GR L 76145; (June, 1987) (Digest)
G.R. No. L-76145, June 30, 1987
CATHAY INSURANCE CO., petitioner, vs. HON. COURT OF APPEALS and REMINGTON INDUSTRIAL SALES CORPORATION, respondents.
FACTS
Remington Industrial Sales Corporation filed a complaint against Cathay Insurance Co. to recover losses under a marine insurance policy. The claim involved a shipment of seamless steel pipes from Japan to the Philippines aboard the SS “Eastern Mariner,” which arrived heavily rusted. The Regional Trial Court ruled in favor of Remington, ordering Cathay to pay P868,339.15, representing 30% of the cargo’s value as recoverable loss, plus interest, surveyor’s fees, attorney’s fees, and costs. The Court of Appeals affirmed this decision.
Cathay Insurance contested liability, arguing that rusting was not a covered “peril of the sea” but rather an inherent vice of the steel pipes, excluded under the policy. It also contended that heavy rusting could not occur within the seven-day voyage and emphasized clean cargo receipts. Remington countered that coverage was clear, rust resulted from external sea perils, and contractual limitations must be strictly construed against the insurer.
ISSUE
Whether the rust damage to the steel pipes is a covered risk under the marine insurance policy issued by Cathay Insurance Co.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The legal logic rests on three key principles. First, the rusting of steel pipes during a sea voyage constitutes a “peril of the sea.” The Court recognized that exposure to wind, water, and salt conditions inherently causes such damage during transit, aligning the loss with the fundamental purpose of marine cargo insurance.
Second, any ambiguity in an insurance contract must be construed strictly against the insurer as its drafter. The policy’s terms did not unequivocally exclude rusting under these circumstances. Applying the rule of contra proferentem ensures that the protective intent of insurance is not defeated by obscure exceptions.
Third, the Court upheld the factual findings of the lower courts. Cathay’s reliance on the “inherent vice” exclusion and a 15-day claim clause was unavailing; the latter was deemed foreclosed during pre-trial proceedings. The assessment of a 30% loss allowance and the awarded interest, based on the policy and Insurance Code, were supported by evidence. The Supreme Court emphasized its policy of not disturbing factual conclusions of appellate courts absent compelling exceptions, none of which applied here. Thus, Cathay was rightly held liable for the insured loss.