Supreme Court landmark ruling differentiates insurance agent from plain employee

MANILA, Philippines – The Supreme Court (SC) has issued a ruling that defines the relationship between a life insurance company and a contracted agent for an insurance company.

GR 167622 states that there is a difference between the Labor Code concept of “control” and the “control” that must necessarily exist in a principal-agent relationship.

The high court stated that “the principal cannot but also have his or her say in directing the course of the principal-agent relationship, especially in cases where the company-representative relationship in the insurance industry is an agency.”

It further stated: “We can take judicial notice that as a matter of Insurance Code-based business practice, an agency relationship prevails in the insurance industry for the purpose of selling insurance.”

Insurers said that the SC ruling ensures that life insurance companies are able to protect the interest of Filipino consumers, since they are able to strictly enforce their respective codes of business conduct guidelines required of their independent contractors without fear of possible labor law implications.

It further provides consumers with the assurance that insurance companies are able to implement and reinforce all of their necessary business control and quality standards at every point of customer contact.

They added that the decision has averted what could have been “a massive re-engineering of the business models adopted by life insurance companies, which could have severely impacted various stakeholder groups.”

The Supreme Court made it very clear that any rules regarding the desired results (e.g., the required volume to continue to qualify as a company agent, rules to check on the parameters on the authority given to the agent, and rules to ensure that industry, legal and ethical rules are followed) 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 governed by the Labor Code.

The high court decision in GR 167622 had to do with a motion of reconsideration filed by the Manufacturers Life Insurance Co. (Philippines) Inc. under then chief executive Renato A. Vergel de Dios.

The SC made an earlier decision dated Dec. 3, 2008 ordering Manulife to pay Gregorio V. Tongko backwages and separation pay for illegal dismissal. Tongko was then a regional sales manager of Manulife.

“We reverse our decision of Nov. 7, 2008, grant Manulife’s motion for reconsideration and accordingly dismiss Tongko’s petition. No costs,” the order, signed by SC Chief Justice Renato C. Corona, stated. –(The Philippine Star)