WHITE GOLD MARINE SERVICES, INC., petitioner, vs. It cites the definition of a P & I Club in Hyopsung Maritime Co.
& I Club in Hyopsung Maritime Co., Ltd. v. Court of
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 latters 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.
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.
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY and RODRIGO DE
LOS REYES vs. HON. ARMANDO ANSALDO, in his capacity as Insurance
Commissioner, and RAMON MONTILLA PATERNO, JR.
Nature of the Case: A petition for certiorari and prohibition, with prayer for writ of
preliminary injunction or issuance of TRO, against jurisdiction of Insurance
Commission.
Issue: (1). Can the Insurance Commission preside over issues assailing the validity of
a Contract of Agency?
Held (1). No. The general authority of the Insurance Commissioner is laid down in
the Insurance Code, among others, to regulate the business of insurance. Since a
Contract of Agency is not covered in the authority of the Insurance Commission to
regulate business of insurance, jurisdiction of Ansaldo is wanting.

Facts: Paterno wrote a letter of complaint to Ansaldo (Insurance Commissioner)
alleging problems encountered by workers and public consumers as a result of
Philamlifes practices.
Ansaldo sought the comment of De Los Reyes [Philamlife President], who in turn
sought a bill of particulars.
Paterno responded that his letter was sufficient in form and sought for a hearing.
Philamlife countered that Paternos response did not enable him to answer the letter
of complaint.
Thereafter, a hearing on the complaint heard the validity of the Contract of Agency
(CoA) complained of, requiring Paterno to supply the specific provisions in the CoA
which he claims to be illegal.
Paterno: (1) reiterated his initial letter of complaint; (2) prayed that the (a) provisions
on charges and fees in the CoA; (b) implementing provisions in the agents' handbook,
agency bulletins and circulars, be declared null and void; and (3) to reimburse agents
of the amounts deducted from charges and fees already collected with interest.
Ansaldo also has no quasi-judicial power to speak of in the Insurance Code since xxx
his power is limited to claims and complaints involving any loss, damage or liability
for which an insurer may be answerable under any kind of policy or contract of
insurance xxx".
This power does not affect the relationship between an insurance company and its
agents. In the same light, although the Insurance Code provides for the subject
Insurance Agents and Brokers, the same only speaks licensing requirements and
limitations imposed on insurance agents and brokers.
Thus, it is clear that the Insurance Code does not grant Ansaldo the authority to take
cognizance of the case. On the other hand, there are two classes of insurance agents:
(1) salaried employees who keep definite hours and work under the control and
supervision of the company; and (2) registered representatives, who work on
commission basis. The former is cognizable by the Labor Arbiter (as it involves the
Contract of Employment and provisions of the Labor Code) and the latter by regular
courts (as it involves issues on the Contract of Agency and the Civil Code provisions
on Agency).

This was furnished by Ansaldo to Philamlife who thereafter submitted its contentions,
to wit: (1) Private respondent's letter of August 11, 1986 does not contain any of the
particular information which Philamlife was seeking from him and which he promised
to submit; and (2) [t]hat since the Commission's quasi-judicial power was being
invoked with regard to the complaint, private respondent must file a verified formal
complaint before any further proceedings.

Meanwhile, Paterno sought for the resumption of hearing in re his complaint and
about a month later executed his affidavit. Philamlife [through Manuel Ortega, SVP]
questioned the jurisdiction of Ansaldo and the locus standi of Paterno. Ansaldo
thereafter notified parties to a hearing.

Philamlife [through Ortega] moved for quashal since subpoena has no legal basis
and Insurance Commission has no jurisdiction. The same was however denied by
Ansaldo. Hence, this petition.
Philippine Health Care Providers, Inc. V. CIR (2009)
Lessons Applicable: Elements (Insurance)
FACTS: Philippine Health Care Providers, Inc. is a domestic corporation whose
primary purpose is "[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."
Individuals enrolled in its health care programs pay an annual membership fee and are
entitled to various preventive, diagnostic and curative medical services provided by
its duly licensed physicians, specialists and other professional technical staff
participating in the group practice health delivery system at a hospital or clinic owned,
operated or accredited by it.
January 27, 2000: Commissioner of Internal Revenue (CIR) sent petitioner a formal
demand letter and the corresponding assessment notices demanding the payment of
deficiency taxes, including surcharges and interest, for the taxable years 1996 and
1997 in the total amount of P224,702,641.18
Petitioner protested the assessment in a letter dated February 23, 2000.
CIR did not act on the protest, petitioner filed a petition for review in the Court of Tax
Appeals (CTA) seeking the cancellation of the deficiency VAT and DST assessments.
CTA: PARTIALLY GRANTED to pay VAT, DST assessment CANCELLED AND
SET ASIDE
CIR: health care agreement was a contract of insurance subject to DST under Section
185 of the 1997 Tax Code
CA: health care agreement was in the nature of a non-life insurance contract subject
to DST
Court Affirmed CA
ISSUE:
W/N the Philippine Health Care Providers, Inc (HMO) was engaged in the business
of insurance during the pertinent taxable years - NO
W/N the Philippine Health Care Providers, Inc enters into an insurance contract - NO
HELD: motion for reconsideration is GRANTED
1. NO
P.D. 612 Insurance Code
Sec. 2 (2)
(2) The term "doing an insurance business" or "transacting an insurance business",
within the meaning of this Code, shall include:
(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.
In the application of the provisions of this Code 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 be deemed
conclusive to show that the making thereof does not constitute the doing or
transacting of an insurance business.
No profit is derived from the making of insurance contracts, agreements or
transactions or that no separate or direct consideration is received therefore, shall not
be deemed conclusive to show that the making thereof does not constitute the doing
or transacting of an insurance business
2. NO. Basic distinction between medical service corporations and ordinary health
and accident insurers is that the former undertake to provide prepaid medical services
through participating physicians, thus relieving subscribers of any further financial
burden, while the latter only undertake to indemnify an insured for medical expenses
up to, but not beyond, the schedule of rates contained in the policy
A participating provider of health care services is one who agrees in writing to render
health care services to or for persons covered by a contract issued by health service
corporation in return for which the health service corporation agrees to make payment
directly to the participating provider
Any indemnification resulting from the payment for services rendered in case of
emergency by non-participating health providers would still be incidental to
petitioners purpose of providing and arranging for health care services and does not
transform it into an insurer.
As an HMO, it is its obligation to maintain the good health of its members
its undertaking under its agreements is not to indemnify its members against any loss
or damage arising from a medical condition but, on the contrary, to provide the health
and medical services needed to prevent such loss or damage
Overall, petitioner appears to provide insurance-type benefits to its members (with
respect to its curative medical services), but these are incidental to the principal
activity of providing them medical care. The "insurance-like" aspect of petitioners
business is miniscule compared to its noninsurance activities. Therefore, since it
substantially provides health care services rather than insurance services, it cannot be
considered as being in the insurance business.
HMO, undertakes a business risk when it offers to provide health services. But it is
not the risk of the type peculiar only to insurance companies. Insurance risk, also
known as actuarial risk, is the risk that the cost of insurance claims might be higher
than the premiums paid. The amount of premium is calculated on the basis of
assumptions made relative to the insured.
In our jurisdiction, a commentator of our insurance laws has pointed out that, even if
a contract contains all the elements of an insurance contract, if its primary purpose is
the rendering of service, it is not a contract of insurance. The primary purpose of the
parties in making the contract may negate the existence of an insurance contract.
health care agreements are clearly not within the ambit of Section 185 of the NIRC
and there was never any legislative intent to impose the same on HMOs

Principal Purpose Test

The purpose of determining what "doing an insurance business" means, we have to
scrutinize the operations of the business as a whole and not its mere components

The letter dated September 3, 2000, the Insurance Commissioner confirmed that
petitioner is not engaged in the insurance business. This determination of the
commissioner must be accorded great weight

Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement

whereby one undertakes for a consideration to indemnify another against loss, damage
or liability arising from an unknown or contingent event. An insurance contract exists
where the following elements concur: - NOT present
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designed peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses among
a large group of persons bearing a similar risk and
5. In consideration of the insurers promise, the insured pays a premium.

-no indemnity
-member can take advantage of the bulk of the benefits anytime even in the absence
of any peril, loss or damage on his or her part.
-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

Since indemnity of the insured was not the focal point of the agreement but the
extension of medical services to the member at an affordable cost, it did not partake
of the nature of a contract of insurance