G.R. No. 200740 - Land Transportation Franchising and Regulatory Board vs. Stronghold Insurance Co., Inc.

The LTFRB is the government agency responsible for regulating franchises of land-based public utility vehicles and, by virtue of its statutory mandate, implementing the Passenger Personal Accident Insurance Program.
The Program was created to compel operators of passenger public utility vehicles to secure accident insurance policies for the protection of passengers against accident-related risks.
LTFRB’s issuance of accreditation involved selecting two groups of insurance providers through an open bidding process.
In the 2005 bidding, LTFRB accredited Universal Transport Solutions, Inc. (UNITRANS), whose lead insurer was Stronghold Insurance Company, Inc. (Stronghold).

The five-year contract (First MOA) between LTFRB and UNITRANS, dated 15 September 2005, contained a “Matching Clause.”

This clause provided that after the contract’s expiration, the accredited management groups would donate their facilities to the government.
In consideration of the initial investment and risk assumed, the management groups were given the right to match the best bid in a subsequent bidding process.

The Matching Clause was later invoked by Stronghold as a basis for its participation rights in later rounds of bidding.

Shortly before the expiration of the First MOA, LTFRB extended the contract and conducted three separate biddings for accrediting new groups of insurance providers.

The first two rounds were cancelled by the Department of Transportation and Communication (DOTC).
In the third round, LTFRB adopted revised requirements stipulated under the Third Reference.

First Reference: Allowed aggregation of the capital of the lead and member insurers with a minimum of P250 million for lead and P250 million for member insurers.
Second Reference: Increased the aggregate requirement to P500 million for both lead and member insurers.
Third Reference: Required individual compliance (aper insurera) with a minimum capitalization of P250 million for the lead insurer and P125 million for each member insurer, with a minimum of ten members per group.

Although Stronghold participated in all three rounds, its group in the third round failed to qualify due to:

ii. The lead insurer’s capitalization of P140 million being below the minimum of P250 million.

Stronghold contended that this individual (aper insurera) requirement violated both its right of first refusal under the First MOA’s Matching Clause and the equal protection clause under the Constitution.

Before LTFRB could select the winning bidders from the third round, Stronghold filed a petition for a writ of prohibition with the Court of Appeals.

The writ sought to enjoin LTFRB from opening bid documents and to nullify the bidding proceedings.
The argument centered on alleged violations: the breach of the Matching Clause and a discriminatory application of the minimum capital requirements.

The Court of Appeals initially enjoined LTFRB from enforcing the subsequent MOA (the Second MOA) pending resolution.
LTFRB defended its action, arguing that its revised rules were within its regulatory authority and that Stronghold had already been disqualified on substantive grounds.

Whether the Court of Appeals erred in issuing the writ of prohibition in annulling LTFRB’s bidding process for accrediting insurance providers for the Program.

Specifically, whether LTFRB’s adoption of an individual (aper insurera) basis for determining compliance with the minimum capital requirements constituted a grave abuse of discretion amounting to lack or excess of jurisdiction.
Whether the new qualification requirements under the Third Reference violated Stronghold’s contractual right of first refusal under the Matching Clause of the First MOA and the equal protection clause of the Constitution.