5. PHILAMLIFE v. ANSALDO (TIMBOL c/o kara) their agents.

Lastly, there are two categories of employees in an insurance

July 26, 1994| Quiason, J. | Insurance Commissioner
company: (1) Salaried employees through a Contract of Employment,
which are governed by the Labor Code; and (2) Registered
PETITIONER: Philippine American Life Insurance Company and
Representatives paid by commission, through a Contract of Agency. And
Rodrigo De Los Reyes
disputes involving the latter are within the jurisdiction of the regular
RESPONDENTS: Hon. Armando Ansaldo, Commissioner, and Ramon
courts.
Montilla Paterno
DOCTRINE: The Insurance Code does not have provisions governing
SUMMARY: PATERNO sent a letter-complaint to COMM. ANSALDO
the relations between insurance companies and their agents. It follows that
alleging certain problems encountered by agents, supervisors, managers
the Insurance Commissioner cannot, in the exercise of its quasi-judicial
and public consumers of PHILAMLIFE, particularly regarding the
power, assume jurisdiction over controversies between the insurance
charges and fees in the CONTRACT OF AGENCY. DE LOS REYES,
companies and their agents.
President of PHILAMLIFE, answered to PATERNO’s letter stating that it
was not sufficient in form and substance, and that since the
FACTS:
COMMISIONER’s Quasi Judicial Power was being invoked, PATERNO 1. A letter-complaint of Ramon M. Paterno, Jr. (PATERNO) to
should file a verified formal complaint. Upon submission, COMM. Commissioner Ansaldo (ANSALDO), alleging certain problems
ANSALDO sent a notice of hearing to both parties. PHILAMLIFE encountered by agents, supervisors, managers and public
(through Ortega its AVP) filed a Motion to Quash Subpoena/Notice on consumers of the Philippine American Life Insurance Company
two grounds: (1) Subpoena/Notice has no legal basis and is premature; (PHILAMLIFE) as a result of certain practices by said company
and (2) The Insurance Commision has no jurisdiction over the subject 2. ANSALDO requested Rodrigo de los Reyes (DE LOS REYES), in
his capacity as PHILAMLIFE’s president, to comment on
matter nad the parties involved. COMM. ANSALDO denied the Motion
PATERNO’s letter
to Quash. Hence this petition. 3. DE LOS REYES suggested that PATERNO submit some sort of a
bill of particulars listing and citing actual cases, facts, dates,
Whether or not COMM. ANSALDO has jurisdiction to rule over the figures, provisions of law, rules and regulations, and all other
CONTRACT OF AGENCY. pertinent data which are necessary to enable him to prepare an
intelligent reply
4. ANSALDO received a letter from PATERNO maintaining that his
The SC held that the Insurance Commissioner has no jurisdiction. First,
letter- complaint was sufficient in form and substance, and
the Insurance Code under Sec. 415 provides that the COMMISIONER requested that a hearing thereon be conducted
may only regulate the business of insurance. The Contract of Agency is 5. DE LOS REYES reiterated his claim that PATERNO’s letter did
not considered as doing business of insurance. Second, althought Sec. 416 not supply the information he needed to enable him to answer the
provides QUASI- JUDICIAL POWERS to the COMMISSIONER, such letter-complaint
powers are limited only to claims and complaints involving any loss, 6. A hearing on the letter-complaint was held ANSALDO on the
damage or liability, for which an insurer may be answerable under any validity of the CONTRACT OF AGENCY complained of by
PATERNO
kind of policy or contract of insurance. Third, the Insurance Code does not
7. PATERNO was required by ANSALDO to specify the provisions
have provisions governing the relations between insurance companies and of the agency contract which he claimed to be illegal
 a. PATERNO submitted a letter of specification and
praying that the provisions on charges and fees stated in
the CONTRACT OF AGENCY executed between
PHILAMLIFE and its agents, as well as the implementing
provisions as published in the agent’s handbook, agency
bulletins and circulars, be declared as NULL AND VOID
b. He also asked that the amounts of such charges and fees
already deducted and collected by PHILAMLIFE in
connection therewith be reimbursed to the agents, with
interest at the prevailing rate reckoned from the date when
they were deducted
8. DE LOS REYES submitted an Answer:
a. PATERNO’s letter does not contain any of the particular
information which PHILAMLIFE was seeking from him
and which he promised to submit
b. Since the Commission’s QUASI-JUDICIAL POWER
was being invoked with regard to the complaint,
PATERNO must file a VERIFIED formal complaint
before any further proceedings
9. PATERNO executed an affidavit, verifying his letters
10. Manuel Ortega, PHILAMLIFE’s Senioer AVP and Executive
Assistant to the President, asked that Commission first rule on the
questions of the jurisdiction of the Insurance Commissioner over
the subject matter of the letters-complaint and the legal standing of
PATERNO
11. ANSALDO notified both parties of the hearing of the case
a. Ortega filed a MOTION TO QUASH Subpoena/Notice
on the following grounds:
i. The Subpoena/Notice has no legal basis and is
premature because:
1. No complaint sufficient in form and
contents has been filed;
2. No summons has been issued nor
received by DE LOS REYES, and
hence no jurisdiction has been acquired
over his person
3. No answer has been filed, hence,
Subpoena/Notice is premature and lacks
legal basis
ii. The Insurance Commission has no jurisdiction
over:
1. The subject matter or nature of the
action; AND
2. Over the parties involved
12. ANSALDO denied the Motion to Quash. Hence this appeal.
ISSUE:
1. WoN the resolution of the legality of the Contract of Agency falls
within the jurisdiction of the Insurance Commissioner – NO,
because disputes regarding the Contract of Agency are cognizable
by the regular courts. A Contract of Agency, moreover, is not
considered an insurance business, which the Commissioner may
regulate. Also, the quasi-judicial power of the Commissioner may
not be invoked because it is limited to claims and damages for
which an insurer may be liable under any kind of policy or a
contract of insurance
RULING: WHEREFORE, the petition is GRANTED. The Order dated
November 6, 1986 of the Insurance Commission is SET ASIDE.
HELD:
1. The general regulatory authority of the Insurance Commissioner is
described in Sec. 414 of the Insurance Code, to wit:
a. The Insurance Commissioner shall have the duty to see
that all laws relating to insurance, insurance companies
and other insurance matters, mutual benefit associations
and trusts for charitable uses are faithfully executed and
to perform the duties imposed upon him by this Code
2. On the other hand, Sec. 415 provides:
a. In addition to the administrative sanctions provide
elsewhere in this Code, the Insurance Commissioner is
hereby authorized, at his discretion, to impose upon
insurance companies, their directors and/or officer and/or
agents, for any willful failure or refusal to comply with, or
violation of any provision of this Code, or any order,
instruction, regulation or ruling of the Insurance
Commissioner, or any commission of irregularities,
and/or conducting business in an unsafe and unsound
manner as may be determined by the Insurance
Commissioner, the following:
 i. Fines not in excess of P500/day; AND
ii. Suspension, or after due hearing, removal of
directors and/or officers and/or agents
iii.
3. A plain reading of the above-quoted provisions show that the
Insurance Commissioner has the authority to regulate the business
of insurance, which is defined as follows:
a. The term “doing an insurance business” or “transacting an
insurance business,” within the meaning of this Code,
shall include:
i. Making or proposing to make, as insurer, any
insurance contract;
ii. 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;
iii. 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;
iv. 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
4. Since the CONTRACT OF AGENCY entered into between
PHILAMLIFE and its agents is NOT INCLUDED within the
meaning of an insurance business, Sec.2 of the Insurance Code
CANNOT be invoked to give jurisdiction over the same to the
Insurance Commissioner (Expressio Unius est exclusion alterius)
5. Sec. 416 of the Insurance Code pertaining to the QUASI-
JUDICIAL POWERS of the COMMISSIONER is also not
applicable:
a. The Commissioner shall have the power to adjudicate
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, or for which
such insurer may be liable under a contract of suretyship,
or for whicha reinsurer may be used under any contract or
reinsurance it may have entered into, or for which a
mutual benefit association may be held liable under the
membership certificates it has issued to its members,
where the amount of any such loss, damage or liability,
excluding interest, costs and attorney’s fees, being
claimed or sued upon any kind of insurance, bond
reinsurance contract, or membership certificate does not
exceed in any single claim P100,000
6. A reading of the said section shows that the quasi-judicial power of
the Insurance Commissioner is limted by law “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,”
7. Hence, this power does not cover the relationship affecting the
insurance company and its agents but is limited to adjudicating
claims and complaints filed by the insured against the insurance
company
8. While the subject of Insurance Agents and Brokers is discussed
under Chapter IV, Title I of the Insurance Code, the provisions of
said Chapter speak only of the licensing requirements an
limitations imposed on insurance agents and brokers
9. The Insurance Code does not have provisions governing the
relations between insurance companies and their agents. It follows
that the Insurance Commissioner cannot, in the exercise of its
quasi-judicial power, assume jurisdiction over controversies
between the insurance companies and their agents
10. We have held in the cases of GREPALIFE v. Judico, and
Investment Planning Corp., v. Social Security Commission, that an
insurance company may have two classes of agents who sell its
insurance policies:
a. Salaried employees who keep definited hours and work
under the control and supervision of the company; AND
b. Registered representatives, who work on commission
basis
11. Under the first category, the relationship between the insurance
company and its agents is governed by the Contract of
Employment and the provisions of the Labor Code, while udner
the second category, the same is governed by the Contract of
Agency and the provisions of the Civil Code on the Agency
a. Disputes involving the latter are cognizable by the regular
courts