1 G.R. No. 154514.
July 28, 2005
WHITE GOLD MARINE SERVICES, INC., Petitioners,
vs.
PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING
ASSOCIATION (BERMUDA) LTD., Respondents.
QUISUMBING, J.:
Facts:
White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its vessels from The
Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and
Surety Corporation (Pioneer). Subsequently, White Gold was issued a Certificate of Entry and Acceptance. Pioneer also
issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its accounts, Steamship Mutual
refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latter’s unpaid
balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual
violated Sections 186 and 187 of the Insurance Code, while Pioneer violated Sections 299, 300 and 301 in relation to
Sections 302 and 303, thereof.
The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license
because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and Indemnity
Club (P & I Club). Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for Steamship
Mutual because Steamship Mutual was not engaged in the insurance business and Pioneer was already licensed therefore
it did not need a separate license as agent/broker of Steamship Mutual.
The Court of Appeals affirmed the decision of the Insurance Commissioner. The appellate court held that Pioneer merely
acted as a collection agent of Steamship Mutual. Hence this petition.
Issues:
(1) Whether or not Steamship Mutual, a P & I Club, is engaged in the insurance business in the Philippines.
(2) Whether or not Pioneer need a license as an insurance agent/broker for Steamship Mutual.
Ruling:
P & I Club is "an association composed of shipowners in general who band together for the specific purpose of providing
insurance cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of third parties"
(Hyopsung Maritime Co., Ltd. v. Court of Appeals). It stresses that as a P & I Club, Steamship Mutual’s primary purpose is
to solicit and provide protection and indemnity coverage and for this purpose, it has engaged the services of Pioneer to act
as its agent.
Respondents contend that although Steamship Mutual is a P & I Club, it is not engaged in the insurance business in the
Philippines. It is merely an association of vessel owners who have come together to provide mutual protection against
liabilities incidental to shipowning.
Section 2(2) of the Insurance Code enumerates what constitutes "doing an insurance business" or "transacting an
insurance business". These are:
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any
other legitimate business or activity of the surety;
(c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an
insurance business within the meaning of this Code;
(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade
the provisions of this Code.
The same provision also provides, the fact that no profit is derived from the making of insurance contracts, agreements or
transactions, or that no separate or direct consideration is received therefor, shall not preclude the existence of an insurance
business.
The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act
required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or
circumstances under which the performance becomes requisite.
An insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or contingent event.
In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses
incident to a marine adventure.
Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the insurer and
insured. In it, the members all contribute, by a system of premiums or assessments, to the creation of a fund from which
all losses and liabilities are paid, and where the profits are divided among themselves, in proportion to their
interest. Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely, protection and
indemnity, war risks, and defense costs.
A P & I Club is "a form of insurance against third party liability, where the third party is anyone other than the P & I Club
and the members." By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged
in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of
authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit
insurance and to collect payments in its behalf. Thus, to continue doing business here, Steamship Mutual or through its
agent Pioneer, must secure a license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance
company is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance
Commission.
Pioneer on the other hand is the resident agent of Steamship Mutual as evidenced by the certificate of
registration issued by the Insurance Commission. It has been licensed to do or transact insurance business by virtue
of the certificate of authority issued by the same agency. However, a Certification from the Commission states that Pioneer
does not have a separate license to be an agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for
Steamship Mutual. Section 299 of the Insurance Code clearly states:
SEC. 299 . . .
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for
insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the
Commissioner, which must be renewed annually on the first day of January, or within six months thereafter. . .
The petition is PARTIALLY GRANTED. The Steamship Mutual Underwriting Association (Bermuda) Ltd., and Pioneer
Insurance and Surety Corporation are ORDERED to obtain licenses and to secure proper authorizations to do
business as insurer and insurance agent, respectively. The petitioner’s prayer for the revocation of Pioneer’s Certificate
of Authority and removal of its directors and officers, is DENIED.
