INSURANCE I.

Definition A contract whereby, for a stipulated consideration, one party undertakes to compensate the other for loss on a specified subject by specified perils. A contract whereby one undertakes to indemnify another against loss, damage, or liability arising from an unknown or contingent event and is applicable only to some contingency or act to occur in the future. An agreement by which one party for a consideration prornises to pay money or its equivalent or to do an act valuable to the other party upon destruction, loss, or injury of something in which the other party has an interest, 2. Obligation and Contract Elements of a contract: 1. Consent 2. Object 3. Cause Pure and Conditional Obligations Art. 1179. Every obligation whose performance does not depend upon a future or uncertain event, or upon a past event unknown to the parties, is demandable at once. Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. (1113) Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. (1114) Guaranty and suretyship Guaranty: Guarantor liable only if principal debtor defaults, has the benefit of exhaustion Surety. Surety can be held solidarily liable with principal debtor, does not have the benefit of exhaustion 3. History a. Mutual Insurance: concept of extending aid to a member of a group when that member is in crisis, from a pool of contributions b. Early maritime or marine insurance: Aboitiz Shipping vs. New India Assurance (2006) 1 . A B O I T I Z S H I P P I N G C O R P O R A T I O N V N E W I N D I A A S S U R A N C E L T D . ( 2 0 0 6 ) Facts: 1.Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from France on a vessel ownedby Franco-Belgian Services Inc (FBSI). Cargo was consigned to General Textile Inc. In Manila and insured by (R)New India Assurance Ltd. 2.In Hongkong, the cargo was transferred to M/V P. Aboitiz for transhipment to Manila. 3.Before departing, the Japanese Meteorological Center advised that it was safe to travel but while at sea, a report said that a typhoon was moving to the ships general path. The vessel changed its course however, its hull leaked. The vessel sank but the captain and crew were saved. 4.(P) Aboitiz Shipping Corp. notified General Textile of the total loss of the cargo. General textile lodged a claim with New India for the amount of its loss. 5.New India paid General Textile and was subrogated to its rights.

6. After the surveyor hired by New India reported that the cause of the sinking was the vessels question ableseaworthiness, New India filed a complaint for damages against FBSI (and its local agent FB Zuellig) and Aboitiz. 7. New India: b r e a c h o f c o n t r a c t o f c a r r i a g e a. Proximate cause: fault or negligence of the master and the crew or vessel b. Unseaworthiness c. Failure to exercise extraordinary diligence in the transport of goods 8.FBSI and Zuellig: exercised extraordinary diligence, seaworthy, proximate cause of loss is fortuitous event Filed cross-claim against Aboitiz 9.Aboitiz: raised same defenses and added that in accordance with the real and hypothecary nature of maritime law, the sinking of M/V Aboitiz extinguished its liability for the loss of the cargoes. 10.Board of Marine Inquiry (BMI) conducted an investigation to determine the administrative liability of the captainand crew. They were exonerated but the findings were not presented in court. 11.TC: liable for total loss of cargo with interest. CA: Affirmed. 12.Aboitiz: share should be only against the insurance proceeds a n d l i m i t e d t o i t s p r o - r a t a s h a r e a p p l y i n g t h e doctrine of limited liability. 13. New India: because Aboitiz was found to be negligent, the doctrine of real and hypothecary nature of maritimelaw cannot be applied thus Aboitiz must pay the total value of the cargo. ISSUE: Whether the limited liability doctrine, which limits respondents award of damages to its pro-rata share in the insuranceproceeds, applies in this case HELD: Aboitiz failed to overcome the presumption of negligence thus the doctrine of limited liability cannot be applied R A T I O a.Exception to the limited liability doctrine: when the shipowner is concurrently negligent with the captain and crew = liability: full extent of damage b. From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary diligence over the goods they transport according to all the circumstances of each case. c.GR: responsible for loss, destruction or deterioration of insured goods XPN: causes under Art. 1734, CC. (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act of omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority. d. (presumption of negligence) When the vessel is unseaworthy, the shipowners are found to be negligent becausethey failed to maintain the vessel. e. Facts established by the RTC and CA show that the weather was moderate during the voyage and that the vessel was unseaworth Manila Steamship vs. Insa Abdulhaman (1956) FACTS Respondent filed this case to recover damages for the death of his five children and loss of personal properties on board the M/L Consuelo V (maritime collision between said vessel and the M/S Bowline Knot) 7 to 8PM: M/L Consuelo V left Zamboanga bound for Siokon, towing a "kumpit" named Sta. Maria Bay. Weather was good and fair, with respondent and his family on board 9:30 to 10PM: rain Sudden and unforeseen collision with M/S Bowline Knot, M/L Consuelo V capsized: 9 passengers dead and cargo lost Board of Marine Inquiry: negligent commanding officer

o both vessels solidarily liable to plaintiff o Manila Steamship Co. pleads exemption from liability to plaintiff, claiming it exercised the diligence of a good father of a family in the selection of its employees (M/L ISSUE: WoN petitioner is exempt from liability HELD: NO. Both Manila Steamship (owner of Bowline Knot) and Respondent Lim Hong To (owner of M/L Consuelo V) are solidarily liable to Abdulhaman RATIO - Maritime tort - Under Article 827 of the Code of Commerce, in case of collision between two vessels imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages occasioned to their cargoes. The characteristic language of the law in making the vessels solidarily liable for the damages due to the maritime collision emphasizes the direct nature of the responsibilities on account of the collision incurred by the shipowner under maritime law , as distinguished from the civil law and mercantile law in general - it is a general principle, well established maritime law and custom, that shipowners and ship agents are civilly liable for the acts of the captain (Code of Commerce, Article 586 1) and for the indemnities due the third persons (Article 587); so that injured parties may immediately look for reimbursement to the owner of the ship, it being universally recognized that the ship master or captain is primarily the representative of the owner Manila Steamship - To exempt the plaintiff because of the due diligence of a bonus paterfamilias would allow shipowners to escape liability in practically every case o qualifications and licensing of ship masters and officers determined by the State Lim Hong To o that by operating with an unlicensed master, Lim Hong To deliberately increased the risk to which the passengers and shippers of cargo aboard the Consuelo V would be subjected. In his desire to reap greater benefits in the maritime trade, Lim Hong To willfully augmented the dangers and hazards to his vessels unwarry passengers c. Development of Insurance in the Philippines Sources of Insurance Law in the Philippines o Code of Commerce and Old Civil Code- Spanish period o Act No. 2427, Insurance Act, 1915, American Regime (repealing all insurance provisions in the Code of Commerce) o R.A. No. 386, Civil Code, L950, repealing all insurance provisions in the Old Civil Code o Some Civil Code provisions on life annuities, donations, damages, subrogation, guarantees and sureties, restitution, other frauds, etc, and alPprovisions regarding contracts rvhich apply subsidiarily (furtl-rer discussion on applicable sections) o Special laws (GSIS, SSS, PDIC, etc. Note: The Insurance Code governs primarily but for matters in question where the Code is silent, the contract provisions of the Civil Code and other