1.
White Gold Marine Services vs Pioneer Insurance and
Surety Corporation
FACTS: Petition for Review assailing the decision of the CA.
The decision of the CA affirmed that of the Insurance
Commission.
Petitioner White Gold Marine Services (White Gold) procured
a protection and indemnity coverage for its vessels from
Steamship Mutual Underwriting Association (Bermuda)
Limited (Steamship) through respondent Pioneer Insurance
and Surety Corporation (Pioneer).
Pioneer issued a Certificate of Entry and Acceptance, and
receipts evidencing payments for the coverage to White
Gold. However, when White Gold failed to fully pay its
accounts, Steamship Mutual refused to renew the coverage.
Steamship thereafter filed a case against White Gold for
collection of sum of money to recover the latter’s unpaid
balance. White Gold on the other hand filed a complaint before
the Insurance Commission claiming that Steamship did not
have a license to engage in the insurance business.
The Insurance Commission dismissed the complaint and such
dismissal was affirmed by the CA.
Insurance Commission said that there was no need for
Steamship Mutual to secure a license because it was not
engaged in the insurance business. It explained that Steamship
Mutual was a Protection and Indemnity Club (P & I Club).
Likewise, Pioneer need not obtain another license as insurance
agent and/or a broker for Steamship Mutual because
Steamship Mutual was not engaged in the insurance business.
Moreover, Pioneer was already licensed, hence, a separate
license solely as agent/broker of Steamship Mutual was already
superfluous.
CA distinguished between P & I Clubs vs conventional
insurance. Also held that Pioneer merely acted as a collection
agent of Steamship Mutual.
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?
DISCUSSION: 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.
Petitioner insists that Steamship Mutual as a P & I Club is
engaged in the insurance business. To buttress its assertion, 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."
It stresses that as a P & I Club, Steamship Mutual’s
primary purpose is to solicit and provide protection and
indemnity coverage and for this purpose, it has
engaged the services of Pioneer to act as its agent.
Respondents contend that although Steamship Mutual is a P &
I Club, it is not engaged in the insurance business in the
Philippines. It is merely an association of vessel owners who
have come together to provide mutual protection against
liabilities incidental to shipowning. Respondents
aver Hyopsung is inapplicable in this case because the issue
in Hyopsung was the jurisdiction of the court over Hyopsung.
RULING: 1. Is Steamship Mutual engaged in the insurance
business?
Section 2(2) of the Insurance Code enumerates what
constitutes "doing an insurance business" or
"transacting an insurance business". These are:
(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.
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.
Insurance contract is a contract of indemnity. In it, one
undertakes for a consideration to indemnify another against
loss, damage or liability arising from an unknown or contingent
event.
Marine insurance undertakes to indemnify the assured against
marine losses, such as the losses incident to a marine
adventure. Section 99 of the Insurance Code enumerates
the coverage of marine insurance.
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.
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."
IMP! By definition then, Steamship Mutual as a P & I
Club is a mutual insurance association engaged in the
marine insurance business.
The records reveal Steamship Mutual is doing business in the
country albeit without the requisite certificate of authority
mandated by Section 187 of the Insurance Code. It maintains a
resident agent in the Philippines to solicit insurance and to
collect payments in its behalf. We note that Steamship Mutual
even renewed its P & I Club cover until it was cancelled due to
non-payment of the calls. Thus, 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.
2. Does Pioneer, as agent/broker of Steamship Mutual,
need a special license?
Pioneer is the resident agent of Steamship Mutual as evidenced
by the certificate of registration issued by the Insurance
Commission. It has been licensed to do or transact insurance
business by virtue of the certificate of authority issued by the
same agency. However, a Certification from the Commission
states that Pioneer does not have a separate license to be an
agent/broker of Steamship Mutual.
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.
Finally, White Gold seeks revocation of Pioneer’s certificate of
authority and removal of its directors and officers. Regrettably,
we are not the forum for these issues.
Petition is PARTIALLY GRANTED. The Decision of CA
affirming the Decision the Insurance Commission is hereby
REVERSED AND SET ASIDE. The Steamship Mutual
Underwriting Association (Bermuda) Ltd., and Pioneer
Insurance and Surety Corporation are ORDERED to obtain
licenses and to secure proper authorizations to do business as
insurer and insurance agent, respectively. The petitioner’s
prayer for the revocation of Pioneer’s Certificate of Authority
and removal of its directors and officers, is DENIED.
2. Philippine Health Care Providers, Inc. vs Commissioner
of Internal Revenue
FACTS: Petitioner is a domestic corporation whose primary
purpose is "to 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.
The deficiency DST assessment was imposed on petitioner's
health care agreement with the members of its health care
program pursuant to Section 185 of the 1997 Tax Code which
provides:
Section 185. 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), and all bonds, undertakings, or
recognizances, conditioned for the performance of the
duties of any office or position, for the doing or not
doing of anything therein specified, and on all
obligations guaranteeing the validity or legality of any
bond or other obligations issued by any province, city,
municipality, or other public body or organization, and
on all obligations guaranteeing the title to any real
estate, or guaranteeing any mercantile credits, which
may be made or renewed by any such person,
company or corporation, there shall be collected a
documentary stamp tax of fifty centavos (P0.50) on
each four pesos (P4.00), or fractional part thereof, of
the premium charged. (emphasis supplied)
Petitioner protested such assessment in a letter, but the
respondent did not act on the protest which led the petitioner to
file a petition in the Court of Tax Appeals (CTA) seeking the
cancellation of said assessments. CTA partially granted the
petition wherein the petitioner is ordered to pay the deficiency
VAT and set aside the DST deficiency tax.
Respondent appealed in CA with regard to the cancellation of
DST assessment. CA granted the petition and held that
petitioner's health care agreement was in the nature of a non-
life insurance contract subject to DST. Petitioner moved for
reconsideration but the CA denied it. Hence, this petition.
Petitioner essentially argues that its health care agreement
is not a contract of insurance but a contract for the
provision on a prepaid basis of medical services, including
medical check-up, that are not based on loss or damage.
Petitioner also insists that it is not engaged in the
insurance business. It is a health maintenance organization
regulated by the Department of Health, not an insurance
company under the jurisdiction of the Insurance
Commission. For these reasons, petitioner asserts that the
health care agreement is not subject to DST. - We do not
agree.
ISSUE: Is a health care agreement in the nature of an
insurance contract and therefore subject to the documentary
stamp tax (DST) imposed under Section 185 of Republic Act
8424 (Tax Code of 1997)?
RULING:
The DST is levied on the exercise by persons of certain
privileges conferred by law for the creation, revision, or
termination of specific legal relationships through the execution
of specific instruments. It is an excise upon the privilege,
opportunity, or facility offered at exchanges for the transaction
of the business. In particular, the DST under Section 185 of
the 1997 Tax Code is imposed on the privilege of making or
renewing any policy of insurance (except life, marine,
inland and fire insurance), bond or obligation in the nature of
indemnity for loss, damage, or liability.
IMP! Under the law, a contract of insurance is an agreement
whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an
unknown or contingent event. The event insured against must
be designated in the contract and must either be unknown or
contingent.
IMP! Petitioner's health care agreement is primarily a
contract of indemnity. And in the recent case of Blue
Cross Healthcare, Inc. v. Olivares, this Court ruled that
a health care agreement is in the nature of a non-life
insurance policy.
IMP! Contrary to petitioner's claim, its health care agreement is
not a contract for the provision of medical services. Petitioner
does not actually provide medical or hospital services but
merely arranges for the same and pays for them up to the
stipulated maximum amount of coverage.
Petitioner's health care agreement is substantially similar to that
involved in Philamcare Health Systems, Inc. v. CA.18 The health
care agreement in that case entitled the subscriber to avail of
the hospitalization benefits, whether ordinary or emergency,
listed therein. It also provided for "out-patient benefits" such as
annual physical examinations, preventive health care and other
out-patient services. This Court ruled in Philamcare Health
Systems, Inc.:
[T]he insurable interest of [the subscriber] in obtaining
the health care agreement was his own health. The
health care agreement was in the nature of non-life
insurance, which is primarily a contract of
indemnity. Once the member incurs hospital, medical
or any other expense arising from sickness, injury or
other stipulated contingency, the health care provider
must pay for the same to the extent agreed upon
under the contract.19 (emphasis supplied)
IMP! Similarly, the insurable interest of every member of
petitioner's health care program in obtaining the health care
agreement is his own health. Under the agreement, petitioner is
bound to indemnify any member who incurs hospital, medical or
any other expense arising from sickness, injury or other
stipulated contingency to the extent agreed upon under the
contract.
Petitioner's contention that it is a health maintenance
organization and not an insurance company is irrelevant.
Contracts between companies like petitioner and the
beneficiaries under their plans are treated as insurance
contracts.
Moreover, DST is not a tax on the business transacted but an
excise on the privilege, opportunity, or facility offered at
exchanges for the transaction of the business. It is an excise
on the facilities used in the transaction of the
business, separate and apart from the business itself.
Petition is hereby DENIED. Decision of the CA is AFFIRMED.
Petitioner is ordered to pay the amounts of P55,746,352.19
and P68,450,258.73 as deficiency documentary stamp tax for
1996 and 1997, respectively, plus 25% surcharge for late
payment and 20% interest per annum from January 27, 2000
until full payment thereof.
Philippine Health Care Providers, Inc. V. CIR (2009)
FACTS: Petitioner Philippine Health Care Providers, Inc. is a
domestic corporation whose primary purpose is "to 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.
The deficiency DST assessment was imposed on petitioner's
health care agreement with the members of its health care
program pursuant to Section 185 of the 1997 Tax Code
Petitioner protested such assessment in a letter, but the
respondent did not act on the protest which led the petitioner
to file a petition in the CTA seeking the cancellation of said
assessments.
CTA partially granted the petition and ordered petitioner to pay
the deficiency VAT and set aside the DST deficiency tax.
Respondent appealed in CA with regard to the cancellation of
DST assessment.
CA granted the petition and held that petitioner's health care
agreement was in the nature of a non-life insurance contract
subject to DST.
Petitioner moved for reconsideration but the CA denied it.
Hence, this petition.
ISSUES:
1. W/N the Philippine Health Care Providers, Inc. (HMO-
health maintenance organization) was engaged in the
business of insurance during the pertinent taxable years -
NO
2. W/N the Philippine Health Care Providers, Inc enters
into an insurance contract - NO
RULING: 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 petitioner’s 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 petitioner’s 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.
 principal purpose test
 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
 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 insurer’s 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
 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
ISSUES: (1) Whether or not Philippine Health Care Providers,
Inc. engaged in insurance business; and (2) Whether or not the
agreements between petitioner and its members possess all
elements necessary in the insurance contract.
RULING: NO. Health Maintenance Organizations are not
engaged in the insurance business. The SC said in June 12,
2008 decision that it is irrelevant that petitioner is an HMO and
not an insurer because its agreements are treated as insurance them to do but they earn less. De Dios was thus of the
contracts and the DST is not a tax on the business but an opinion that Tongko has not been proactive all these
excise on the privilege, opportunity or facility used in the years when it comes to agency growth. He thus
transaction of the business. Petitioner, however, submits that it directed Tongko to hire at his expense a competent
is of critical importance to characterize the business it is assistant, and told him that the rest of the Agency
engaged in, that is, to determine whether it is an HMO or an operations will deal with the North Star Branch in
insurance company, as this distinction is indispensable in turn autonomous fashion.
to the issue of whether or not it is liable for DST on its health  ‘The above changes can end at this point, and
care agreements. Petitioner is admittedly an HMO. Under RA they need not go any further. This, however, is
7878 an HMO is “an entity that provides, offers or arranges for entirely dependent upon you. ***’
coverage of designated health services needed by plan
members for a fixed prepaid premium. The payments do not  The following month, De Dios issued a notice of
vary with the extent, frequency or type of services provided. termination of the Agency Agreement with Tongko. The
Section 2 (2) of PD 1460 enumerates what constitutes “doing latter thus filed a complaint for illegal dismissal with the
an insurance business” or “transacting an insurance NLRC. Main contention - He was Manulife’s EE before he
business”which are making or proposing to make, as insurer, was illegally dismissed.
any insurance contract; making or proposing to make, as
surety, any contract of suretyship as a vocation and not as TONGKO MANULIFE
merely incidental to any other legitimate business or activity of  As Regional Sales  Tongko had no fixed
the surety; doing any kind of business, including a reinsurance Manager, he was wage or salary; he
business, specifically recognized as constituting the doing of an given certain was paid
insurance business within the meaning of this Code; doing or allowances apart commissions of
proposing to do any business in substance equivalent to any of from his varying amounts.
the foregoing in a manner designed to evade the provisions of commissions.  It deducted and
this Code.  He was tasked with withheld a 10% tax
numerous from all commissions
administrative Tongko received; the
Overall, petitioner appears to provide insurance-type benefits to functions and latter even declared
its members (with respect to its curative medical services), but supervisory himself to be self-
these are incidental to the principal activity of providing them authority over employed and
medical care. The “insurance-like” aspect of petitioner’s Manulife’s EEs consistently paid
business is miniscule compared to its noninsurance activities. aside from selling taxes as such.
Therefore, since it substantially provides health care services policies and  Tongko is not their EE
rather than insurance services, it cannot be considered as recruiting agents. (citing Carungcong vs.
being in the insurance business.  He was assigned a NLRC)
definite place in
Manulife’s office
3. Tongko vs. The Manufacturers Life Insurance Co. (Phils.)  He was required to
Inc. and Renato Vergel de Dios (2010, Brion) follow at least 3
codes of conduct.
FACTS (Note: This case is an MR of a previous SC Decision)
 First phase of contractual relationship between Tongko and  Labor Arbiter - No ER-EE rel.; NLRC - ER-EE rel.; CA - No
Manulife - Career Agent’s Agreement (1977) ER-EE rel.
o Pertinent clause: ‘It is understood and agreed that the  SC (1st Decision) - ER - EE rel.
Agent is an independent contractor and nothing o SC’s ruling in 1st Insular Life case did not foreclose
contained herein shall be construed or interpreted as the possibility of an insurance agent becoming an EE
creating an ER-EE rel. between the Company and the of an insurance company; if evidence exists showing
Agent.’ that the company promulgated rules effectively
controlling or restricting an agent’s choice of methods
 Second phase - Tongko became a Unit Manager, then a in selling insurance.
Branch Manager, and finally a Regional Sales Manager. o Manulife had power of control over Tongko:
 Tongko undertook to comply with Manulife’s rules
 Note: Tongko consistently declared himself self-employed and regulations.
in his ITRs. Manulife withheld the corresponding 10% tax  Various affidavits of Manulife’s insurance agents
on his earnings. and managers, showing that they performed
administrative duties that established employment
 Nov. 2001 - Manulife instituted manpower development with Manulife.
programs at the regional sales management level. De Dios  Tongko was tasked to recruit some agents in
wrote to Tongko re: concerns brought up during the Metro addition to his other administrative functions; his
North Sales Managers Meeting. failure to follow this directive led to his termination.
o Gist: Tongko’s region was the lowest performer (on a
per manager basis) in terms of recruiting in 2000 and ISSUE/HELD: W/N an ER-EE rel. existed between Tongko and
still continues to remain one of the laggards in the Manulife. NO. SC reversed its Decision.
area. No Sales Manager confirmed Tongko’s
statement that some of the managers are unhappy RULING: The Insurance and the Civil Codes; the parties’ intent
with their earnings and would want to revert to the and established industry practices
position of agents. Moreover, Tongko’s statement that  Since the factual antecedents were set in the insurance
Sales Managers are doing what the company asks industry, the Insurance Code (IC) primarily governs (i.e.
 agent and broker relationship with the insurance company).
But the same Code does not wholly regulate the agency
that it speaks of, as agency is a civil law matter governed
by the Civil Code (CC).
 Sec. 186, IC: No person, partnership, or association of
persons shall transact any insurance business in the
Philippines except as agent of a person or corporation
authorized to do the business of insurance in the Phils.
 Sec. 299, IC: No insurance company doing business in the
Phils., nor any agent thereof, shall pay any commission or
other compensation to any person for services in obtaining
insurance, unless such person shall have first procured
from the Commissioner a license to act as insurance agent
of such company or as insurance broker as hereinafter
provided.
 Under the IC, the agent must, as a matter of
qualification, be licensed and must also act within the
parameters of the authority granted under the license
and under the contract with the principal. Rules
regarding the desired results are built-in elements of
control specific to an insurance agency and should not
and cannot be read as elements of control that attend
an employment relationship under the Labor Code
(LC).
 Art. 1868, CC: An agent is a person who binds himself to
render some service or to do something in representation
or on behalf of another, with the consent or authority of the
latter.
 The employer controls the employee both in the
results and the means and manner of achieving such
result. The principal in an agency relationship also has
the prerogative to exercise control over the agent in
undertaking the assigned task based on parameters
outlined in pertinent laws.
 General law on agency as applied to insurance - agency
must be express in light of need for license and designation
by the insurance company.
o Here, the Agreement fully serves as grant of authority
to Tongko as Manulife’s insurance agent. This is
supplemented by the company’s agency practices and
usages, duly accepted by the agent in carrying out the
agency.
o By authority of the IC (Sec. 299), an insurance agency
is for compensation, a matter the CC (Art. 1875)
presumes in the absence of proof to the contrary.
 Particularly relevant is the provision that in the execution of
the agency, the agent shall act in accordance with the
instructions of the principal. (Art. 1887)
The Cited Case
 Carungcong, Grepalife and Second Insular cases dealt
with the proper legal characterization of a subsequent
management contract that superseded the original agency
contract between the insurance company and its agent. A
determination of the presence of the LC element of control
was made on the basis of the stipulations in the
subsequent contracts.
o Here, the only contract or document extant and
submitted as evidence is the Agreement, a pure
agency agreement in the CC context similar to the
original contract in the First Insular and AFPBMAI
cases. While Tongko was later designated to several
positions, no formal contract regarding these
undertakings appears in the records of the case.
Analysis of the evidence
1. The Agreement. This Agreement stood for more than 2
decades, and based on the records of the case, was
never modified or novated. It assumes primacy
because it directly dealt with the nature of the parties’
relationship up to the very end; and both parties never
disputed its authenticity or accuracy of its terms.
o By its express terms, Tongko served as an insurance
agent, NOT as an employee. This characterization by
the parties cannot be brushed aside, because it
embodies their intent at the time they entered into the
Agreement, and they were governed by this
understanding throughout their relationship. This intent
is reinforced by the system of compensation which the
Agreement provides, which is in accordance with the
production-based sales commissions that the IC
provides.
 Moreover, this intent is not illegal or outside the
contemplation of law. The IC expressly envisions
a principal-agent relationship between the
insurance company and the insurance agent in
the sale of insurance to the public.  JUDICIAL
NOTICE that as a matter of IC based business
practice, an agency relationship prevails in the
insurance industry for the purpose of selling
insurance.
 Evidence shows that Tongko’s role as an insurance agent
never changed during his relationship with Manulife. He
essentially remained an agent, but moved up thru
Manulife’s recognition that he could use other agents
approved by Manulife, but operating under his guidance
and in whose commissions he had a share. (‘lead agent’)
o As an agent who was recruiting and guiding other
insurance agents, Tongko likewise moved up in terms
of the reimbursement of expenses he incurred in the
course of his lead agency, a prerogative he enjoyed
pursuant to Art. 1912 (CC).
o What happened was a mere grant of an expanded
sales agency role that recognized him as leader
amongst agents.
 Tongko consistently clung to the view that he was an
independent agent selling insurance products since he
invariably declared himself a business or self-employed
person in his ITS.  Never mentioned in the First SC
Decision; it would have constituted admissions against his
interet.
o Estoppel - Tongko’s previous admissions in several
years of ITRs as an independent agent, as against his
belated claim that he was all along an employee, are
too diametrically opposed to be simply ignored.
 Dissent (Velasco) - Tongko had dual roles: (1) agent
insofar as he sold insurance, (2) employee in his capacity
as a manager.
o SC - there is lack of evidentiary support for the
conclusion that Manulife exercised control over
Tongko in the sense understood in the LC; it is
moreover devoid of jurisprudential basis.
2. Other evidence of alleged control
 Prior to De Dios’ letter, Manulife had practically left Tongko
alone not only in doing the business of selling insurance,
but also in guiding the agents under his wing.
 Mere presentation of codes of conduct is not per se
indicative of labor law control.
o IC imposes obligations on both the insurance company
and its agents in the performance of their respective
obligations under the Code. The general law on
agency expressly allows the principal an element of
control over the agent in a manner consistent with an
agency relationship.
o First Insular case: A commitment to abide by the rules
and regulations of an insurance company does not
ipso facto make the insurance agent an employee.
Guidelines indicative of labor law ‘control’ should not
merely relate to the mutually desirable result intended
by the contractual relationship; they must have the
nature of dictating the means or methods to be
employed in attaining the result, or of fixing the
methodology and of binding or restricting the party
hired to the use of these means.
o Results-wise, the principal can impose production
quotas and can determine how many agents, with
specific territories, ought to be employed to achieve
the company’s objectives. These are management
policy decisions that the labor law element of control
cannot reach.
o Here, Manulife’s codes of conduct, all of which do not
intrude into the insurance agents’ means and manner
of conducting their sales and only control them as to
the desired results and Insurance Code norms, cannot
be used as basis for a finding that the labor law
concept of control existed between Tongko and
Manulife.
 Dissent - Imposition of administrative and managerial
functions as indicative of labor law control; a substantive
alteration of Manulife’s authority over Tongko and the
performance of his end of the relationship with Manulife.
o SC - Tongko and Manulife never altered the original
Agreement. Moreover, the operative words are the
‘sales target,’ the methodology being left undefined
except to the extent of being coordinative. To
coordinate is not so much a matter of control by
Manulife; it is a statement of a branch manager’s role
in relation with his agents from the point of view of
Manulife whose business Tongko’s sales group
carries.
o The portion of the affidavits suggesting labor law
control were highlighted, while some portions were not
brought out: ex. - I have no fixed wages since my
services are compensated by way of commissions; I
employ my own method in soliciting insurance at a
time and place I see fit, etc.
o De Dios’ letter indicates the least amount of intrusion
into Tongko’s exercise of his role as manager in
guiding the sales agents. It contained mere operational
guidelines on how Tongko could align his operations
with Manulife’s directed goal of being a big league
player.
 This directive cannot strictly be understood as an
intrusion into Tongko’s method of operating and
supervising the group of agents within his
delineated territory; at most, it was a signal to
Tongko that his results were unsatisfactory, and
was a suggestion on how his weakness in
delivering results could be remedied.
o Tongko was not supervising regular full-time
employees of Manulife engaged in the running of the
insurance business; he was effectively guiding his
corps of sales agents, who are bound to Manulife
through the same Agreement that he had with
Manulife, all the while sharing in these agents’
commissions through his overrides.
o Company aims and objectives were simply relayed to
him through the expansion of non-employee sales
force.
 Dissent - Any doubt in the existence of an ER-EE rel.
should be resolved in favor of its existence.
o SC - Application of Art. 4 (LC) is misplaced, as it
applies only when doubt exists in the implementation
and application of LC and its IRR; it does not apply
where no doubt exists as in a situation where the
claimant clearly failed to substantiate his claim of
employment relationship by the quantum of evidence
that the LC requires.
Tongko vs Manufacturer’s Life Insurance Co. GR No.
167622 January 25, 2011
Issue: Whether or not petitioner as insurance agent is an
employee of respondent company.
Held: No. Based on the evidence on record, the petitioner’s
occupation was to sell Manulife’s insurance policies and
products from 1977 until the termination of the career agent’s
agreement. The evidence also shows that through the years,
Manulife permitted him to exercise guiding authority over other
agents who operate under their own agency agreements with
Manulife and whose commissions he shared. Under this
scheme — an agreement that pervades the insurance industry
— petitioner in effect became a “lead agent” and his own
commissions increased as they included his share in the
commissions of the other agents; he also receive greater
reimbursement for expenses and was allowed to use Manulife’s
facilities. His designation also changed from unit manager to
branch manager and then to regional sales manager, to reflect
the increase in the number of agents he recruited and guided,
as well as the increase in the area where these agents
operated.
In our June 29, 2010 resolution, we noted that there are built in
elements of control specific to an insurance agency, which do
not amount to the elements of control that characterizes an
employment relationship governed by the labor code. The
insurance code provides definite parameters in the way an
agent negotiates for the sale of the company’s insurance
products, his collection activities and his delivery of the
insurance contract or policy. In addition, the civil code defines
an agent as a person who binds himself to do something in
behalf of another, with the consent or authority of the latter.
Article 1887 of the civil code also provides that in the execution
of the agency, the agent shall act in accordance with the
instructions of the principal.