Lawyer's Perspective | Commercial insurance policyholders only pay part of the premiums, and how to bear the insurance liability
【Zhuhai Lawyer, Zhuhai Legal Consulting, Zhuhai Law Firm, Jingshi Law Firm, Jingshi Zhuhai Law Firm, Jingshi Zhengzhou Law Firm】
Special statement: This article is reprinted in Beijing Jingshi (Zhengzhou) Law Firm
The author of this article is lawyer Su Zhenghao
In the Chinese context, "insurance" is interpreted as a safe and reliable guarantee, and in the process of modern social development, it has gradually extended into a security mechanism, which is an important tool used by natural persons to plan their life finances, and has also become the basic means of risk management for legal entities under the conditions of market economy, and has increasingly become an important pillar of the financial system and social security system.
In 1999, the 14th Session of the Standing Committee of the Eighth National People's Congress passed the Insurance Law of the People's Republic of China (hereinafter referred to as the "Insurance Law"), which has since been amended several times and relevant judicial interpretations have been promulgated to improve the judicial application of the Insurance Law.
Article 2 of the Insurance Law stipulates that the term "insurance" as used in this Law refers to the commercial insurance behavior in which the insured pays insurance premiums to the insurer in accordance with the contract, and the insurer bears the liability for compensating for the property losses caused by the occurrence of accidents that may occur as agreed in the contract, or assumes the liability to pay insurance money when the insured dies, is disabled, is sick, or reaches the age and time limit agreed in the contract. It can be seen from this that the conclusion of a contract between the two parties has become the theoretical basis for the application of insurance clauses between the two parties. However, in judicial practice, litigation problems often arise when the insurance contract is concluded and the policyholder fails to pay the premium or the premium is insufficient. Based on the vast territory of the mainland, there are also different opinions on this issue, and this article will discuss the judicial practice of some provinces in China based on this issue and the payment of premiums.
1. Requirements for the establishment of an insurance contract
Article 13 of the Insurance Law stipulates that the insurance contract shall be established if the policyholder makes an insurance request and the insurer agrees to underwrite the insurance. The insurer shall issue an insurance policy or other insurance certificate to the policyholder in a timely manner. The insurance policy or other insurance certificate shall clearly state the content of the contract agreed upon by both parties. The parties may also agree to set out the contents of the contract in other written forms. An insurance contract established in accordance with the law shall take effect from the time of its establishment. The policyholder and the insurer may agree on the validity of the contract with conditions or a time limit.
It can be seen from this that the formation of a contract between the two parties in the Insurance Law is limited to the conclusion of the insurance contract, but Article 13 also stipulates that "the policyholder and the insurer may agree on the validity of the contract with conditions or a time limit." ”
That is, the insurance contract is a promise contract, and the policyholder and the insurer reach an agreement on the expression of intent through the offer and commitment, and the insurance contract is established. However, the parties may agree to limit the positive or negative conditions and time limits for the formation of the insurance contract, such as from the date on which the insured pays the premium, and if the construction project specifies the date on which the insured commences the insured project.
2. The insured has not paid the premium in full
In this part of the discussion, it should be made clear that the two parties have expressly signed the Insurance Contract and the policyholder has paid part of the premium, that is, this article does not discuss the situation where the two parties have signed the Insurance Contract but the policyholder has not paid the premium. The discussion of this issue can be classified according to the criteria of whether the payment of premiums is charged in stages in the Insurance Contract and whether the agreement affects the validity of the Insurance Contract.
First, the two parties expressly agreed that the policyholder did not pay the full amount under the segmented collection of premiums.
Article 14 of the Insurance Law stipulates that after the conclusion of an insurance contract, the policyholder shall pay the insurance premium as agreed, and the insurer shall begin to bear the insurance liability according to the agreed time.
In the author's opinion, in the discussion under this item, the phrase "in accordance with the agreement" here can be interpreted as "the payment of premiums clearly stipulates the form of installments", so if the policyholder fails to pay the full amount under this condition, the insurance company has reason to defend that the guarantee obligation under the insurance contract has been terminated due to the failure to pay the premium as agreed. However, what needs to be considered in judicial practice is that the signing of the Insurance Contract is generally based on the contract provided by the insurer, and there are situations where the people's court argues that "although the insurance clause involved in the case stipulates that the insurer shall not be liable for compensation before the policyholder pays off the premium, the insurance contract involved in the case is a standard contract".
Therefore, the judgment under this item should not only be combined with the contractual agreement on the payment of premiums in installments, but also whether the obligation of clear reminder and explanation can be fulfilled when the insurance contract sets the clause. If the party providing the standard clauses has the obligation to prompt or explain, it shall draw the attention of the other party to the clauses exempting or limiting its liability, and explain them in accordance with the requirements of the other party.
Second, the policyholder fails to pay the full amount under the failure to agree on the collection of premiums in stages.
For this part, the judicial practice in mainland China is mainly divided into two views:
(1) Assert proportional liability, that is, bear responsibility in proportion to the premium payable.
Article 2 of the Guiding Opinions of the Zhejiang Provincial High People's Court on Several Issues Concerning the Trial of Cases Involving Disputes over Property Insurance Contracts stipulates that if the property insurance contract stipulates that the payment of insurance premiums by the policyholder shall be a condition for the contract to take effect, and if the policyholder has paid part of the insurance premiums but has not paid them in full, the contract shall be deemed to have entered into force, and the insurer shall bear the insurance liability in accordance with the ratio of the insurance premiums paid to the insurance premiums payable. However, the insurer has notified the policyholder in writing to terminate the contract before the occurrence of the insured event.
It can be seen from this view that if the premium is not paid in full, then when the insurance liability is assumed, the paid premium and the unpaid premium should be agreed in proportion, and the insurer should determine the insurance amount when the insurance liability is assumed. For example, if the premium payable by the policyholder is 10,000 yuan, and the amount of the unpaid premium is 5,000 yuan, then when the insurance event occurs, the insurance company will bear 50% of the insurance amount paid.
(2) Once the contract has come into effect, the insurance contract shall be effective in its entirety, and the insurer shall bear all the liabilities.
Article 1 of the Notice of the Shandong Provincial High People's Court on Printing and Distributing the Opinions on Several Issues Concerning the Trial of Insurance Contract Dispute Cases (for Trial Implementation) stipulates that if the policyholder fails to pay the insurance premiums as agreed after the insurance contract takes effect, unless otherwise agreed in the contract, after the occurrence of the insured accident, the insurer cannot exempt the insured from the insurance liability on the grounds that the policyholder is in arrears of insurance premiums, but may deduct the outstanding insurance premiums. If the insurance contract stipulates that the insurance liability shall be borne in accordance with the proportion of the insurance premiums paid and the insurance premiums payable, such agreement shall be followed.
It can be seen from this that in the absence of a clear agreement on the treatment of underpayment of premiums, this view holds that whether the premiums are paid in full does not affect the insurer's assumption of insurance liabilities, and the deducted premiums are essentially the full performance of the policyholder's premium obligations.
III. The Supreme People's Court issued the "Minutes of the National Conference on the Trial of Civil and Commercial Cases by Courts" (Fa [2019] No. 254).
In November 2019, the Supreme People's Court issued the Minutes of the National Work Conference on Civil and Commercial Trial of Courts (Fa [2019] No. 254), which took effect immediately. This is the ninth meeting minutes issued by the Supreme People's Court, and it focuses on the trial of civil and commercial matters, so it is called the "Minutes of the Nine Peoples". In response to the issues discussed in this article, the minutes of the Ninth People's Republic of China respond in Article 97.
| "Minutes of the Nine Peoples" | "Minutes of the Nine Peoples" (Draft for Solicitation of Comments) |
| 97. [Contractual Validity of Failure to Pay Insurance Premiums in Accordance with the Agreement] Where the parties agree in the property insurance contract that the payment of insurance premiums by the policyholder is a condition for the contract to take effect, but it is unclear whether the effective condition is to pay the insurance premiums in full, and the policyholder who has already paid part of the insurance premiums claims that the insurance contract has already taken effect, the people's court shall support it in accordance with law. | 96. [Handling of Failure to Pay Insurance Premiums in Accordance with the Agreement] Where the parties agree in the property insurance contract that the payment of insurance premiums by the policyholder shall be a condition for the contract to take effect, and the policyholder has already paid part of the insurance premiums, it shall be deemed that the contract has taken effect. After the occurrence of an insured event, the insurer shall bear the insurance liability in accordance with the rules of the insurance premiums paid and the insurance premiums payable, and the people's court shall support it. |
In the author's opinion, the confirmation of the corresponding premium in the first view of the second part of this article is essentially that the insurance contract is partially established, and the cost of the insurance contract is also paid according to the amount of the part. The second view is to affirm the establishment and validity of the Insurance Contract, and on this basis, if there is an agreement in accordance with the principle of proportionality, then the handling of the issue shall be clarified in accordance with the strict contractual principle, and if there is no such part, the unpaid premiums will be deducted. At the same time, although the Insurance Contract is a contract between equal subjects, due to the public law nature of the Insurance Law, it also reflects the tendency of the relevant guidance provisions to protect the policyholder.
Combined with the above comparison, compared with the official draft, the minutes (draft for comments) stipulate a clear "proportionality principle" to bear the burden, but the handling method is deleted in the official draft, which only confirms the validity of the insurance contract between the two parties, but can also reflect the guiding spirit of the minutes.
4. Cases of the Henan Provincial District Court's judgment on this issue
When the author searched for relevant public legal documents through alpha with "underpaid premiums" and "Henan Province", the only public case so far is the Civil Judgment of the First Instance of the Property Insurance Contract Dispute between Xinxiang County Huihong Agricultural Planting Professional Cooperative and Xinxiang County Branch of Chinese Life Property Insurance Co., Ltd. [Case No.: (2019) Yu 0702 Minchu No. 5380] issued by the Hongqi District People's Court of Xinxiang City on November 22, 2019.
The court of first instance held that on the issue of whether the policyholder had paid the insurance premiums in full and whether the insurer was liable for compensation. (1) "Henan Province Wheat Planting Insurance" has the nature of financial subsidies, and its premium payment method is special, that is, 45% of the central financial subsidy, 30% of the provincial financial subsidy, 5% of the prefectural and municipal financial subsidies, and 20% of the county (district) financial subsidy Even if the state financial subsidies at all levels are not in place, it does not affect the insurer's assumption of insurance liability to the insured at the time of the occurrence of the insured event, and the two are not the same legal relationship, and the insurer may claim rights from the relevant departments separately. and deducted the unpaid judgment amount when the judgment amount was confirmed. [According to the insurance terms, the compensation amount = the maximum compensation standard per mu in the corresponding growth period at the time of the insured accident× the damaged area × loss rate, so the insurance money that the defendant should pay to the plaintiff is 800 yuan/mu ×100% × 1441.48 mu ×60%-386604.93 yuan - the defendant has paid 386,604.93 yuan - the plaintiff owes 15,294.86 yuan in premium = 290,010.61 yuan. After the original defendant of the first instance appealed, the Xinxiang Intermediate People's Court was guilty of the two copies of the "Henan Wheat Planting Supplementary Insurance (Commercial)" insured by Huihong Cooperative for failing to pay the premiums in full The judgment held that although the insurance clause involved in the case stipulated that the insurer would not be liable for compensation before the policyholder paid off the premium, the insurance contract involved in the case was a standard contract, and Huihong Cooperative was the insured of the insurance contract, and it did not participate in the conclusion of the contract, and the Xinxiang County Branch of Life Property and Casualty Insurance Company did not submit evidence to prove that it clearly informed Huihong Cooperative of the content of the insurance clause involved in the case, and based on the evidence involved in the case and the statements of both parties, it can be determined that after Huihong Cooperative paid the premium, the Xinxiang County Branch of Life Property and Casualty Insurance delivered the policy to it, and did not inform Huihong Cooperative of the premium payment in a timely manner, nor did it express its intention to disagree with the underwritingAccording to Article 4 of the Interpretation (II) of the Supreme People's Court on Several Issues Concerning the Application of the <> Insurance Law of the People's Republic of China, the insurance contract has been established and taken effect at this time, and the insurance company shall compensate in full in the event of an insured accident. The court of first instance upheld the court holding that the insurance contract involved in the case had been established, that the policyholder should pay the premiums to the insurer in full, that the insurer should bear the liability for settling claims, and that it was not improper to deduct the underpaid premiums from the compensation amount involved in the case. The appeal was dismissed and the original judgment was upheld.
summary
To sum up, the author believes that when faced with the problem that commercial insurance policyholders only pay part of the premium, our approach should be as follows:
First, confirm whether the people's court and the higher court at the place where the dispute between the two parties are located have issued relevant adjudication guidelines for similar cases;
Second, confirm that the "Insurance Contract" of both parties includes the terms of installment payment of premiums and insurance liability;
Third, confirm whether there is a possibility that the above clauses will be recognized as standard clauses when the two parties sign them.
Based on this approach, the litigation strategy and handling methods are comprehensively analyzed.
However, from the current judicial adjudication viewpoint, the comparison between the official draft of the Minutes and the draft for comments, and the legal basis behind the Insurance Law, the current overall adjudication thinking on this type of issue is still to take the protection of policyholders and beneficiaries as the starting point and the end point.
About the Author
Su Zhenghao
Lawyer of Beijing Jingshi (Zhengzhou) Law Firm
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Editor / Wang Mengnan
Review / Jin Fangzhou