G.R. No. L-66935, 11 November 1985, 139 SCRA 597

FACTS:

In 1972, the Manila Bay Lighterage Corporation (Manila Bay), a common carrier, entered into a contract with the petitioners whereby the former would load and carry on board its barge logs from Palawan to Manila.
The petitioners insured the logs against loss for P100,000.00 with respondent Pioneer Insurance and Surety Corporation (Pioneer) but the shipment never reached its destination because Mable 10 sank with the 811 pieces of logs somewhere off Palawan on its way to Manila due to the entrance of the sea water into the ship’s hold through the defective pipe.
On March 8, 1972, the petitioners wrote a letter to Manila Bay demanding payment of P150,000.00 for the loss of the shipment plus P100,000.00 as unrealized profits but the latter ignored the demand.
Another letter was sent to respondent Pioneer claiming the full amount of P100,000.00 under the insurance policy but respondent refused to pay on the ground that its liability depended upon the “Total loss by Total Loss of Vessel only”. Hence, petitioners commenced a civil case against Manila Bay and respondent Pioneer.
After hearing, the trial court found in favor of the petitioners.
Respondent Pioneer appealed to the IAC but Manila Bay did not appeal. According to the petitioners, the transportation company is no longer doing business and is without funds.
In 1984, the appellate court modified the trial court’s decision and absolved Pioneer from liability after finding that there was a breach of implied warranty of seaworthiness on the part of the petitioners and that the loss of the insured cargo was caused by the “perils of the ship” and not by the “perils of the sea”. It ruled that the loss is not covered by the marine insurance policy.
After the appellate court denied their motion for reconsideration, the petitioners filed this petition.

ISSUE:

Whether or not the loss of the cargo was caused by the perils of the ship.

RULING:

Yes.
Petitioners maintain, that the loss of the cargo was caused by the perils of the sea, not by the perils of the ship because as found by the trial court, the barge was turned loose from the tugboat east of Cabuli Point “where it was buffeted by storm and waves.
However, the SC ruled that the loss of the cargo was due to the perils of the ship rather than the perils of the sea. The facts clearly negate the petitioners’ claim under the insurance policy.
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.
In the present case 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 result from the perils of the sea.
Suffice it to say that upon the authority of those cases there is no room to doubt the liability of the shipowner for such a loss as occurred in this case. By parity of reasoning the insurer is not liable; for generally speaking, the shipowner excepts the perils of the sea from his engagement under the bill of lading, while this is the very perils against which the insurer intends to give protection.
Neither can petitioners allege barratry on the basis of the findings showing negligence on the part of the vessel’s crew.
Barratry as defined in American Insurance Law is any willful misconduct on the part of master or crew in pursuance of some unlawful or fraudulent purpose without the consent of the owners, and to the prejudice of the owner’s interest.
Barratry necessarily requires a willful and intentional act in its commission. No honest error of judgment or mere negligence, unless criminally gross, can be barratry.
In the case at bar, there is no finding that the loss was occasioned by the willful or fraudulent acts of the vessel’s crew. There was only simple negligence or lack of skill. Hence, the petition must be dismissed.

*Case digest by Oscar Lim Abadies Jr, LLB-IV, Andres Bonifacio College Law School, SY 2018-2019