STEAMSHIP MUTUAL
UNDERWRITING ASSOCIATION (BERMUDA) LIMITED, v. SULPICIO
LINES, INC. GR. No. 196072, September 20, 2017
Facts: Steamship
was a Bermuda-based Protection and Indemnity Club, managed outside England. It
insures its members-shipowners against "third party risks and liabilities"
for claims arising from (a) death or injury to passengers; (b) loss or damage
to cargoes; and (c) loss or damage from collisions.
Sulpicio insured its
fleet of inter-island vessels with Steamship for Protection & Indemnity
risks through local insurance agents, Pioneer Insurance or Seaboard-Eastern
Insurance Co., Inc. 1 of these vessels was the M/V Princess of the World.
In 2005, the vessel was gutted by fire resulting in total loss
of its cargoes. The fire incident was found to be "accidental" in
nature.
Sulpicio claimed indemnity from Steamship. Steamship denied the
claim and subsequently rescinded the insurance coverage of Sulpicio's other
vessels on the ground that "Sulpicio was grossly negligent in conducting
its business regarding safety, maintaining the seaworthiness of its vessels as
well as proper training of its crew."
Issue: WON Sulpicio is a member of Steamship
Held: Yes. The contract between Sulpicio and Steamship is more
than a contract of insurance between a marine insurer and a shipowner. By
entering its vessels in Steamship, Sulpicio not only obtains insurance coverage
for its vessels but also becomes a member of Steamship.
A protection and indemnity club is an association composed of
shipowners generally formed for the specific purpose of providing insurance
cover against third-party liabilities of its members. A protection and
indemnity club is a mutual insurance association.
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 contract of insurance is perfected between the parties upon
Steamship's issuance of the Certificate of Entry and Acceptance.
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, one that leaves nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have met in agreement.
Insurance policy is the written instrument in which a contract of insurance is
set forth. The policy, which is required to be in printed form, "may
contain blank spaces; and any word, phrase, clause, mark, sign, symbol,
signature, number, or word necessary to complete the contract of insurance
shall be written on the blank spaces." Any rider, clause, warranty, or
endorsement attached and referred to in the policy by its descriptive title or
name is considered part of this policy or contract of insurance and binds the
insured.
The information that must be stated in the policy, namely: the
parties in the insurance contract, amount insured, premium, property or life
insured, risks insured against, and period of insurance. However, there is
nothing in the law that prohibits the parties from agreeing to other terms and
conditions that would govern their relationship, in which case the general rules
of the Civil Code regulating contracts will apply.
The dispute between Sulpicio and Steamship is referred to
arbitration in London in accordance with Rule 47 of the 2005/2006 Club Rules.
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