G.R. NO. 154514 – 464 SCRA 448 – Mercantile Law – Law on Insurance – Protection and Indemnity Club – Mutual Insurance Company – Certificate of Authority
White Gold Marine Services, Inc. owns several shipping vessels. Steamship Mutual Underwriting Association, Ltd. (based in Bermuda) is a protection and indemnity club which is 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 against third parties. White Gold, through Pioneer Insurance (agent of Steamship Mutual here), procured a protection and indemnity coverage from Steamship Mutual. Steamship Mutual does not have authority from the Insurance Commission to conduct insurance business in the Philippines but its collection agent here (Pioneer Insurance) has been licensed to conduct insurance business.
Later, Steamship Mutual filed a case for collection of sum of money against White Gold due to the latter’s failure to pay its balance with the former. White Gold averred that Steamship Mutual has no license [hence it cannot collect]. Nor can it collect through Pioneer Insurance because, though Pioneer Insurance is licensed as an insurance company, it is not licensed to be an insurance broker/agent. Steamship Mutual insisted it is not conducting insurance business here and is merely a protection and indemnity club. The Insurance Commission as well as the Court of Appeals ruled against White Gold.
ISSUE: Whether or not Steamship Mutual needs a license to operate in the Philippines.
HELD: Yes. 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. If it is a contract of indemnity, it must be a contract of insurance. In fact, a protection and indemnity club is a form of insurance where the members are both the insurers and the insured. It is a mutual insurance company. The club indemnifies the member for whatever risks it may incur against a third party where the third party is other than the club and the members. Hence, Steamship Mutual needs to procure a license from the Insurance Commission in order to continue operating here.
Pioneer Insurance also needs to secure another license as an insurance broker/agent of Steamship Mutual pursuant to Section 299 of the Insurance Code.