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Malayan Insurance Corp vs CA G.R. 119599 March 20, 1997
J. Romero
Facts:
TKC Marketing imported 3,000 metric tons of soya from Brazil to Manila. It was insured by
Malayan at the value of almost 20 million pesos. The vessel, however, was stranded on South
Africa because of a lawsuit regarding the possession of the soya. TKC consulted Malayan on
recovery of the amount, but the latter claimed that it wasn’t covered by the policy. The soya was
sold in Africa for Php 10 million, but TKC wanted Malayan to shoulder the remaining value of
10 million as well.
Petitioner filed suit due to Malayan’s reticence to pay. Malayan claimed that arrest by civil
authorities wasn’t covered by the policy. The trial court ruled in TKC’s favor with damages to
boot. The appellate court affirmed the decision under the reason that clause 12 of the policy
regarding an excepted risk due to arrest by civil authorities was deleted by Section 1.1 of the
Institute War Clauses which covered ordinary arrests by civil authorities. Failure of the cargo to
arrive was also covered by the Theft, Pilferage, and Non-delivery Clause of the contract. Hence
this petition.
Issues:
1. WON the arrest of the vessel was a risk covered under the subject insurance policies.
2. WON the insurance policies must strictly construed against the insurer.
Held: Yes. Yes. Petition dismissed.
Ratio:
1. Section 12 or the "Free from Capture & Seizure Clause" states: "Warranted free of capture,
seizure, arrest, restraint or detainment, and the consequences thereof or of any attempt thereat…
Should Clause 12 be deleted, the relevant current institute war clauses shall be deemed to form
part of this insurance.”
This was really replaced by the subsection 1.1 of section 1 of Institute War Clauses (Cargo)
which included “the risks excluded from the standard form of English Marine Policy by the
clause warranted free of capture, seizure, arrest, restraint or detainment, and the consequences
thereof of hostilities or warlike operations, whether there be a declaration of war or not.”
The petitioner’s claim that the Institute War Clauses can be operative in case of hostilities or
warlike operations on account of its heading "Institute War Clauses" is not tenable. It reiterated
the CA’s stand that “its interpretation in recent years to include seizure or detention by civil
authorities seems consistent with the general purposes of the clause.” This interpretation was
regardless of the fact whether the arrest was in war or by civil authorities.
The petitioner was said to have confused the Institute War clauses and the F.C.S. in English law.
“It stated that "the F.C. & S. Clause was "originally incorporated in insurance policies to
eliminate the risks of warlike operations". It also averred that the F.C. & S. Clause applies even if
there be no war or warlike operations. In the same vein, it contended that subsection 1.1 of
Section 1 of the Institute War Clauses (Cargo) "pertained exclusively to warlike operations" and
yet it also stated that "the deletion of the F.C. & S. Clause and the consequent incorporation of
subsection 1.1 of Section 1 of the Institute War Clauses (Cargo) was to include "arrest, etc. even
if it were not a result of hostilities or warlike operations."
The court found that the insurance agency tried to interpret executive and political acts as those
not including ordinary arrests in the exceptions of the FCS clause , and claims that the War
Clauses now included executive and political acts without including ordinary arrests in the new
stipulation.
“A strained interpretation which is unnatural and forced, as to lead to an absurd conclusion or to
render the policy nonsensical, should, by all means, be avoided.”
2. Indemnity and liability insurance policies are construed in accordance with the general rule of
resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared
by the insurer. A contract of insurance, being a contract of adhesion, means that any ambiguity
should be resolved against the insurer.
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J. Romero
Facts:
TKC Marketing imported 3,000 metric tons of soya from Brazil to Manila. It was insured by
Malayan at the value of almost 20 million pesos. The vessel, however, was stranded on South
Africa because of a lawsuit regarding the possession of the soya. TKC consulted Malayan on
recovery of the amount, but the latter claimed that it wasn’t covered by the policy. The soya was
sold in Africa for Php 10 million, but TKC wanted Malayan to shoulder the remaining value of
10 million as well.
Petitioner filed suit due to Malayan’s reticence to pay. Malayan claimed that arrest by civil
authorities wasn’t covered by the policy. The trial court ruled in TKC’s favor with damages to
boot. The appellate court affirmed the decision under the reason that clause 12 of the policy
regarding an excepted risk due to arrest by civil authorities was deleted by Section 1.1 of the
Institute War Clauses which covered ordinary arrests by civil authorities. Failure of the cargo to
arrive was also covered by the Theft, Pilferage, and Non-delivery Clause of the contract. Hence
this petition.
Issues:
1. WON the arrest of the vessel was a risk covered under the subject insurance policies.
2. WON the insurance policies must strictly construed against the insurer.
Held: Yes. Yes. Petition dismissed.
Ratio:
1. Section 12 or the "Free from Capture & Seizure Clause" states: "Warranted free of capture,
seizure, arrest, restraint or detainment, and the consequences thereof or of any attempt thereat…
Should Clause 12 be deleted, the relevant current institute war clauses shall be deemed to form
part of this insurance.”
This was really replaced by the subsection 1.1 of section 1 of Institute War Clauses (Cargo)
which included “the risks excluded from the standard form of English Marine Policy by the
clause warranted free of capture, seizure, arrest, restraint or detainment, and the consequences
thereof of hostilities or warlike operations, whether there be a declaration of war or not.”
The petitioner’s claim that the Institute War Clauses can be operative in case of hostilities or
warlike operations on account of its heading "Institute War Clauses" is not tenable. It reiterated
the CA’s stand that “its interpretation in recent years to include seizure or detention by civil
authorities seems consistent with the general purposes of the clause.” This interpretation was
regardless of the fact whether the arrest was in war or by civil authorities.
The petitioner was said to have confused the Institute War clauses and the F.C.S. in English law.
“It stated that "the F.C. & S. Clause was "originally incorporated in insurance policies to
eliminate the risks of warlike operations". It also averred that the F.C. & S. Clause applies even if
there be no war or warlike operations. In the same vein, it contended that subsection 1.1 of
Section 1 of the Institute War Clauses (Cargo) "pertained exclusively to warlike operations" and
yet it also stated that "the deletion of the F.C. & S. Clause and the consequent incorporation of
subsection 1.1 of Section 1 of the Institute War Clauses (Cargo) was to include "arrest, etc. even
if it were not a result of hostilities or warlike operations."
The court found that the insurance agency tried to interpret executive and political acts as those
not including ordinary arrests in the exceptions of the FCS clause , and claims that the War
Clauses now included executive and political acts without including ordinary arrests in the new
stipulation.
“A strained interpretation which is unnatural and forced, as to lead to an absurd conclusion or to
render the policy nonsensical, should, by all means, be avoided.”
2. Indemnity and liability insurance policies are construed in accordance with the general rule of
resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared
by the insurer. A contract of insurance, being a contract of adhesion, means that any ambiguity
should be resolved against the insurer.
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