White Gold Marine Services Inc.

v Pioneer Insurance & Surety

Corporation (Insurance)

[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.

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.

DECISION OF 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 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 Insurance Commissioner.
ISSUES:
(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?

RULING:
(1) Yes. 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.
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.
It cites the definition of a P & I Club in Hyopsung Maritime Co.,
Ltd. v. Court of Appeals 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.”
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.
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.
(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.

Perez v CA G.R. No. 112329. January 28, 2000

Facts:

Primitivo B. Perez had been insured with the BF Lifeman

Insurance Corporation for P20,000.00. Sometime in October
1987, an agent of the insurance corporation, visited Perez in
Quezon and convinced him to apply for additional insurance
coverage of P50,000.00. Virginia A. Perez, Primitivo’s wife, paid
P2,075.00 to the agent. The receipt issued indicated the
amount received was a "deposit." Unfortunately, the agent lost
the application form accomplished by Perez and he asked the
latter to fill up another application form. The agent sent
the application for additional insurance of Perez to the Quezon
office. Such was supposed to forwarded to the Manila office.

Perez drowned. His application papers for the additional

insurance of P50,000.00 were still with the Quezon. It was only
after some time that the papers were brought to Manila.
Without knowing that Perez died, BF Lifeman Insurance
Corporation approved the application and issued the
corresponding policy for the P50,000.00.

Petitioner Virginia Perez went to Manila to claim

the benefits under the insurance policies of the deceased. She
was paid P40,000.00 under the first insurance policy for
P20,000.00 but the insurance company refused to pay the
claim under the additional policy coverage of P50,000.00, the
proceeds of which amount to P150,000.00.

The insurance company maintained that the insurance for

P50,000.00 had not been perfected at the time of the death of
Primitivo Perez. Consequently, the insurance company
refunded the amount paid.

BF Lifeman Insurance Corporation filed a complaint against

Virginia Perez seeking the rescission and declaration of nullity of
the insurance contract in question.

Petitioner Virginia A. Perez, on the other hand, averred that the

deceased had fulfilled all his prestations under the contract
and all the elements of a valid contract are present.

On October 25, 1991, the trial court rendered a decision in

favor of petitioner ordering respondent to pay 150,000 pesos.
The Court of Appeals, however, reversed the decision of the
trial court saying that the insurance contract for P50,000.00
could not have been perfected since at the time that the
policy was issued, Primitivo was already dead.

Petitioner’s motion for reconsideration having been denied by

respondent court, the instant petition for certiorari was filed on
the ground that there was a consummated contract of
insurance between the deceased and BF Lifeman Insurance
Corporation.

Issue:

WON the widow can receive the proceeds of the

2nd insurance policy

Held:

No. Petition dismissed.

Ratio:

Perez’s application was subject to the acceptance of private

respondent BF Lifeman Insurance Corporation. The perfection
of the contract of insurance between the deceased and
respondent corporation was further conditioned with the
following requisites stated in the application form:

"there shall be no contract of insurance unless and until a

policy is issued on this application and that the said policy shall
not take effect until the premium has been paid and the policy
delivered to and accepted by me/us in person while I/We,
am/are in good health."

BF Lifeman didn’t give its assent when it merely received

the application form and all the requisite supporting papers of
the applicant. This happens only when it gives a policy.
It is not disputed, however, that when Primitivo died on
November 25, 1987, his application papers for additional
insurance coverage were still with the branch office of
respondent corporation in Quezon. Consequently, there was
absolutely no way the acceptance of the application could
have been communicated to the applicant for the latter
to accept inasmuch as the applicant at the time was already
dead.

Petitioner insists that the condition imposed by BF that a policy

must have been delivered to and accepted by the proposed
insured in good health is potestative, being dependent upon
the will of the corporation and is therefore void. The court
didn’t agree. A potestative condition depends upon the
exclusive will of one of the parties and is considered void. The
Civil Code states: When the fulfillment of the condition
depends upon the sole will of the debtor,
the conditional obligation shall be void.

The following conditions were imposed by the respondent

company for the perfection of the contract of insurance: a
policy must have been issued, the premiums paid, and the
policy must have been delivered to and accepted by the
applicant while he is in good health.

The third condition isn’t potestative, because the health of the

applicant at the time of the delivery of the policy is beyond the
control or will of the insurance company. Rather, the condition
is a suspensive one whereby the acquisition of rights depends
upon the happening of an event which constitutes the
condition. In this case, the suspensive condition was the policy
must have been delivered and accepted by the applicant
while he is in good health. There was non-fulfillment of the
condition, because the applicant was already dead at the
time the policy was issued.
As stated above, a contract of insurance, like other contracts,
must be assented to by both parties either in person or by their
agents. So long as an application for insurance has not been
either accepted or rejected, it is merely an offer or proposal to
make a contract. The contract, to be binding from the date
of application, must have been a completed contract.

The insurance company wasn’t negligent because delay in

acting on the application does not constitute acceptance
even after payment. The corporation may not be penalized for
the delay in the processing of the application papers due to
the fact that process in a week wasn’t the usual timeframe in
fixing the application. Delay could not be deemed
unreasonable so as to constitute gross negligence.

G.R. No. 198174, September 2, 2013 (PERALTA, J.)

FACTS:

Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for

her Toyota Revo DLX DSL with Alpha Insurance and Surety Co
(Alpha). The contract of insurance obligates the petitioner to
pay the respondent the amount of P630,000 in case of loss or
damage to said vehicle during the period covered.

On April 16, 2007, respondent instructed her driver, Jose Joel

Salazar Lanuza to bring the vehicle to nearby auto-shop for a
tune up. However, Lanuza no longer returned the motor
vehicle and despite diligent efforts to locate the same, said
efforts proved futile. Resultantly, respondent promptly reported
the incident to the police and concomitantly notified petitioner
of the said loss and demanded payment of the insurance
proceeds.

Alpha, however, denied the demand of Castor claiming that

they are not liable since the culprit who stole the vehicle is
employed with Castor. Under the Exceptions to Section III of the
Policy, the Company shall not be liable for (4) any malicious
damage caused by the insured, any member of his family or by
“A PERSON IN THE INSURED’S SERVICE”.

Castor filed a Complaint for Sum of Money with Damages

against Alpha before the Regional Trial Court of Quezon City.
The trial court rendered its decision in favor of Castor which
decision is affirmed in toto by the Court of Appeals. Hence, this
Petition for Review on Certiorari.

ISSUE:

Whether or not the loss of respondent’s vehicle is excluded

under the insurance policy

HELD:

NO. The words “loss” and “damage” mean different things in

common ordinary usage. The word “loss” refers to the act or
fact of losing, or failure to keep possession, while the word
“damage” means deterioration or injury to property. Therefore,
petitioner cannot exclude the loss of Castor’s vehicle under the
insurance policy under paragraph 4 of “Exceptions to Section
III”, since the same refers only to “malicious damage”, or more
specifically, “injury” to the motor vehicle caused by a person
under the insured’s service. Paragraph 4 clearly does not
contemplate “loss of property”.

A contract of insurance is a contract of adhesion. So, when the

terms of the insurance contract contain limitations on liability,
courts should construe them in such a way as to preclude the
insurer from non-compliance with his obligation. Thus, in Eternal
Gardens Memorial Park Corporation vs. Philippine American
Life Insurance Company, this Court ruled that it must be
remembered that an insurance contract is a contract of
adhesion which must be construed liberally in favor of the
insured and strictly against the insurer in order to safeguard the
latter’s interest.
 Philippine Health Care v CIR G.R. No. 167330 September 18,
2009

J. Corona

Facts:

Philippine Health Care’s objectives were:

"[t]o establish, maintain, conduct and operate a prepaid

group practice health care delivery system or a health
maintenance organization to take care of the sick and
disabled persons enrolled in the health care plan and to
provide for the administrative, legal, and financial
responsibilities of the organization.”

It lost the case in 2004 when it was made to pay over 100
million in VAT deficiencies. At the time the MFR was filed, it was
able to avail of tax amnesty under RA 9840 by paying 5
percent of the tax or 5 million pesos.

Petitioner passed an MFR but the CA denied. Hence, this case.

Issue:

Was petitioner, as an HMO, engaged in the business of

insurance during the pertinent taxable years, and was thus
liable for DST?

Held:

No. Mfr granted. CIR must desist from collecting tax.

Ratio:
Section 185 of the NIRC . Stamp tax on fidelity bonds and other
insurance policies. – On all policies of insurance or bonds or
obligations of the nature of indemnity for loss, damage, or
liability made or renewed by any person, association or
company or corporation transacting the business of accident,
fidelity, employer’s liability, plate, glass, steam boiler, burglar,
elevator, automatic sprinkler, or other branch of insurance
(except life, marine, inland, and fire insurance).

Two requisites must concur before the DST can apply, namely:
(1) the document must be a policy of insurance or an
obligation in the nature of indemnity and (2) the maker should
be transacting the business of accident, fidelity, employer’s
liability, plate, glass, steam boiler, burglar,
elevator, automatic sprinkler, or other branch of insurance
(except life, marine, inland, and fire insurance).

Under RA 7875, an HMO is "an entity that provides, offers or

arranges for coverage of designated health services needed
by plan members for a fixed prepaid premium."

Various courts in the United States have determined that HMOs

are not in the insurance business. One test that they
have applied is whether the assumption of risk and
indemnification of loss are the principal object and purpose of
the organization or whether they are merely incidental to its
business. If these are the principal objectives, the business is
that of insurance. But if such is incidental and service is the
principal purpose, then the business is not insurance.

Applying the "principal object and purpose test," there is

significant American case law supporting the argument that a
corporation, whose main object is to provide the members of a
group with health services, is not engaged in the insurance
business.

For the purpose of determining what "doing an insurance

business" means, we have to scrutinize the operations of the
business as a whole. This is of course only prudent and
appropriate, taking into account laws applicable to those in
the insurance business.

Petitioner, as an HMO, is not part of the insurance industry. This

is evident from the fact that it is not supervised by the Insurance
Commission but by the Department of Health. In fact, in a letter
dated September 3, 2000, the Insurance Commissioner
confirmed that petitioner is not engaged in the insurance
business.

As to whether the business is covered by the DST, we can see

that while the contract did contains all the elements of an
insurance contract, as stated in Sec 2., Par 1 of the Insurance
Code, the primary purpose of the company is to render
service. The primary purpose of the parties in making the
contract may negate the existence of an insurance contract.

Also, there is no loss, damage or liability on the part of the

member that should be indemnified by petitioner as an HMO.
Under the agreement, the member pays petitioner a
predetermined consideration in exchange for the hospital,
medical and professional services rendered by the petitioner’s
physician or affiliated physician to him.

In other words, there is nothing in petitioner's agreements that

gives rise to a monetary liability on the part of the member to
any third party-provider of medical services which might in turn
necessitate indemnification from petitioner. The terms
"indemnify" or "indemnity" presume that a liability or claim has
already been incurred. There is no indemnity precisely because
the member merely avails of medical services to be paid or
already paid in advance at a pre-agreed price under
the agreements.

Also, a member can take advantage of the bulk of

the benefits anytime, e.g. laboratory services, x-ray, routine
annual physical examination and consultations, vaccine
administration as well as family planning counseling, even in
the absence of any peril, loss or damage on his or her part.

Petitioner is obliged to reimburse the member who receives

care from a non-participating physician or hospital. However,
this is only a very minor part of the list of services available. The
assumption of the expense by petitioner is not confined to the
happening of a contingency but includes incidents even in the
absence of illness or injury.

Consequently, there is a need to distinguish prepaid service

contracts (like those of petitioner) from the usual insurance
contracts.

However, assuming that petitioner’s commitment to provide

medical services to its members can be construed as an
acceptance of the risk that it will shell out more than the
prepaid fees, it still will not qualify as an insurance contract
because petitioner’s objective is to provide medical services at
reduced cost, not to distribute risk like an insurer.

If it had been the intent of the legislature to impose DST on

health care agreements, it could have done so in clear and
categorical terms. It had many opportunities to do so. But it did
not. The fact that the NIRC contained no specific provision on
the DST liability of health care agreements of HMOs at a time
they were already known as such, belies any legislative intent
to impose it on them. As a matter of fact, petitioner was
assessed its DST liability only on January 27, 2000, after more
than a decade in the business as an HMO.

In view of petitioner’s availment of the benefits of [RA 9840],

and without conceding the merits of this case as discussed
above, respondent concedes that such tax amnesty
extinguishes the tax liabilities of petitioner.

21 Our Insurance Code was based on California and New York

laws. When a statute has been adopted from some other state
or country and said statute has previously been construed by
the courts of such state or country, the statute is deemed to
have been adopted with the construction given.

G.R. No. 116940 Case Digest

G.R. No. 116940 June 11, 1997

The Phil. American Gen. Insurance Co., Inc.

vs Court of Appeals and Felman Shipping Lines

Ponente: Bellosillo

Facts:

July 6, 1983 Coca-cola loaded on board MV Asilda, owned

and operated by Felman, 7,500 cases of 1-liter Coca-Cola soft
drink bottles to be transported to Zamboanga City to Cebu.
The shipment was insured with Philamgen.

July 7, the vessel sank in Zamboanga del Norte. July 15,

cocacola filed a claim with respondent Felman for recovery of
damages. Felman denied thus prompted cocacola to file an
insurance claim with Philamgen. Philamgen later on claimed its
right of subrogation against Felman which disclaimed any
liability for the loss.

Philamgen alleged that the sinking and loss were due to

the vessel's unseaworthiness, that the vessel was improperly
manned and its officers were grossly negligent. Felman filed a
motion to dismiss saying that there is no right of subrogation in
favor of Philamgen was transmitted by the shipper.
RTC dismissed the complaint of Philamgen. CA set aside the
dismissal and remanded the case to the lower court for trial on
the merits. Felman filed a petition for certiorari but was denied.

RTC rendered judgment in favor of Felman. it ruled that

the vessel was seaworthy when it left the port of Zamboanga
as evidenced by the certificate issued by the Phil. Coast Guard
and the ship owner’s surveyor. Thus, the loss is due to a
fortuitous event, in which, no liability should attach unless there
is stipulation or negligence.

On appeal, CA rendered judgment finding the vessel

unseaworthy for the cargo for being top-heavy and the
cocacola bottles were also improperly stored on deck.
Nonetheless, the CA denied the claim of Philamgen, saying
that Philamgen was not properly subrogated to the rights and
interests of the shipper plus the filing of notice of abandonment
had absolved the ship owner from liability under the limited
liability rule.

Issues:

(a) Whether the vessel was seaworthy, (b) whether limited

liability rule should apply and (c) whether Philamgen was
properly subrogated to the rights against Felman.

Ruling:

(a) The vessel was unseaworthy. The proximate cause thru the
findings of the Elite Adjusters, Inc., is the vessel's being top-
heavy. Evidence shows that days after the sinking coca-cola
bottles were found near the vicinity of the sinking which would
mean that the bottles were in fact stowed on deck which the
vessel was not designed to carry substantial amount of cargo
on deck. The inordinate loading of cargo deck resulted in the
decrease of the vessel's metacentric height thus making it
unstable. (b) Art. 587 of the Code of Commerce is not
applicable, the agent is liable for the negligent acts of the
captain in the care of the goods. This liability however can be
limited through abandonment of the vessel, its equipment and
freightage. Nonetheless, there are exceptions wherein the ship
agent could still be held answerable despite the
abandonment, as where the loss or injury was due to the fault
of the ship owner and the captain. The international rule is that
the right of abandonment of vessels, as legal limitation of
liability, does not apply to cases where the injury was
occasioned by the fault of the ship owner. Felman was
negligent, it cannot therefore escape liability. (c) Generally, in
marine insurance policy, the assured impliedly warrants to the
assurer that the vessel is seaworthy and such warranty is as
much a term of the contract as if expressly written on the face
of the policy. However, the implied warranty of seaworthiness
can be excluded by terms in writing in the policy of the clearest
language. The marine policy issued by Philamgen to cocacola
has dispensed that the "seaworthiness of the vessel as between
the assured and the underwriters in hereby admitted."

The result of the admission of seaworthiness by Philamgen may

mean two things: (1) the warranty of seaworthiness is fulfilled
and (2) the risk of unseaworthiness is assumed by the insurance
company. This waiver clause would mean that Philamgen has
accepted the risk of unseaworthiness, therefore Philamgen is
liable. On the matter of subrogation, it is provided that; Art.
2207. If the plaintiff's property has been insured, and he has
received indemnity from the insurance company for the injury
or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to
the rights of the insured against the wrongdoer or the person
who has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency
from the person causing the loss or injury.
 Pan Malayan Insurance Corp. vs CA: The right of
subrogation is not dependent upon, nor does it grow out of
any privity of contract or upon payment by the insurance
company of the insurance claim. It accrues simply upon
payment by the insurance company of the insurance claim.

Therefore, the payment made by PHILAMGEN to Coca-

Cola Bottlers Philippines, Inc., gave the former the right to bring
an action as subrogee against FELMAN. Having failed to rebut
the presumption of fault, the liability of FELMAN for the loss of
the 7,500 cases of 1-liter Coca-Cola soft drink bottles is
inevitable.

WHEREFORE, the petition is GRANTED. Respondent

FELMAN SHIPPING LINES is ordered to pay petitioner PHILIPPINE
AMERICAN GENERAL INSURANCE CO., INC.