Tuesday, February 21, 2012

White Gold Marine Service Inc. vs. Pioneer Insurance and Surety Co.

Facts: Petitioner White Gold bought a protection and indemnity coverage for its ships from Steamship Mutual through Respondent Pioneer. Certificates and receipts thus were given. However, Petitioner failed to fulfill its payments thus Steamship refused to renew its coverage. Steamship then filed for collection against Petitioner for recovery of unpaid balance. Thereafter, Petitioner also filed a complaint against Steamship and Respondent before the Insurance Commission for violations (186,187 for Steamship and 299,300,301 in relation to 302 and 303 for Respondent) of the Insurance Code-license requirements as an Insurance company for the former and as insurance agent for the latter. Said commission dismissed the complaint which decision was affirmed by the CA. 

Issue: Whether or not Steamship Mutual is a Protection and Indemnity Club engaged in the insurance business in the Philippines 

Held: Steamship Mutual as a P & I Club is a mutual insurance company engaged in the marine insurance business. 

An insurance contract is a contract of indemnity. This means that one party undertakes for a consideration to indemnify another party against loss, damage, or liability arising from an unknown or contingent event. While to determine if a contract is an insurance contract we can look at the nature of the promise, the act to be performed, exact nature of the agreement in view of the entire occurrence, contingency or circumstance where the performance is mandated. The label is not controlling. While under Section 2(2) of the Insurance Code the phrase “doing an insurance business” constitutes the following: 1) making or proposing to make, as insurer, any insurance contract; 2) 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; 3) 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; 4) doing or proposing to do any business in substance to any of the foregoing in a manner designed to evade the provision of this code. 

Taking all of these in to consideration, Steamship Mutual engaged in marine insurance business undertook to indemnify Petitioner White Gold against marine losses as enumerated under sec. 99 of the Insurance Code. It is immaterial whether profit is derived from making insurance contract and that no separate or direct consideration is received since these does not preclude the existence of an insurance business. 


*Mutual Insurance company- cooperative enterprise where the members are both the insurer and insured. 

*Protection and Indemnity Club- a form of insurance against third party liability where the third party is anyone other than the P & I Club and its members.

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