/N the action has prescribed --NO

RATIO
1 The provision, only the carrier's liability is extinguished if no suit is brought
within one year. But the liability of the insurer is not extinguished
because the insurer's liability is based not on the contract of carriage
but on the contract of insurance.
The Carriage of Goods by Sea Act governs the relationship between the
carrier on the one hand and the shipper, the consignee and/or the insurer on
the other hand.
It defines the obligations of the carrier under the contract of carriage. It does
not, however, affect the relationship between the shipper and the
insurer. The latter case is governed by the Insurance Code.

Filipino Merchants is different to the case at bar because it involves an insurer

who filed for reimbursement against the carrier more than a year after the
delivery. In the case at bar, it was the shipper which filed a claim against the
insurer. The basis of the shipper's claim is the "all risks" insurance policies.
Filipino Merchants applies only to suits against the carrier filed by either the
shipper, consignee, or insurer
When the court said in Filipino Merchants that Section 3(6) of the Carriage of
Goods by Sea Act applies to the insurer, it meant that the insurer, like the
shipper, may no longer file a claim against the carrier beyond the one-year
period provided in the law. But it does not mean that the shipper may no
longer file a claim against the insurer because the basis of the insurer's
liability is the insurance contract.

1 The action has not prescribed. When private respondents issued the "all risks"
policies to petitioner Mayer, they bound themselves to indemnify the latter in

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 case of loss or damage to the goods insured. Such obligation prescribes in 10
years.

IN VIEW WHEREOF, the petition is GRANTED.