FIRST DIVISION

[G.R. No. 154514. July 28, 2005.]

WHITE GOLD MARINE SERVICES, INC., petitioner, vs. PIONEER

INSURANCE AND SURETY CORPORATION AND THE
STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION
(BERMUDA) LTD., respondents.

Marlito I. Villanueva Law Office for petitioner.

Borja Medialdea Bello Guevarra & Gerodias for respondent.

DECISION

QUISUMBING, J : p

This petition for review assails the Decision 1 dated July 30, 2002 of the
Court of Appeals in CA.-G.R. SP No. 60144, affirming the Decision 2 dated May
3, 2000 of the Insurance Commission in I.C. Adm. Case No. RD-277. Both
decisions held that there was no violation of the Insurance Code and the
respondents do not need license as insurer and insurance agent/broker.
The facts are undisputed.

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. 3 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 4 and 187 5 of the Insurance Code,
while Pioneer violated Sections 299, 6 300 7 and 301 8 in relation to Sections
302 and 303, thereof. STaCIA

The Insurance Commission dismissed the complaint. It said that there was
no need for Steamship Mutual to secure a license because it was not engaged
in the insurance business. It explained that Steamship Mutual was a Protection
and Indemnity Club (P & I Club). Likewise, 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, hence, a separate license solely as agent/broker
of Steamship Mutual was already superfluous.
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 The Court of Appeals affirmed the decision of the Insurance
Commissioner. In its decision, the appellate court distinguished between P & I
Clubs vis-à-vis conventional insurance. The appellate court also held that
Pioneer merely acted as a collection agent of Steamship Mutual.

In this petition, petitioner assigns the following errors allegedly committed

by the appellate court,
FIRST ASSIGNMENT OF ERROR

THE COURT A QUO ERRED WHEN IT RULED THAT RESPONDENT

STEAMSHIP IS NOT DOING BUSINESS IN THE PHILIPPINES ON THE
GROUND THAT IT COURSED . . . ITS TRANSACTIONS THROUGH ITS
AGENT AND/OR BROKER HENCE AS AN INSURER IT NEED NOT SECURE
A LICENSE TO ENGAGE IN INSURANCE BUSINESS IN THE PHILIPPINES.

SECOND ASSIGNMENT OF ERROR

THE COURT A QUO ERRED WHEN IT RULED THAT THE RECORD IS

BEREFT OF ANY EVIDENCE THAT RESPONDENT STEAMSHIP IS
ENGAGED IN INSURANCE BUSINESS.

THIRD ASSIGNMENT OF ERROR

THE COURT A QUO ERRED WHEN IT RULED, THAT RESPONDENT

PIONEER NEED NOT SECURE A LICENSE WHEN CONDUCTING ITS
AFFAIR AS AN AGENT/BROKER OF RESPONDENT STEAMSHIP.

FOURTH ASSIGNMENT OF ERROR

THE COURT A QUO ERRED IN NOT REVOKING THE LICENSE OF

RESPONDENT PIONEER AND [IN NOT REMOVING] THE OFFICERS AND
DIRECTORS OF RESPONDENT PIONEER. 9

Simply, the basic issues before us are (1) Is Steamship Mutual, a P & I
Club, engaged in the insurance business in the Philippines? (2) Does Pioneer
need a license as an insurance agent/broker for Steamship Mutual?
The parties admit that Steamship Mutual is a P & I Club. Steamship Mutual
admits it does not have a license to do business in the Philippines although
Pioneer is its resident agent. This relationship is reflected in the certifications
issued by the Insurance Commission. ECcTaS

Petitioner insists that Steamship Mutual as a P & I Club is engaged in the

insurance business. To buttress its assertion, it cites the definition of a P & I
Club in Hyopsung Maritime Co., Ltd. v. Court of Appeals 10 as "an association
composed of shipowners in general who band together for the specific purpose
of providing insurance cover on a mutual basis against liabilities incidental to
shipowning that the members incur in favor of third parties." It stresses that as
a P & I Club, Steamship Mutual's primary purpose is to solicit and provide
protection and indemnity coverage and for this purpose, it has engaged the
services of Pioneer to act as its agent.
Respondents contend that although Steamship Mutual is a P & I Club, it is
not engaged in the insurance business in the Philippines. It is merely an
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 association of vessel owners who have come together to provide mutual
protection against liabilities incidental to shipowning. 11 Respondents aver
Hyopsung is inapplicable in this case because the issue in Hyopsung was the
jurisdiction of the court over Hyopsung.

Is Steamship Mutual engaged in the insurance business?

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.

xxx xxx xxx

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. 12
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. 13
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. 14

In particular, a marine insurance undertakes to indemnify the assured

against marine losses, such as the losses incident to a marine adventure. 15
Section 99 16 of the Insurance Code enumerates the coverage of marine
insurance. HEacDA

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
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 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. AEaSTC

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. 21

Does Pioneer, as agent/broker of Steamship Mutual, need a special

license?

Pioneer is the resident agent of Steamship Mutual as evidenced by the

certificate of registration 22 issued by the Insurance Commission. It has been
licensed to do or transact insurance business by virtue of the certificate of
authority 23 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. 24

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. . .

Finally, White Gold seeks revocation of Pioneer's certificate of authority

and removal of its directors and officers. Regrettably, we are not the forum for
these issues.

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated July

30, 2002 of the Court of Appeals affirming the Decision dated May 3, 2000 of
the Insurance Commission is hereby REVERSED AND SET ASIDE. The Steamship
Mutual Underwriting Association (Bermuda) Ltd., and Pioneer Insurance and
Surety Corporation are ORDERED to obtain licenses and to secure proper
authorizations to do business as insurer and insurance agent, respectively. The
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 petitioner's prayer for the revocation of Pioneer's Certificate of Authority and
removal of its directors and officers, is DENIED. Costs against respondents.

SO ORDERED.

Davide, Jr., C.J., Ynares-Santiago, Carpio and Azcuna, JJ., concur.

Footnotes
1. Rollo , pp. 28-41. Penned by Associate Justice Delilah Vidallon-Magtolis, with
Associate Justices Candido V. Rivera, and Sergio L. Pestaño concurring.
2. CA Rollo , pp. 43-51.
3. Id. at 103.
4. SEC. 186. No person, partnership, or association of persons shall transact
any insurance business in the Philippines except as agent of a person or
corporation authorized to do the business of insurance in the Philippines,
unless possessed of the capital and assets required of an insurance
corporation doing the same kind of business in the Philippines and invested
in the same manner; nor unless the Commissioner shall have granted to him
or them a certificate to the effect that he or they have complied with all the
provisions of law which an insurance corporation doing business in the
Philippines is required to observe.

Every person, partnership, or association receiving any such certificate of

authority shall be subject to the insurance laws of the Philippines and to the
jurisdiction and supervision of the Commissioner in the same manner as if an
insurance corporation authorized by the laws of the Philippines to engage in
the business of insurance specified in the certificate.
5. SEC. 187. No Insurance Company shall transact any insurance business in
the Philippines until after it shall have obtained a certificate of authority for
that purpose from the Commissioner upon application therefor and payment
by the company concerned of the fees hereinafter prescribed.

xxx xxx xxx

6. 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 so to act from the Commissioner, . .
.
7. SEC. 300. Any person who for compensation solicits or obtains insurance on
behalf of any insurance company or transmits for a person other than himself
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 an application for a policy or contract of insurance to or from such company
or offers or assumes to act in the negotiating of such insurance shall be an
insurance agent within the intent of this section and shall thereby become
liable to all the duties, requirements, liabilities and penalties to which an
insurance agent is subject.
8. SEC. 301. Any person who for any compensation, commission or other thing
of value acts or aids in any manner in soliciting, negotiating or procuring the
making of any insurance contract or in placing risk or taking out insurance,
on behalf of an insured other than himself, shall be an insurance broker
within the intent of this Code, and shall thereby become liable to all the
duties, requirements, liabilities and penalties to which an insurance broker is
subject.
9. Rollo , pp. 144-145.
10. No. L-77369, 31 August 1988, 165 SCRA 258, 260.

11. Rollo , p. 176.

12. THE INSURANCE CODE OF THE PHILIPPINES, Section 2(2).
13. 43 AM JUR. 2d Insurance Sec. 4 (1982).
14. RUFUS B. RODRIGUEZ, THE INSURANCE CODE OF THE PHILIPPINES
ANNOTATED 4 (4th ed., 1999), citing BUIST M. ANDERSON, VANCE ON
INSURANCE 83 (3 rd ed., 1951).
15. EDUARDO F. HERNANDEZ AND ANTERO A. PEÑASALES, PHILIPPINE
ADMIRALTY AND MARITIME LAW 612 (1st ed., 1987).
16. SEC. 99. Marine insurance includes:
(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes,
merchandise, effects, disbursements, profits, moneys, securities, choses in
action, evidences of debt, valuable papers, bottomry, and respondentia
interests and all other kinds of property and interests therein, in respect to,
appertaining to or in connection with any and all risks or perils of navigation,
transit or transportation, or while being assembled, packed, crated, baled,
compressed or similarly prepared for shipment or while awaiting shipment, or
during any delays, storage, transshipment, or reshipment incident thereto,
including war risks, marine builder's risks, and all personal property floater
risks.
(b) Person or property in connection with or appertaining to a marine,
inland marine, transit or transportation insurance, including liability for loss
of or damage arising out of or in connection with the construction, repair,
operation, maintenance or use of the subject matter of such insurance (but
not including life insurance or surety bonds nor insurance against loss by
reason of bodily injury to any person arising out of the ownership,
maintenance, or use of automobiles).

(c) Precious stones, jewels, jewelry, precious metals, whether in course

of transportation or otherwise.
(d) Bridges, tunnels and other instrumentalities of transportation and
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 communication (excluding buildings, their furniture and furnishings, fixed
contents and supplies held in storage); piers, wharves, docks and slips, and
other aids to navigation and transportation, including dry docks and marine
railways, dams and appurtenant facilities for the control of waterways.
(2) "Marine protection and indemnity insurance," meaning insurance
against, or against legal liability of the insured for loss, damage, or expense
incident to ownership, operation, chartering, maintenance, use, repair, or
construction of any vessel, craft or instrumentality in use in ocean or inland
waterways, including liability of the insured for personal injury, illness or
death or for loss of or damage to the property of another person.

17. Supra, note 13 at Sec. 65.

18. HOWARD BENNETT, THE LAW OF MARINE INSURANCE 236 (1996).
19. Supra, note 15 at 733.
20. Supra, note 5.
21. Supra, note 12 at Sec. 187.
22. CA Rollo , p. 154.
23. Id. at 153.
24. Id, at 112. Certification issued by the Insurance Commission which certified
that Pioneer is not a registered broker for any foreign corporation.

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