By: Abg. Miguel Angel Saltos, Mgs .
Case Summary
The appeal judgment that is the subject of this analysis corresponds to Judgment No. 69-2010 (Judgment No. 288-07 ex 1st Chamber) of Civil, Commercial and Family matters, of the National Court of Justice (published in Special Edition No. 356, October 31 , 2012).
The appeal was filed by Eduardo Mahauad Witt, legal representative of Mahauad Asociados Agencia Asesora Productora de Seguros Cia . Ltda., against the ruling handed down by the First Civil and Commercial Chamber of the Superior Court of Justice of Quito. This ruling confirmed a previous ruling that dismissed the plaintiff’s claim in a lawsuit for breach of contract against Colonial Compañía de Seguros y Reaseguros SA
The appeal is based on the allegation that the lower court ruling did not correctly apply the provisions of the General Insurance Law, Resolution SB-INS-99-440 and the Civil Code.
The text of the norm of Resolution SB-INS-99-440 in force at that time to which the sentence refers is the fifth paragraph of Article 19, which mentioned the following: “the commissions generated by the placement of an insurance contract They can only be received by the insurance agent without a relationship of dependency or insurance producing advisory agencies that have managed the placement of the insurance policy, without prejudice to the fact that the agency contract with the insurer has been unilaterally terminated”.
The central issue of the case is the interpretation and application of the norms related to the perception of commissions by the insurance agencies, and if these are maintained even after the termination of the agency contract. The issue to be resolved focuses on a communication made by Mahauad Asociados Cia . Ltda. where they reported that they were withdrawing from insurance advice and brokerage for EMAAP-Q.
The analysis and resolution of the Chamber
Therefore, the Chamber, among the points of analysis, had the task of determining the scope and effects of this communication in relation to the norms of Art. 19 of the Resolution of the Superintendency of Banks SB-INS-99-440.
It is important to take into account that there was an agency contract between Colonial Compañía de Seguros y Reaseguros SA and Agencia Productora de Seguros Mahauad Asociados Cia . Ltd.
The conflict arises when the insurer does not pay the commissions owed to the Insurance Production Agency, which total approximately $90,000.
The Chamber, through the analysis of the documents presented and evidenced in the judicial process, identifies the following points of interest:
- Two insurance agency contracts are identified between Mahauad Asociados and Colonial Compañía de Seguros y Reaseguros SA, where the first company offers advisory services and placement of insurance contracts for the second, with commissions established based on contracts or complete contract renewals. paid.
- Mahauad Asociados obtained for Colonial a package of insurance policy contracts for the Empresa Metropolitana de Alcantarillado y Agua Potable de Quito (EMAAP-Q), valid for three years from September 1999 to September 2002.
- In August 2000, Mahauad Asociados notified its decision to withdraw from insurance consulting and brokerage for EMAAP-Q and its intention to assign its legal rights as “Insurance Producer” to whomever EMAAP-Q may designate in the future. This decision was also communicated to Colonial.
- Regarding the payment of pending commissions, inquiries were made to the Superintendency of Banks and Insurance. A report was received stating that an insurance advisor who managed and placed the insurance contract cannot be deprived of the commissions that are derived during the term of the policies. The assignment of commissions requires the presentation of a solemn document.
- It is emphasized that the contract between Mahauad Asociados and Colonial is a valid and binding instrument, in accordance with articles 1561 and 1562 of the Civil Code, which establish that contracts must be fulfilled in good faith and are binding on the parties.
- In accordance with the provisions of the agency contracts signed between the parties in this lawsuit and the regulations issued by the Superintendency of Banks on the activities of insurance underwriters, it was determined that the agency had permanent obligations to the client and the insurer during the term of the contract; in such a way that when separating from the advice before the expiration of the corresponding contract term and stop providing such services, for equity, the agency does not have the right to receive one hundred percent of the commissions that it claims.
Considering all these points, the Chamber ruled that it was appropriate to set aside the contested judgment and instead issue the merits one, for which it partially accepted the claim and ordered that the defendant Colonial Compañía de Seguros y Reaseguros SA pay the plaintiff Mahauad Asociados Agencia Asesora Insurance Producer Cia . Ltda. the sum of US$ 67,500 for the commissions that are the subject of this lawsuit.
Analysis and comments of the case
The world of insurance law is full of unique and complex cases that defy standard legal interpretation, one example being Judgment No. 69-2010 that we are analyzing in this article. As we can see, the center of this legal dilemma is the perception of commissions by the insurance agencies, specifically after the termination of the agency contract.
The legal norm in force at that time that regulated the right to collect commissions from insurance brokers was Article 19 of Resolution SB-INS-99-440, which generally established that the commissions of an insurance contract can only be be received by the insurance agent who managed the placement of the policy, regardless of the unilateral termination of the agency contract.
Currently, the activities of insurance producing agencies are regulated by THE STANDARD FOR THE EXERCISE OF THE ACTIVITIES OF INSURANCE PRODUCER ADVISORS, INSURANCE EXPERTS AND REINSURANCE INTERMEDIARIES (Resolution SCVS-INS-2020-0008, published in the Registry Official 248, 17-VII-2020). Specifically, on the subject referring to the right of insurance advisory agents to collect their commissions in those cases in which the insured has designated another insurance broker, Art. 9.6 establishes the following:
“(…) 9.6 The commissions, in the case of insurance policies with annual validity or shorter term, whose premium payment is made according to the term or conditions agreed in the policy, will be paid to the insurance producer adviser who has commissioned them. initially managed, even when the insured has appointed another insurance producer advisor during the term of the insurance contracts. It will correspond to the new insurance producer adviser to receive the commissions generated from the renewals or extensions of validity, when the validity period of the initial contract has expired”.
The rule establishes that commissions can be received “without prejudice to the fact that the agency contract with the insurer has been unilaterally terminated.” This provision may seem fair in principle, but in practice it can generate certain problems. For example, if an insurance agent decides to unilaterally terminate the agency contract with the insured, is he still entitled to receive all commissions generated during the term of the contract, even if he has not completed all his contractual obligations? This ambiguity can create a potential conflict of interest.
To understand the concept of charging commissions by insurance agents, it is essential to understand the nature of the insurance contract and your relationship with the insurance agency. An insurance contract is an agreement between an insurance company and an entity or individual, with the insurance agent acting as an intermediary. The agent receives commissions as compensation for their services, which generally involve the placement and administration of insurance policies.
However, the legislation varies regarding the remuneration of these insurance agents. Some jurisdictions, such as Ecuador, allow insurance agents to charge commissions even after termination of the contract with the insurance company, recognizing the vital role they play in purchasing insurance policies.
The right to charge commissions by insurance producing advisory agents, however, has been the subject of debate. According to Daniel Schwarcz in “A Products Liability theory for the Judicial Regulation of Insurance Policies “, there is a legal argument that once an agent ends their relationship with an insurance company, they lose their right to commissions on the policies they immediately helped place.
In contrast, a number of scholars, including Robert E. Keeton in ” Insurance Law – A Guide to Fundamental Principles , Legal Doctrines and Commercial Practices “, argue that agents should be entitled to commissions even after the termination of their relationship with the insurance company. They argue that this right compensates for the effort and time that the agent invested in acquiring the insurance policy.
In conclusion, the right to collect commissions by insurance producing advisory agents is a complex area that continues to evolve with changes in the legal landscape and business practices. Legal rules are required to help balance the rights of insurance agents with the interests of insurance companies and policyholders. As commission structures and regulation in the insurance industry change, it is imperative that these issues are addressed to provide clarity and fairness to all parties involved.
Abg. Miguel Angel Saltos, Mgs .: miguel.saltos@lince-saltos.com
