WHITE GOLD MARINE SERVICES, INC. vs. PIONEER INSURANCE AND SURETY CORPORATION

QUISUMBING, J.:

Facts:

ê  White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual Underwriting Association Limited through Pioneer.

ê  White Gold was issued a Certificate of Entry and Acceptance.

ê  Pioneer also issued receipts evidencing payments for the coverage.

ê  When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.

ê  Steamship Mutual filed a case against White Gold to recover the unpaid balance while White Gold filed a complaint with the Insurance Commission alleging that Steamship violated Sections 186 and 187 of the Insurance Code, while Pioneer violated Sections' 299, 300and 301 in relation to Sections 302 and 303.

ê  The Insurance Commission dismissed the complaint on the grounds that Steamship was not engaged in the insurance business and hence did not need a license.  It found Steamship Mutual to be a Protection and Indemnity Club and found Pioneer to be an agent/broker for Steamship Mutual à Pioneer has a license.

ê  CA affirmed holding that Pioneer merely acted as a collection agent of Steamship mutual.

Issues:

(1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?  YES

(2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual? YES

Held/Ratio:

The records reveal Steamship Mutual is doing business 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.

ê  Court cited SEC 2(2) of the insurance code and enumerated what constitutes doing an insurance business.

(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.

ê  Court noted how lack of profit does not preclude existence of insurance business

ê  TEST WON INSURANCE OR NOT à 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.

ê  Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business.

o    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

o    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.

o    Since a contract of insurance involves public interest, regulation by the State is necessary. à needs a license!

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:

ê  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.

ê  Pioneer is the resident agent of Steamship Mutual it is licensed to do or transact insurance business by virtue of the certificate of authority issued by the Insurance Commission. However Pioneer does not have a separate license to be an agent/broker of Steamship Mutual.




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