White Gold Marine Services Vs Pioneer Insurance

White Gold Marine Services vs Pioneer Insurance
July 28, 2005
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.
DECISIONS OF THE LOWER COURTS:
(1) Insurance Commissioner: Dismissed the complaint.
There was no violation of the Insurance Code and the respondents do not need license as insurer and
insurance agent/broker because it was not engaged in the insurance business. It explained that
Steamship Mutual was a mere Protection and Indemnity Club (P & I Club). Moreover, Pioneer was
already licensed. Hence, a separate license solely as agent/broker of Steamship Mutual was already
superfluous.
(2) CA: Affirmed the decision of the Insurance Commissioner.
ISSUES:
1. WON Steamship Mutual, a P & I Club, is engaged in the insurance business in the Philippines
2. WON Pioneer needs a license as an insurance agent/broker for Steamship Mutual
HELD
1. Yes. Steamship Mutual is engaged in the insurance business in the Philippines.
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 that 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.
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. 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.
2. Yes. 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. . .

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White Gold Marine Services vs Pioneer Insurance

July 28, 2005

DECISIONS OF THE LOWER COURTS:

(1) Insurance Commissioner: Dismissed the complaint.

(2) CA: Affirmed the decision of the Insurance Commissioner.

1. Yes. Steamship Mutual is engaged in the insurance business in the Philippines.

(a) making or proposing to make, as insurer, any insurance contract;

No person shall act as an insurance agent or as an insurance broker in the solicitation or

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