Standard Insurance mulls contempt charges vs LTO

MANILA, Philippines – Standard Insurance Co. Inc. is threatening to file contempt charges against the Land Transportation Office (LTO) for blatantly disregarding a temporary restraining order (TRO) issued last Dec. 2.

The TRO, issued by the Makati Regional Trial Court Branch 65, stops the implementation of Memorandum Circular AVT-2015-1975, also known as the Reformed Comprehensive Third Party Liability (RCTPL) auto insurance.

Standard Insurance counsel Reynaldo G. Geronimo said in a statement that they were contemplating filing contempt charges against LTO officials headed by Assistant Secretary Alfonso Tan Jr. for not complying with the court order.

According to Geronimo, they learned from press statements and in LTO’s website that Tan and the agency’s bids and notices section proceeded in appointing national administrators despite of the TRO penned by Judge Edgardo M. Caldona.

“Such action by the LTO in the accreditation of the administrators is a clear violation of the TRO and LTO, together with Tan, could be cited for contempt of court,” Geronimo of the Romulo Mabanta Buenaventura Sayoc and De Los Angeles Law Firm, said.

It was also revealed that in Dec. 4, the LTO proceeded with provisions of the memorandum circular seeking to appoint two administrators for the issuance of the RCTPL.

In Dec. 7, the LTO in its website indicated that three firms out of eight that applied for the two administrator positions, had been considered. The three were: Malayan Insurance Co. Inc., Pioneer Insurance and Surety Corp., and AlliedBankers Insurance Corp.

Eventually, Malayan Insurance and Pioneer Insurance were recommended to be the administrators for the RCTPL.

Geronimo said the designation of administrators is in excess of LTO’s jurisdiction and the circular infringes upon the constitutional provision against monopolies and restraint of trade under Section 19, Article XII of the Constitution.

The administrators, based on the memorandum circular, will be transformed into insurers issuing the CTPL, and that all participating insurance companies will be transformed into mere re-insurers of the specific auto insurance business.

Insurers argued that 90 percent of the premiums will go to the administrators and the LTO. The other insurers originally issuing CTPLs will be taking home breadcrumbs in the form of reduced premiums.

Likewise, Standard Insurance and the Philippine Insurers and Reinsurers Association (PIRA) argued that the process violates the mandate and powers of the Insurance Commission, the only government entity that governs the country’s insurance industry. PIRA is the only recognized organization of the country’s non-life insurance industry.

LTO statistics indicate that premiums will steadily increase from P3.7 billion in 2012 to P8.3 billion by 2016, or from 7.4 million vehicles in 2012 to nine million in 2016.

That means greater opportunities for insurers under the present set-up or dramatically lower if the memorandum circular is implemented.