Shipyard told to pay P50M for vessel’s loss

THE Supreme Court (SC) has ordered the biggest shipyard in the Visayas to pay an insurance firm P50 million for the loss of Superferry 3 in 2000.

The SC en banc modified the decision of its Third Division and ordered Keppel Cebu Shipyard Inc. (KCSI) to pay Pioneer Insurance and Surety Corp., the insurer of Superferry 3.

The High Court directed KCSI to pay Pioneer P50 million plus six percent interest per year, beginning at the time the case was filed until the SC decision became final and executory.

“Both WG&A (Jebsens Ship Management Inc.) and KCSI were equally negligent for the loss of Superferry 3,” the resolution dated Sept. 18 and penned by Associate Justice Jose Catral Mendoza for the SC en banc read.

The decision came after the SC en banc granted the petition of KCSI to reopen the proceedings involving claims made by Pioneer.

Salvage value

KCSI lodged the petition after the SC Third Division ordered KCSI to pay Pioneer Insurance P329.747 million, representing the salvage value recovered by the insurance firm from Superferry 3.

On Jan. 26, 2000, KCSI and WG&A Jebsens Ship Management Inc. entered into a ship repair agreement for the renovation and reconstruction of Superferry 3.

Before the agreement was signed, Superferry 3 was insured by WG&A with Pioneer for US$8,472,581.78.

A fire gutted the Superferry 3 while it was drydocked at the KCSI’s shipyard in 2000.

Claim

After the incident, WG&A declared a “total constructive loss” and filed an insurance claim.

Pioneer paid WG&A P360 million “in full satisfaction, compromise and discharge of all claims for loss and expenses sustained to the vessel.”

Armed with the subrogation receipt, or proof that it had paid the insurance to WG&A, Pioneer tried to collect from KCSI about US$8.47 million, but KCSI allegedly denied any responsibility for the loss.

Pioneer argued that KCSI was solely responsible for the loss of Superferry since the vessel was in the shipyard’s premises.

But Keppel denied Pioneer’s claim and argued the insurance firm had no standing to file the request for arbitration.

2009 ruling

The SC Third Division, in its Sept. 25, 2009 decision, ordered Keppel to pay Pioneer P329,747,351.91 plus six percent interest per year from the time the request for arbitration was filed.

In granting Pioneer’s petition, the SC Third Division found that KCSI was solely liable for the loss of Superferry 3 and that WG&A declared the vessel as constructive total loss.

In the en banc ruling, the high tribunal ruled, though, that WG&A and KCSI were equally negligent for the vessel’s loss.

WG&A’s negligence was in allowing the welders of KCSI to wield steel plates outside the agreed area, which is the restaurant of the vessel’s promenade deck.

Sparks

Had the shipping firm followed the rule, the sparks or the hot molten slags produced by the welding of the steel plates would not have reached the flammable lifejackets stored at the deck below.

KCSI, the High Court said, also failed to secure a hot work permit.

The SC en banc also refused to rule on Pioneer’s liability to WG&A since the shipping firm is not a party to the case.

“Due process dictates that these should be threshed out in a separate action,” the SC held.