Insular Life Assurance v. NLRC and Melecio Basiao (G.R. No. 84484)


Petitioner Insular Life entered into a contract with respondent Basiao where the latter is authorized to solicit for insurance policies. Sometime later, the parties entered into another contract which caused Basiao to organize an agency in order to fulfill its terms. The contract being subsequently terminated by petitioner, Basiao sued the latter which prompted also for the termination of their engagement under the first contract. Basiao thus filed before the Ministry of Labor seeking to recover alleged unpaid commissions. Petitioner contends that Basiao is not an employee but an independent contractor for which they have no obligation to pay said commissions. The Labor Arbiter found for Basiao ruling that there exists employer-employee relationship between him and petitioner. NLRC affirmed.


Whether or not employer-employee relationship existed between petitioner and Basiao.

Ruling: NO.

In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees’ conduct — although the latter is the most important element. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term.

Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. None of these really invades the agent’s contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company.

The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action.

*In contrast to the case decided by the Court 10 years after, Insular Life Assurance v. NLRC and Pantaleon De Los Reyes.

Click here for the Pantaleon De Los Reyes case


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