TOPIC: Concepts Defined (Contract of Insurance)
MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES DEPARTMENT vs. COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC. and the CHARTER INSURANCE CORPORATION
G.R. No. 124050 June 19, 1997
Hongkong contracted with Mayer to manufacture and supply various steel pipes and fittings.Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice.
Prior to the shipping, petitioner Mayer the same against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). The pipes and fittings covered by Invoice Nos. MSPC-1014, 1015 and 1025 with a total amount of US$212,772.09 were insured with respondent South Sea, while those covered by Invoice Nos. 1020, 1017 and 1022 with a total amount of US$149,470.00 were insured with respondent Charter.
Petitioners, jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine whether the pipes and fittings are manufactured in accordance with the specifications in the contract. International certified that all are in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged.
A claim against private respondents for indemnity under the insurance contract was filed. Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75. Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of repair of the damaged pipes. Private respondents refused to pay because the insurance surveyor's report allegedly showed that the damage is a factory defect.
On April 17, 1986, petitioners filed an action against private respondents to recover the sum of HK$299,345.30.
Private respondents averred that they have no obligation to pay the amount claimed by petitioners...