GR 94052; (August, 1991) (Digest)
G.R. No. 94052; August 9, 1991
ORIENTAL ASSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS AND PANAMA SAW MILL CO., INC., respondents.
FACTS
Private respondent Panama Sawmill Co., Inc. insured a shipment of 1,208 pieces of apitong logs (2,000 cubic meters) with petitioner Oriental Assurance Corporation under a marine insurance policy for P1,000,000. The policy explicitly stipulated it was against “TOTAL LOSS ONLY.” The logs were loaded onto two barges, PCT-7000 and TPAC-1000. During the voyage, rough seas caused damage to Barge TPAC-1000, resulting in the loss of 497 out of the 598 pieces loaded on that specific barge.
Panama demanded payment from Oriental Assurance for the loss. The insurer refused, relying on the “total loss only” warranty. Panama filed a complaint. The Regional Trial Court ruled in favor of Panama, ordering Oriental Assurance to pay an indemnity. The Court of Appeals affirmed, reducing the interest rate. Both lower courts treated the insurance contract as divisible, considering the cargo on each barge separately. They held the loss of 497 logs from one barge constituted a constructive total loss of that portion, making it compensable.
ISSUE
Whether Oriental Assurance can be held liable under the marine insurance policy based on the theory of a divisible contract and a constructive total loss of a portion of the shipment.
RULING
No, Oriental Assurance cannot be held liable. The terms of the insurance contract are the measure of the insurer’s liability. The policy insured the entire shipment of 2,000 cubic meters of logs as one inseparable unit. The fact of loading onto two barges did not make the contract severable, as the logs were not separately valued or separately insured in the policy. Only one premium was paid for the entire shipment.
The insurer’s liability was for “total loss only,” which may be actual or constructive. For a constructive total loss under Section 139 of the Insurance Code, the insured may abandon the thing insured, or any portion thereof, but only if that portion is “separately valued by the policy, or otherwise separately insured.” This requirement was not met. Therefore, the correct basis for determining constructive total loss is the totality of the insured shipment.
Of the entire shipment of 1,208 pieces, only 497 pieces were lost, constituting 41.45%. This does not exceed the 75% threshold required by law to constitute a constructive total loss of the insured subject matter. In the absence of either an actual or constructive total loss of the entire insured unit, no recovery under the policy is warranted. The decision of the Court of Appeals is reversed, and Oriental Assurance is absolved from liability.