INSURANCE LAW

Under Memo Circulars No. 2-8112 and 2-85, dated December 17, 1981 and August 7, 1985, res ecti!el", issued b" t#e $nsurance Commissioner, insurance agents are barred %rom ser!ing more t#an one insurance com an", in order to rotect t#e ublic and to enable insurance com anies to e&ercise e&clusi!e su er!ision o!er t#eir agents in t#eir solicitation 'or(. )#us, t#e e&clusi!it" restriction clearl" s rings %rom a regulation issued b" t#e $nsurance Commission, and not %rom an intention b" etitioner to establis# control o!er t#e met#od and manner b" '#ic# ri!ate res ondent s#all accom lis# #is 'or(. )#is %eature is not meant to c#ange t#e nature o% t#e relations#i bet'een t#e arties, nor does it necessaril" imbue suc# relations#i 'it# t#e *ualit" o% control en!isioned b" t#e la'. +AFP Mutual Benefit Association v. NLRC, ,- No. 1.2199, /anuar" 28, 19970 A stoc( insurance com an" doing business in t#e 1#ili ines ma" 2alter its organi3ation and trans%orm itsel% into a mutual insurance com an".4 + Republic v. Sunlife Assurance, ,- No. 158.85, 5ctober 16, 2..50 A mutual li%e insurance com an" is conducted %or t#e bene%it o% its memberolic"#olders, '#o a" into its ca ital b" 'a" o% remiums. )o t#at e&tent, t#e" are res onsible %or t#e a"ment o% all its losses. 2)#e cas# aid in %or remiums and t#e remium notes constitute t#eir assets.4 $n t#e e!ent t#at t#e com an" itsel% %ails be%ore t#e terms o% t#e olicies e& ire, t#e member- olic"#olders do not ac*uire t#e status o% creditors. -at#er, t#e" sim l" become debtors %or '#ate!er remiums t#at t#e" #a!e originall" agreed to a" t#e com an", i% t#e" #a!e not "et aid t#ose amounts in %ull, %or 2mutual com anies de end solel" u on remiums.4 5nl" '#en t#e remiums 'ill #a!e accumulated to a sum larger t#an t#at re*uired to a" %or com an" losses 'ill t#e member- olic"#olders be entitled to a 2 ro rata di!ision t#ereo% as ro%its.4 Contributing to its ca ital, t#e member- olic"#olders o% a mutual com an" are ob!iousl" also its o'ners. 7ustaining a dual relations#i inter se, t#e" not onl" contribute to t#e a"ment o% its losses, but are also entitled to a ro ortionate s#are and artici ate ali(e in its ro%its and sur lus. +Republic v. Sunlife Assurance, ,- No. 158.85, 5ctober 16, 2..50 8#ere t#e insurance is ta(en at cost, it is im ortant t#at t#e rates o% remium c#arged b" a mutual com an" be larger t#an mig#t reasonabl" be e& ected to carr" t#e insurance, in order to constitute a margin o% sa%et". )#e table o% mortalit" used 'ill s#o' an admittedl" #ig#er deat# rate t#an 'ill robabl" re!ail9 t#e assumed interest rate on t#e in!estments o% t#e com an" is made lo'er t#an is e& ected to be reali3ed9 and t#e ro!ision %or contingencies and e& enses, made greater t#an 'ould ordinaril" be necessar". )#is course o% action is ta(en, because a mutual com an" #as no ca ital stoc( and relies solel" u on its remiums to meet une& ected losses, contingencies and e& enses. Certainl", man" %actors are considered in calculating t#e insurance remium. 7ince t#e" !ar" 'it# t#e (ind o% insurance ta(en and 'it# t#e grou o% olic"#olders insured, an" e&cess in t#e amount antici ated b" a mutual com an" to co!er t#e cost o% ro!iding %or t#e insurance o!er its actual reali3ed cost 'ill also !ar". $% a member- olic"#older recei!es an e&cess a"ment, t#en t#e a ortionment must #a!e been based u on a calculation o% t#e actual cost o% insurance t#at t#e com an" #as ro!ided %or t#at articular member- olic"#older.

Accordingl", in a ortioning di!isible sur luses, an" mutual com an" uses a contribution met#od t#at aims to distribute t#ose sur luses among its memberolic"#olders, in t#e same ro ortion as t#e" #a!e contributed to t#e sur luses b" t#eir a"ments. A sti ulated insurance remium 2cannot be increased, but ma" be lessened annuall" b" so muc# as t#e e& erience o% t#e receding "ear #as determined it to #a!e been greater t#an t#e cost o% carr"ing t#e insurance.4 )#e di%%erence bet'een t#at remium and t#e cost o% carr"ing t#e ris( o% loss constitutes t#e socalled 2di!idend4 '#ic#, #o'e!er, 2is not in an" real sense a di!idend.4 $t is a tec#nical term t#at is 'ell understood in t#e insurance business to be 'idel" di%%erent %rom t#at to '#ic# it is ordinaril" attac#ed. +Republic v. Sunlife Assurance, ,- No. 158.85, 5ctober 16, 2..50 )#e so-called 2di!idend4 t#at is recei!ed b" member- olic"#olders is not a ortion o% ro%its set aside %or distribution to t#e stoc(#olders in ro ortion to t#eir subscri tion to t#e ca ital stoc( o% a cor oration. One, a mutual com an" #as no ca ital stoc( to '#ic# subscri tion is necessar"9 t#ere are no stoc(#olders to s ea( o%, but onl" members. And, two, t#e amount t#e" recei!e does not arta(e o% t#e nature o% a ro%it or income. )#e *uasi-a earance o% ro%it 'ill not c#ange its c#aracter. $t remains an overpay ent, a bene%it to '#ic# t#e memberolic"#older is e*uitabl" entitled. +Republic v. Sunlife Assurance, ,- No. 158.85, 5ctober 16, 2..50 :A; mutual li%e insurance cor oration is a coo erati!e t#at romotes t#e 'el%are o% its o'n members. $t does not o erate %or ro%it, but %or t#e mutual bene%it o% its member- olic"#olders. )#e" recei!e t#eir insurance at cost, '#ile reasonabl" and ro erl" guarding and maintaining t#e stabilit" and sol!enc" o% t#e com an". 2)#e economic bene%its %ilter to t#e coo erati!e members. <it#er e*uall" or ro ortionall", t#e" are distributed among members in correlation 'it# t#e resources o% t#e association utili3ed.4 +Republic v. Sunlife Assurance, ,- No. 158.85, 5ctober 16, 2..50 U on a"ment to t#e consignee o% an indemnit" %or t#e loss o% or damage to t#e insured goods, t#e insurer=s entitlement to subrogation ro tanto -- being o% t#e #ig#est e*uit" -- e*ui s it 'it# a cause o% action in case o% a contractual breac# or negligence. 2>urt#er, t#e insurer=s subrogator" rig#t to sue %or reco!er" under t#e bill o% lading in case o% loss o% or damage to t#e cargo is ?uris rudentiall" u #eld.4 $n t#e e&ercise o% its subrogator" rig#t, an insurer ma" roceed against an erring carrier. )o all intents and ur oses, it stands in t#e lace and in substitution o% t#e consignee. +Fe!eral "#press v. A erican $o e Assurance, ,- No. 15..96, August 18, 2..60 Resident Agent )#e $nsurance Code is *uite clear as to t#e ur ose and role o% a resident agent. 7uc# agent, as a re resentati!e o% t#e %oreign insurance com an", is tas(ed onl" to recei!e legal rocesses on be#al% o% its rinci al and not to ans'er ersonall" %or an" insurance claims. +S it%, Bell v. Court of Appeals, ,- No. 11.@@8, >ebruar" @, 19970