G.R. No. 85141 November 28, 1989
FILIPINO MERCHANTS INSURANCE CO., INC., petitioner, vs. COURT OF APPEALS and CHOA TIEK SENG, respondents.

FACTS

Private respondent Choa Tiek Seng insured a shipment of 59.940 metric tons of fishmeal from Bangkok to Manila with petitioner Filipino Merchants Insurance Co., Inc. under an “all risks” marine cargo policy. Upon discharge at the Port of Manila on December 11, 1976, a joint survey by the ship’s agent and the arrastre contractor revealed 105 bags in bad order. A subsequent survey by the arrastre contractor before delivery to the consignee showed the damaged bags increased to 227. Petitioner’s own surveyor conducted a final survey and confirmed a loss of 12,148 kilos, valued at P51,568.62. The consignee filed a formal claim, which the insurer refused to pay, leading to a collection suit.
The insurer, as defendant, filed a third-party complaint against the carrier, Compagnie Maritime Des Chargeurs Reunis, and the arrastre contractor, E. Razon, Inc. The trial court ruled in favor of the consignee, ordering the insurer to pay the claim. It also held the carrier and the arrastre contractor jointly and severally liable for reimbursement to the insurer. On appeal, the Court of Appeals affirmed the liability of the insurer but modified the third-party complaint, holding only the arrastre contractor liable for reimbursement and dismissing the complaint against the carrier.

ISSUE

The primary issues were: (1) whether the consignee could recover under the “all risks” insurance policy without proving the loss was due to a fortuitous event; (2) whether the consignee had an insurable interest in the cargo; and (3) whether the consignee was guilty of fraud for non-disclosure of a alleged lack of insurable interest.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. On the first issue, the Court held that an “all risks” insurance policy covers all losses except those caused by delay, inherent vice, or nature of the goods. The burden is on the insured to prove the loss occurred, but not its specific cause. The burden then shifts to the insurer to prove that the loss falls within an exception. Petitioner failed to discharge this burden by proving the loss was due to an excluded cause. Therefore, private respondent’s proof of the fact of loss was sufficient for recovery.
On the second and third issues, the Court ruled that private respondent had an insurable interest. The insurance was procured under a C&F (Cost and Freight) Manila contract, whereby the risk of loss passed to the buyer upon shipment. As the consignee and owner of the cargo upon its shipment, he possessed a valid insurable interest. Furthermore, the defense of lack of insurable interest was not raised in the answer, pre-trial, or trial court proceedings. A party cannot change its theory on appeal, as it violates basic rules of fair play and due process. Consequently, the claim of fraud based on non-disclosure of insurable interest also failed.