G.R. No. 154514, 28 July 2005, 464 SCRA 448

FACTS:

White Gold, petitioner, procured a protection and indemnity for its vessel from the Steamship Mutual Underwriting Association through Pioneer Insurance and Security Corporation. Subsequently, White Gold was issued a Certificate of Entry and Acceptance. When petitioner failed to fully pay its account, Steamship Mutual refused to renew the coverage.
Steamship thereafter filed a case of collection of sum of money for the unpaid balance of the petitioner while the latter filed before the Insurance Commissioner a case against Steamship for violating 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 Commissioner dismissed the complaint and said that there is no need for the Steamship Mutual to procure license because it was not engage in insurance business and was only a protection and indemnity club. Likewise, it ruled that Pioneer need not secure another license as an insurance agent and/or a broker of Steamship Mutual because it was not engaged in insurance business and Pioneer already had a license hence procurement of separate license as an insurance agent would only be superfluous. CA affirmed the decision of Insurance Commissioner.

ISSUE:

Whether or not Steamship Mutual, a P & I Club, is engaged in the insurance business in the Philippines (2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?

RULING:

For the first issue, the court answered positively.
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 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. In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure. Section 99[16] 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.[17] Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely, protection and indemnity, war risks, and defense costs.[18]
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.[19] 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[20] 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.
For the second issue, the court ruled that 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. . .

*Case digest by Em Epsan M. Batoon, LLB-IV, Andres Bonifacio Law School, SY 2018-2019