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Insurance Case Digest: White Gold Marine Services, Inc. v. Pioneer Insurance Surety Corp. (2005)

G.R.No. 154514  July 28, 2005
Lessons Applicable: Mutual Insurance Companies (Insurance)

FACTS: (White Gold > Pioneer > Steamship Mutual)

  • 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)
  • 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 filed a complaint before the Insurance Commission
      • Steamship Mutual violated Sections 186[4] and 187[5] of the Insurance Code
      • Pioneer  violated  Sections  299,[6] 300[7] and 301[8] in relation to Sections 302 and 303, thereof
  • Insurance Commission: dismissed the complaint
    • no need for Steamship Mutual to secure a license because it was a Protection and Indemnity Club (P & I Club) (NOT engaged in the insurance business)
    • 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
      • Moreover, Pioneer was already licensed
  • CA: affirmed Insurance Commission
1. W/N Steamship Mutual, a P & I Club, is engaged in the insurance business in the Philippines - YES.
2. W/N Pioneer as resident agent of Steamship Mutual is required to obtain a license as an insurance agent/broker - YES

HELD:  petition is PARTIALLY GRANTED. CA affirmed. the revocation of Pioneer’s Certificate of Authority and removal of its directors and officers, is DENIED

1. YES

Insurance Code
Sec. 2(2)
(2) The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code, shall include:

(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.

In the application of the provisions of this Code 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 be deemed conclusive to show that the making thereof does not constitute the doing or transacting 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
  • a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure
  • a mutual insurance company is a cooperative enterprise where the members are both the insurer and insured
    • 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
    • provide 3 types of coverage: 
      • protection and indemnity
      • war risks
      • defense costs
  • P & I Club
    • a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members
      • Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business
  • 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
2. YES.
  • Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship Mutual.  
Insurance Code
Sec. 299
Sec. 299. No insurance company doing business in the Philippines, nor any agent  thereof, shall pay any commission or other compensation to any person for services in obtaining insurance, unless such person shall have first procured from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as hereinafter provided.

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 to act from the Commissioner, which must be renewed annually on the first day of January, or within six months thereafter. Such license shall be issued by the Commissioner only upon the written application of the person desiring it, such application if for a license to act as insurance agent, being approved and countersigned by the company such person desires to represent, and shall be upon a form prescribed by the Commissioner giving such information as he may require, and upon payment of the corresponding fee hereinafter prescribed. The Commissioner shall satisfy himself as to competence and trustworthiness of the applicant and shall have the right to refuse to issue or renew and to suspend or revoke any such license in his discretion. No such license shall be valid after the thirtieth day of June of the year following its issuance unless it is renewed.