MAYER STEEL PIPE CORP. v. CA274 SCRA 432, June 19, 1997FACTS: Petitioner Hongkong Government Supplies Department(Hongkong) contracted petitioner Mayer Steel Pipe Corporation(Mayer) to manufacture and supply various steel pipes and fittings.Prior to the shipping, petitioner Mayer insured the pipes and fittingsagainst all risks with private respondents South Sea Surety andInsurance Co., Inc. (South Sea) and Charter Insurance Corp.(Charter). A third-party inspector jointly hired by petitioners certifiedall the pipes and fittings to be in good order condition before theywere loaded in the vessel. Nonetheless, when the goods reachedHongkong, it was discovered that a substantial portion thereof wasdamaged.Petitioners Mayer and Hong Kong filed a claim against privaterespondents for indemnity under the insurance contract.Respondent Charter paid petitioner Hongkong the amount ofHK$64,904.75. Petitioners demanded payment of the balance ofHK$299,345.30 representing the cost of repair of the damagedpipes. Private respondents refused to pay because the insurancesurveyor’s report allegedly showed that the damage is a factorydefect.Petitioners filed an action against private respondents South Seaand Charter to recover the sum of HK$299,345.30.The trial court ruled in favor of petitioners. Private respondentselevated the case to respondent Court of Appeals. Respondentcourt affirmed the finding of the trial court that the damage is notdue to factory defect and that it was covered by the “all risks”insurance policies issued by private respondents to petitionerMayer. However, it set aside the decision of the trial court anddismissed the complaint on the groimd of prescription. It held that,the action is barred under Section 3(6) of the Carriage of Goods bySea Act since it was filed only on April 17, 1986, more than twoyears from the time the goods were unloaded from the vessel.HELD: Section 3(6) of the Carriage of Goods by Sea Act states thatthe carrier and the ship shall be discharged from all liability for lossor damage to the goods if no suit is filed within one year afterdelivery of the goods or the date when they should have beendelivered. Under this provision, only the carrier’s liability isextinguished if no suit is brought within one year. But the liability ofthe insurer is not extinguished because the insurer’s liability isbased not on the contract of carriage but on the contract ofinsurance. A close reading of the law reveals that COGSA governsthe relationship between the carrier on the one hand and theshipper, the consignee and/or the insurer on the other hand. Itdefines the obligations of the carrier under the contract of carriage.It does not, however, affect the relationship between the shipperand the insurer. The latter case is governed by the Insurance Code.