WHITE GOLD MARINE SERVICES, INC. VS.
PIONEER INSURANCE AND SURETY CORPORATION
464 SCRA 448 (G.R. NO. 154514)
JULY 28, 2005
Petitioner: White Gold Marine Services, Inc.
Respondent: Pioneer Insurance and Surety Corporation and the
Steamship Mutual Underwriting Association (Bermuda) Ltd.
White 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). White Gold was then issued a Certificate of Entry and Acceptance. And Pioneer issued receipts evidencing White Gold’s payment for the coverage. Upon White Gold’s failure 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 latters unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Section 186 (requirements before doing an insurance business) and 187 (requirements in securing a certificate of authority) of the Insurance Code, while Pioneer violated Section 299, 300, 301 in relation to Section 302 and 303 thereof (provision in agents and brokers of insurance.
The Insurance Commission dismissed the complaint. The Commission said that Steamship Mutual do not need to secure a license because it was a Protection and Indemnity Club (P & I Club) not engage in Insurance business. Likewise, Pioneer do not need to secure another license as insurance agent and/or broker for Steamship Mutual because the latter is not engage in insurance business. In addition, Pioneer was already license, hence, a separate license as agent/broker of Steamship Mutual was already superfluous.
The Court of Appeals affirmed the decision of the Insurance Commission. The appellate court distinguished between a P & I Club and conventional insurance. The appellate court likewise held that Pioneer merely acted as a collection agent for Steamship Mutual. Hence this petition.
1) Whether a P & I Club like Steamship Mutual is engaged in the insurance business.
2) Whether Pioneer needs a license to act as insurance agent/broker for Steamship Mutual.
On the first issue the Court held yes. 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. It is not by what it is called.
Basically, 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. Section 99 of the Insurance Code enumerates the coverage of marine insurance.
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. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. 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.
On the second issue the court held yes. Pioneer 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.