Pacific Timber v CA G.R. No. L-38613 February 25, 1982

J. De Castro

Facts:

The plaintiff secured temporary insurance from the defendant for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from Quezon Province to Okinawa and Tokyo, Japan.

Workmen’s Insurance issued a cover note insuring the cargo of the plaintiff subject to its terms and conditions.

The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033. Policy No. 53 H0 1033 was for 542 pieces of logs equivalent to 499,950 board feet. Policy No. 53 H0 1033 was for 853 pieces of logs equivalent to 695,548 board feet. The total cargo insured under the two marine policies consisted of 1,395 logs, or the equivalent of 1,195.498 bd. ft.

After the issuance of the cover note, but before the issuance of the two marine policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to be exported were lost during loading operations in the Diapitan Bay.

While the logs were alongside the vessel, bad weather developed resulting in 75 pieces of logs which were rafted together co break loose from each other. 45 pieces of logs were salvaged, but 30 pieces were verified to have been lost or washed away as a result of the accident.

Pacific Timber informed Workmen’s about the loss of 32 pieces of logs during loading of SS woodlock.

Although dated April 4, 1963, the letter was received in the office of the defendant only on April 15, 1963. The plaintiff claimed for insurance to the value of P19,286.79.

Woodmen’s requested an adjustment company to assess the damage. It submitted its report, where it found that the loss of 30 pieces of logs is not covered by Policies Nos. 53 HO 1032 and 1033 but within the 1,250,000 bd. ft. covered by Cover Note 1010 insured for $70,000.00.

The adjustment company submitted a computation of the defendant's probable liability on the loss sustained by the shipment, in the total amount of P11,042.04.

Woodmen’s wrote the plaintiff denying the latter's claim on the ground they defendant's investigation revealed that the entire shipment of logs covered by the two marine policies were received in good order at their point of destination. It was further stated that the said loss may be considered as covered under Cover Note No. 1010 because the said Note had become null and void by virtue of the issuance of Marine Policy Nos. 53 HO 1032 and 1033.

The denial of the claim by the defendant was brought by the plaintiff to the attention of the Insurance Commissioner. The Insurance Commissioner ruled in favor of indemnifying Pacific Timber. The company added that the cover note is null and void for lack of valuable consideration. The trial court ruled in petitioner’s favor while the CA dismissed the case. Hence this appeal.

Issues:

WON the cover note was null and void for lack of valuable consideration

WON the Insurance company was absolved from responsibility due to unreasonable delay in giving notice of loss.

Held: No. No. Judgment reversed.

Ratio:

1. The fact that no separate premium was paid on the Cover Note before the loss occurred does not militate against the validity of the contention even if no such premium was paid. All Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. Also, no separate premiums are required to be paid on a Cover Note.

The petitioner paid in full all the premiums, hence there was no account unpaid on the insurance coverage and the cover note. If the note is to be treated as a separate policy instead of integrating it to the regular policies, the purpose of the note would be meaningless. It is a contract, not a mere application for insurance.

It may be true that the marine insurance policies issued were for logs no longer including those which had been lost during loading operations. This had to be so because the risk insured against is for loss during transit, because the logs were safely placed aboard.

The non-payment of premium on the Cover Note is, therefore, no cause for the petitioner to lose what is due it as if there had been payment of premium, for non-payment by it was not chargeable against its fault. Had all the logs been lost during the loading operations, but after the issuance of the Cover Note, liability on the note would have already arisen even before payment of premium. Otherwise, the note would serve no practical purpose in the realm of commerce, and is supported by the doctrine that where a policy is delivered without requiring payment of the premium, the presumption is that a credit was intended and policy is valid.

2. The defense of delay can’t be sustained. The facts show that instead of invoking the ground of delay in objecting to petitioner's claim of recovery on the cover note, the insurer never had this in its mind. It has a duty to inquire when the loss took place, so that it could determine whether delay would be a valid ground of objection.

There was enough time for insurer to determine if petitioner was guilty of delay in communicating the loss to respondent company. It never did in the Insurance Commission. Waiver can be raised against it under Section 84 of the Insurance Act.