Maritime Liability in Vessel Collisions: Fault, Insurance Claims, and the Code of Commerce

When two vessels collide and cargo is lost, who pays? The answer depends on the legal basis of the claim. In Aleson Shipping Lines v. CGU International Ins. PLC, the Supreme Court clarified that the applicable law hinges on whether the injured party sues under a contract of carriage or under tort. This distinction determines the degree of diligence required and the presumption of negligence that applies.

The Facts of the Case

In 2002, Candano Shipping Lines time-chartered its vessel, M/V Romeo, to Apo Cement Corporation to deliver 31,250 bags of cement from Cebu to Albay. The cargo was insured with CGU International Insurance. On July 14, 2002, around midnight, M/V Romeo was leaving the pier in Apo channel when M/V Aleson Carrier 5, owned by Aleson Shipping, collided with it. The impact created a gaping hole in M/V Romeo's mid-section, causing it to sink within minutes, along with the cement worth over P3.4 million.

Apo Cement's insurer, CGU Insurance, paid the claim and then sued both shipping lines for damages. The trial court found Aleson Shipping solely liable. The Court of Appeals affirmed. Aleson Shipping appealed to the Supreme Court.

The Legal Issue

The central question was whether the lower courts erred in applying the Civil Code provisions on common carriers. Aleson Shipping argued that it had no contract of carriage with CGU Insurance or Apo Cement, so it could not be sued based on contract. The insurer's action against it, Aleson argued, was based on maritime tort, which is governed by the Code of Commerce—not by the Civil Code's rules on common carriers.

The Supreme Court's Ruling

The Supreme Court agreed with Aleson Shipping on the applicable law. The Court held that the cause of action against Aleson Shipping was not based on the time charter but on tort. Aleson Shipping was not a common carrier with respect to the parties. Therefore, the Civil Code provisions on common carriers—which impose a presumption of negligence and require extraordinary diligence—did not apply.

Instead, the Court applied Articles 826 and 827 of the Code of Commerce. Article 826 provides that if a vessel collides with another through the fault or negligence of the captain or crew, the owner of the vessel at fault shall indemnify the losses and damages. Article 827 states that if both vessels are at fault, each bears its own damages, but both are jointly responsible for losses suffered by their cargoes.

To be cleared of liability under these provisions, a vessel must show that it exercised ordinary diligence—the care an ordinary prudent person would exercise over their own property.

Applying the Standard

Even under this lower standard, the Court found Aleson Shipping liable. The testimony of its own captain, Captain Cabeltes, revealed several lapses. He admitted that M/V Romeo was still at the pier when M/V Aleson was about to enter the channel. Despite knowing this, he failed to act with caution. He relied on a radio message relayed by a crew member that the vessel could proceed, without verifying this with the port operator. He admitted that he had about 200 meters of space to maneuver and avoid the collision but chose not to, fearing the vessel would run aground. He also failed to sound the vessel's horn to warn M/V Romeo, contrary to navigation rules.

The Court noted that Captain Cabeltes's nonchalant attitude toward his duties demonstrated a lack of caution. As captain, he was required to take command when entering and leaving ports. Instead, he slept and waited for his crew to confirm whether they could proceed.

The Res Gestae Issue

Aleson Shipping also challenged the admission of testimonies from witnesses who did not personally witness the collision, arguing these were hearsay. The Court rejected this argument. The testimonies qualified as part of res gestae—statements made spontaneously during or immediately after a startling occurrence. The witnesses interviewed the crew and port personnel shortly after the collision, and their statements concerned the incident itself. Even disregarding these testimonies, the Court noted that the captain's own admissions were sufficient to establish liability.

Practical Takeaways

• The applicable law depends on the cause of action. If the claim is based on a contract of carriage (such as a bill of lading), the Civil Code provisions on common carriers apply, imposing a presumption of negligence. If the claim is based on tort, the Code of Commerce governs, requiring proof of fault.
• Ordinary diligence is the standard in maritime tort cases. A vessel owner can avoid liability by showing that the captain and crew exercised the care an ordinary prudent person would exercise over their own property.
• A captain's admissions can be decisive. Courts give great weight to the testimony of the vessel's own captain, especially when it reveals a failure to verify instructions, maneuver to avoid collision, or sound proper signals.
• Res gestae allows admission of spontaneous statements. Statements made immediately after a startling occurrence, relayed by witnesses to investigators, may be admitted even if the original declarant does not testify.
• Insurers step into the shoes of the insured. Through subrogation, an insurer that pays a claim can sue the party at fault, but only with the same rights and causes of action the insured would have had.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.