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A Study On The Insurers’ Statutory Rights To Rescind Insurance Contracts

Posted on:2010-02-07Degree:DoctorType:Dissertation
Country:ChinaCandidate:H J LiFull Text:PDF
GTID:1226330332985549Subject:Civil and Commercial Law
Abstract/Summary:PDF Full Text Request
The system of the rescission of insurance contracts is one of the most important systems in insurance law. Meanwhile, the insurers’ legal rights to rescind insurance contracts is the core component part in rescission of insurance contract system. The insurers’ legal rights to rescind insurance contracts is the right that comes into being in two situations, that is, if the insured breaches the duty of disclosure, which is sufficient to affect the acceptation or premium rates, due to intention or negligence, or, if there is the false declaration on insured’s age which overruns the contractual provision, due to insurance applicant’s intention or gross negligence. In order to balance the interests between the insured and insurer, insurance laws of many countries present the tendency that there is more and more limitations on the insurer’s rescinding right, which is based on the breach the duty of disclosure of the applicant. The major limitation is close confinement on the conditions of insurers’ legal right to rescind contracts, including on subjective condition and objective condition. As a right of rescind contract on insurance law, statutory rescind right of insurer, involving exercise and forfeit, existing the features are differing from the general rescind contract right, because of the characteristic of insurance contract. The author, therefore, explores these issues in details, on purpose to propose the legislation and result the dispute on emergence and exercise conditions of statutory rescind right of insurer.ChapterⅠis about the basic theory of statutory insurer’s rescind-right. First of all, combining with the conceptions of rescind-contract and terminate-contract on civil law, the author defines rescind-insurance contract and insurance contract rescind-right separate precisely. Through exploration on statutory insurer’s rescind-conditions on China Insurance Law, the author points out that the existence condition on statutory insurer’s rescind-right just occurs in the situations that is the insurer could rescind the contract when insurance applicant breaches the disclosure obligation due to intention or gross negligence.The consequences of breach the disclosure obligation have developed from invalidation to rescinding, with the development of the obligation on disclosure. In the period of immense disclosure obligation, the false applicant was subject to severe consequences, that is, if applicant false to disclosure objectively, insurer may claim contractual invalidation, regardless of whether it is subjective false, so there is not the existence of the rescind-right. Comparatively, in the period of limited disclosure obligation, the disclosure depended on the content of questionnaire, and if applicant false to disclose the material facts, insurer could rescind the contract. The exercising effect of the insurer’s legal right of cancellation is mainly reflected on insurer’s bearing of insured liability and return of premium. The insurer shall not bear the liability for premium payment if the insurer exercises the legal right of cancellation before the insurance accident. After the insurance accident, the legal effect produced by the insurer’s exercise of right of cancellation and insured liability borne by the insurer shall be confirmed by the examination on the purposed or unintentional failure of the policy holder on disclosing or falsely disclosing whether there is causality between the important fact and insurance accident. If the policy holder intentionally breaks the duty of disclosure, and the insurer cancels the contract before the insurance accident, the insurer shall not return the premium; after the insurance accident, no matter whether there is causality between the fact of no disclosure and insurance accident, the insurer shall cancel the contract without returning the premium or bear the liability for premium payment. It’s the punishment on the subjective intention of the policy holder that the insurer refuses to return the premium. If the policy holder breaks the duty of disclosure due to culpable negligence, and the insurer cancels the contract before the insurance accident, the insurer shall return the collected premium to the policy holder in full amount; after the insurance accident, only when there is causality between the fact of no disclosure and the insurance accident, the insurer shall cancel the contract, return the premium in full amount without bearing the liability for premium payment, if there is no causality between the fact of no disclosure and insurance accident, the insurer shall not cancel the contract and shall bear the liability for the premium payment. If the policy holder breaks the duty of disclosure due to general negligence, and the insurer cancels the contract before the insurance accident, the insurer shall return the collected premium to the policy holder in full amount.Chapter II discusses the establishment conditions of the insurer’s statutory right to rescind the insurance contracts. This Chapter is divided into two parts as regards to the insurer’s statutory right to rescind the insurance contracts before and after the insured incidents occurrence.Before the occurrence of an insured incident, the exercise of the insurer’s statutory right to rescind the insurance contracts shall meet the objective and subjective conditions at the same time. Objective conditions refer to that whether the insurance applicant or the insurant has performed the obligation of telling the material fact about the insured subject matter, which is enough to affect the insurer’s decision on whether to underwrite the contract or raise the insurance premium. The judgment of so-called ’material fact’ is the key factor in deciding the establishment of objective conditions. material fact in the insurance law is consist of subject and relational elements. We judge whether subject element belongs to material fact by the standard of prudential insurer. Such standard is a objective working-out standard, referring to insurers with same knowledge and insurance experiences as general insurers in the market. Thus, those facts enough to affect general insurers’ decision on whether to underwrite the contract or raise the insurance premium at the market may constitute important facts. Relational elements include "impacts" and "incentives". That is, such elements have decisive impacts on a prudential insurer’s decision on whether to underwrite the contract or reduce the insurance premium, and in reality entice the insurer to underwrite the contract or reduce the insurance premium. Only such facts may constitute important facts. Subjective conditions mean that the insurance applicant or the insurant has the intention or negligence. It is recognized in various nations’legislature that the insurer has the right to rescind the insurance contract if the insurance applicant fails to perform the obligation of telling the truth intentionally or for grow negligence. Yet, there still lacks an unanimous opinion on whether the general negligence of the insurance applicant will enable the insurer to exercise the right to rescind the insurance contract or not. The insurance applicant’s failure to perform the obligation of telling the truth for general negligence may also be an important reason for the insurer’s wrong decision. Therefore, the insurer may still rescind the insurance contract before an insured incident occurs if the insurance applicant fails to perform the obligation for general negligence, or ask the insurance applicant to add the insurance premium in proportion to the premium that shall be paid in accordance with important facts so as to maintain the validity of the insurance contract. And both subjective and objective conditions must be met. They are indispensable to the exercise of the insurer’s right to rescind the insurance contract.After the occurrence of an insured incident, the establishment conditions of the insurer’s right to rescind the contract lie in whether there is a cause and effect relation between the material fact and the insured incident. As for this issue, there are three modes:causality mode, noncausality mode and principle of proportionality mode. Noncausality mode applies when the insurance applicant fails to perform the obligation of telling the truth intentionally. That is, if the insurance applicant fails to perform the obligation of telling the truth intentionally, then no matter the truth has causality with the occurrence of the insured incident or not, the insurer has the right to rescind the contract in any case. And the causality mode applies when the insurance applicant fails to perform the obligation of telling the truth for gross negligence. That is, if the insurance fails to perform the obligation of telling the truth for gross negligence, only when such truth has causality relation with the occurrence of the insured incident can the insurer rescind the contract. If there is no causality relation, the insurer still has to pay the insurance applicant the insurance money. And the principle of proportionality mode applies when the insurance applicant fails to perform the obligation of telling the truth for general negligence. That is, if the insurance applicant fails to perform the obligation of telling the truth for general negligence, the insurer has no right to rescind the contract and still has to pay the insurance money. But the insurance money paid shall be reduced in proportion to the margin between the premium actually paid and the premium shall be paid if the truth is told. If the important facts that the insurance applicant or the insurant fails to tell are non-insured facts, and the insurer can prove that the insurer will refuse to underwrite the contract if the insurance applicant or the insurant performs the obligation of telling the truth, then the insurer can rescind the insurance contract with insurance liability lifted.The insurer’s statutory right to rescind the insurance contract may not be established because of certain exclusive matters as follows. First, the insurer knows or should have known the important facts that the insurance applicant does not tell or does not tell the truth. Second, the important facts that the insurance applicant does not tell or does not tell the truth are facts needless to tell, including those facts may be deduced from the already known facts, facts guaranteed by the insurance applicant or the insurant and the facts that may lower the insurance risks. Third, the insurer gives up the right to require the insurance applicant of important facts. That is, the insurer gives up the right to require the insurance applicant of telling the important facts, or ask the insurance applicant to provide further information.Chapter III discusses the exercise of insurer’s legal right of cancellation. The subject of insurer’s legal right of cancellation shall be the insurer, and the insurer is the rightful subject of insurer’s legal right of cancellation. The insurer shall be the insurance company with certain assets scale, therefore, the confirmation of the insurer as the exercising subject of insurer’s legal right of cancellation is actually the judgment on whether the legal representative of the insurer, the employees of the insurer and the insurance agent can be the exercising subject of the right of cancellation. Although the legal representative of the insurer conducts the civil activity on behalf of legal person, the behavior shall be deemed as the behavior of the legal person, the legal representative shall not be directly engaged into the specific business, therefore, the legal representative shall not be the exercising subject of the insurer’s legal right of cancellation. The employee of the insurer can be the exercising subject of the right of cancellation only when the insurer expressly grant him with the right to cancel the insurance contract, which is known by the third party through certain form. The general agent of the insurer shall be the exercising subject of the right of cancellation, while the soliciting agent has no right to cancel the contract. In term of the exercising subject of insurer’s legal right of cancellation, when the policy holder signs the insurance contract through the agent, if the policy holder is a person with no legal capacity or a person with limited civil capacity, the exercising object of the insurer’s legal right of cancellation shall be the legal agent; if the policy holder is a person with full civil capacity, the insurer can exercise the legal right of cancellation to the policy holder or the authorized agent. The insured will become the exercising object of the insurer’s legal right of cancellation when knowing that the policy holder signs the insurance contract and specific situation of relevant insurance contract. Upon the decease of the policy holder, the insurer shall exercise the right of cancellation to his successor, however, if there are several successors, and he insurance contract parties have no stipulation on this, the insurer’s cancellation of contract shall be expressed to all the successors.The insurer’s legal right of cancellation shall be exercised in the form of written notification in principle, and the cancellation of insurance contract shall be effective after the notice of contract cancellation arrives at relevant party. The duty of disclosure is the pre-contract obligation, and the insurance contract doesn’t come into effect when the policy holder breaks the duty of disclosure, therefore, the insurer shall not exercise the right of cancellation before the insurance contract is formed. Whether the insurer can exercise the right of cancellation before the commencement of insured liability cannot be generalized, generally speaking, the commencement date of insured liability shall be later than the effectiveness date of the insurance contract. The insured liability period doesn’t begin, therefore, the insurer shall not bear the insured liability for the insurance accident before the commencement of the insured liability. If the insurance parties stipulate that the insurer bears the insured liability as of certain time before the insurance contract is formed, the commencement time of insured liability shall be before the establishment of the insurance contract, therefore, therefore, if the policy holder breaks the duty of disclosure when signing the insurance contract, the insurer shall exercise the right of cancellation. The insurer shall exercise the right of cancellation if knowing that the policy holder breaks the duty of disclosure after the insurance accident.The exercising effect of the insurer’s legal right of cancellation is mainly reflected on insurer’s bearing of insured liability and return of premium. The insurer shall not bear the liability for premium payment if the insurer exercises the legal right of cancellation before the insurance accident. After the insurance accident, the legal effect produced by the insurer’s exercise of right of cancellation and insured liability borne by the insurer shall be confirmed by the examination on the purposed or unintentional failure of the policy holder on disclosing or falsely disclosing whether there is causality between the important fact and insurance accident. If the policy holder intentionally breaks the duty of disclosure, and the insurer cancels the contract before the insurance accident, the insurer shall not return the premium; after the insurance accident, no matter whether there is causality between the fact of no disclosure and insurance accident, the insurer shall cancel the contract without returning the premium or bear the liability for premium payment. It’s the punishment on the subjective intention of the policy holder that the insurer refuses to return the premium. If the policy holder breaks the duty of disclosure due to culpable negligence, and the insurer cancels the contract before the insurance accident, the insurer shall return the collected premium to the policy holder in full amount; after the insurance accident, only when there is causality between the fact of no disclosure and the insurance accident, the insurer shall cancel the contract, return the premium in full amount without bearing the liability for premium payment, if there is no causality between the fact of no disclosure and insurance accident, the insurer shall not cancel the contract and shall bear the liability for the premium payment. If the policy holder breaks the duty of disclosure due to general negligence, and the insurer cancels the contract before the insurance accident, the insurer shall return the collected premium to the policy holder in full amount.When the policy holder intentionally discloses or falsely discloses the important fact, the co-competition of the insurer’s legal right of cancellation and insurer’s right of cancellation is produced. The co-competition of the two rights shall adopt " ", that is, the legislation purpose, chief establishment condition and legal effect are different, each right has the key part that the other doesn’t have, as the independent system, the insurer can choose according to the demand. Chapter IV focuses on the termination reasons of the insurer’s statutory right of renouncement. The insurer’s statutory right of renouncement is also the right of formation limited during the scheduled period. The incontestable clause is the unique termination reason of the life insurance contract that roots in the characteristics and functions of the life insurance and the needs for the development of the insure industry. The incontestable clause is compulsorily applicable that even the insurer does not bring this clause into the contest of the insurance contract, the law will also make it become a part of the contract applicable universally. The legislative intent of the incontestable clause is to prevent the moral hazard of the insurer, to supervise the insurer to fulfill his or her obligations and to protect the benefits of the insurer and the beneficiary.The incontestable clause is applicable to the life insurance and the health insurance and is not applicable to the property insurance and liability insurance in all kinds of insurances. And defining from the time range, the applicable time frame of the incontestable clause should be reckoned from the date issuing the insurance policy that the insurer does not exercise the right of renouncement in two years from the date issuing the insurance policy, the right of renouncement should be extinguished and the insurer proposes the counterplea again for this reason. The applicability of the incontestable clause is limited to a certain extent that the insurance coverage or the dispute of the exclusion clause is not applicable to the incontestable clause; serious fraud of the insurant is not applicable to the incontestable clause; the false insurance contract or the invalid insurance contract is not applicable to the incontestable clause; the non-fulfillment of some obligation of the insurant is not applicable to the incontestable clause. Under Chinese insurance law, the incontestable clause is applicable to the life insurance, health insurance and accident/injury insurance, which shall not be included in the general provision of the insurance contract; in addition, the restriction on the applicability of incontestable clause should be added to our insurance law.Waiver and estoppel are important reasons for termination of insurers’ right of cancellation. Waiver in insurance law and other regular contract law is not of essential difference. Both should have the basic elements of the concept of waiver. The constitution of insurer’s right of cancellation mainly makes up of subjective elements and objective elements. Subjective elements refer to the awareness of relative facts and right while the subjective elements refer to the specified actions of the insurers to waive. As far as objective elements are concerned, an insurer intentionally is aware of relative facts and rights and fails to terminate the contract with justifiable reasons or with other defense arguments. There are two major sources of awareness, one from the insurer himself and the other from the insurance agent. The content of awareness is something that the insurer is liable for informing the policy-holder or the insurant. As far as subjective elements are concerned, insurer’s waiver should be specified which can be ostensive, implied, positive or negative. In case that policy-holder or the insurant fails to fulfill the obligation of informing, the insurer’s collection of insurance premium and issue of insurance contract should be regarded as the insurer’s waiver. There should be some restrictions on insurer’s waiver manifesting on restrictions of public interest, relative facts, insurance scope, and items in insurance contract etc.Estoppels should also have some suitable conditions, that is, the awareness of the insurers or the dependence and damage of the insured. The words and deeds of the insurers make the rational insured according to appearance judge that the insurers know themselves having the right of rescission or other defense causes existed, the reliance of the insured is reasonable. Just confidence in words and deeds of the insurers is not enough, it also based on the insured making related behavior on the words and deeds of the insurers. And if it allows the insurers withdrawing the previous words and deeds, there will cause damage to the insured. The general situation occurred to the estoppels mainly have the following kinds, the insurers are fully aware that the insured have some untrue statement, conditions or guarantee violation, etc., which could rescind the contracts in the insurance policy, they still deliver and receive premium; the insurance agent deliberately forge the answers of the insured in the proposal form, and the insured don’t know. The insurers and agents make wrong classification on identity or career of the insured, and the insured don’t know or agree. Establish waiver and estoppel system in the insurance law of our country. Because the relationship of waiver and estoppel is close, both are limitation on the insurer rescission rights or defense rights. Their actions are basically identical, established unified waiver system can be more strong operability, On the concrete setting, there need reference related rules, it doesn’t have to indicate waiver or estoppel. In scope of application of insurance nonvoting and limited aspects, there should reference of British and American legislation related the regulations.
Keywords/Search Tags:Insurer’s Legal Right to Rescind The Insurance Contracts, Material Circumstance, The Duty of Disclosure, Exercise of insurer’s legal of cancellation
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