On Plea For Consideration Of Payment Of Premium And The Assumption Of Liability

China's insurance law dose not clearly stipulate that as for disputes of insurance contract, if the insured makes late payment, whether and/or how the insurer shall undertake liability; local courts are not in agreement on that issue and thus have different understandings and judgments. The solution to that issue actually involves the plea relationship between the payment of premium and the assumption of insurance liability. The present thesis discusses several relevant theories and seeks the plea relationship between the payment of premium and the assumption of insurance liability, by contrasting and referring to the related regulations and insurance theories of other countries and regions under the continental legal system and on the basis of trial practice. In addition, this thesis tries to reveal the essential relationship between the payment of premium and the assumption of insurance liability, from the perspective of the consideration theory under the Britain and American's legal system, and proposes the author's suggestions on amending the insurance law.The present thesis comprises five parts to discuss the plea relationship between the payment of premium and the assumption of insurance liability. The first part concerns the absence of legislation regarding the plea relationship between the payment of insurance and the assumption of insurance liability. In trial practice, it dose not reach agreement that whether the insurer shall undertake liability or not if premium is overdue and the insured has an insured event in the overdue period: the first view thinks the insurer shall exempt from liability, because an insurance contract dose not come into force until premium is paid. The second view thinks the insurance contract is a sort of bilateral contract, so if premium is overdue the insurer shall perform the right of plea in advance and shall not take liability. In case of installment, if the initial installment has been paid and the second has not, the insurer shall take liability according to the proportion of the premiums that have been paid to the premiums that shall be paid. The third view thinks the insurance contract is a sort of consensual contract. After the establishment of the insurance contract, if the insured does not pay premium according to the contract, then they breach the contract and thus shall take liability. However, the insurer shall assume obligations as well, take liability and pay insurance compensation, but the premiums that shall be paid shall be deducted from compensation. As for that, the Insurance Law of the People's Republic of China lacks clear stipulations. In 2004, the Supreme People's Court decreed Interpretations of the Supreme People's Court on Certain Issues Concerning People's Courts'Trial of Insurance Dispute Cases (Draft for Soliciting Opinions). That judicial interpretation involves that issue, but the interpretation has not been launched, and the author thinks it is unreasonable to some extent. Because of the lack of relevant law, the solution of that kind of issues has to dependent on civil law theory. However, an insurance contract is after all greatly different from a commercial contract. As a result, there are different opinions about the plea relationship between the payment of premium and the assumption of insurance liability.The second parts includes whether the payment of premium is the essential component of the entry into force of a contract. In this part, the author discusses the premise of the plea relationship between premium and insurance liability, i.e. the insurance contract shall be real contract or consensual contract. In this part, the author introduces the relevant stipulations of other countries, and discusses why it is rational that China's insurance law stipulates the insurance contract shall be consensual contract. Firstly, there is no need to stipulate that the insurance contract shall be real contract. Society sharing is one of insurance contracts'qualities. Although the payment of premium is of great importance, it should not be stipulated as an essential component of the entry into force of a contract. At the same time, the using range of real contracts in social practice is smaller and smaller, and has logical contradiction. Recently, it is emphasized that real contracts shall criticize themselves; all the property contracts shall be consented, and there is no need to remain them as real contracts. As onerous contracts, insurance contracts shall not be stipulated as real contracts. Secondly, from the perspective of insurance practice, if insurance contracts are stipulated as real contracts, there will be some inevitable contradictions. If thus, since insurance contracts stipulate premium shall be paid by installment, then should the validity of contract begin on the day when the initial installment is paid or on the day when the second installment is paid? Secondly, if the second installment of premium is not paid, some theoretical contradictions will be caused. Thirdly, the stipulation that insurance contracts shall be consensual contracts is the common legislation case in most countries.The third part discusses the plea relationship between premium and insurance liability. This part reflects upon the system of the plea rights on simultaneous performance in China's insurance law. The applicability of the plea rights on simultaneous performance in the countries under the traditionally continental legal system doesn't require that both parties'obligations in the contact have no performing order. Instead, it only requires that the party who invokes the plea right does not have the obligations of performing the contract first. As for the performance in different time, parties shall invoke the plea rights on simultaneous performance and thus refuse payment. The plea rights against the advance performance are indeed a part of the plea rights on simultaneous performance. The word simultaneous in the plea rights on simultaneous performance in China's insurance law is different from that in the traditionally continental legal system. The author then discusses whether the plea rights on simultaneous performance apply to insurance law against three different theories, i.e. the affirmative theory, the negative theory and the neutral theory. The author agrees with the affirmative theory which thinks under the situation that premium is overdue, the insured may exercise the plea rights on simultaneous performance in order to plead against the other party's right of claim. The author discusses that in accordance with the applicable conditions of the plea rights on simultaneous performance from the view that the character of insurance contracts is absolute bilateral contract and whether there is a performing order between the two parties in an insurance contract.The forth part concerns the effects upon the assumption of insurance liability caused by the plea rights on simultaneous performance. As for the quality of the plea rights on simultaneous performance, most countries under the continental legal system adopt plea theory, so dose China. The exercise of right of claim is impeded by that of plea rights of the other party, but dose not disappear. As delayed payment, the insured's late payment breaches the contract. The insurer shall not reject insurance liability because of the plea rights on simultaneous performance, and nor do the courts adjudge that the insured is defeated and the insurer exempts from insurance liability. In this part, the author tries to discuss the plea relationship between the assumption of insurance liability and the payment of premium, from the perspective of the traditional consideration theory in the countries under the Britain and American's legal system, and tries to reveal the essential relationship between them. It is concluded that late payment dose not cause the loss of consideration, so the insurer shall not exempt from liability.The fifth part includes some legislation suggestions on the plea relationship between premium and insurance liability. In China, the insurance law stipulates insurance contracts are consensual contracts, the payment of premium is not the essential component of the entry into force of a contract, and overdue payment shall not lead to the insurer's exemption of liability. The author thinks that stipulation is legal but dose not conform to laws'equity and justice. Therefore, in the author's opinion, as for China's insurance practice, China's insurance law may adopt the Einl¨osungsprinzip in Germany's insurance law, retain Article 14 Section 1 of the Insurance Law, and add Section 2 that If an insured event happens when premium has not been paid, the insurer shall not undertake payment liability. The following are the specific reasons. Firstly, it can help prohibit moral risk. The foremost value of legal system lies in justice, which is the special embodiment of such ethical and moral concepts as equity, equality, justness etc. Laws have to focus on values beyond the contract freedom, and make necessary regulations. The adoption of the Einl¨osungsprinzip in Germany's insurance law is by no means one of the legal value orientations, shows that the state compulsory government in legal system focuses on moral elements as well, and thus may effectively prevent the insured from delaying the payment of premium deliberately. Secondly, such a stipulation also ensures the aim that the insurer gathers premium, which does not only show the rationality of stipulating insurance contracts as consensual contracts, but also realizes the legislation value of stipulating insurance contracts as real contracts. Thirdly, the effectiveness of special stipulations such as overdue payment shall cause the termination of insurance liability in an insurance contract between the insurance company and the insured is all along a puzzle. Adopting stipulations in Germany's law may avert relevant disputes and decrease disagreement.