Zhiheng Original | There was an accident on the way home from buying insurance, and the compensation was refused due to "effective at zero o'clock"? Guangdong High Court ruled like this → (with case)
Author | Attorney Luo Bingwen
Basic Facts of the Case
On May 11, 2017, at 17:13, Mr. Liang went to an insurance agency to renew his compulsory traffic accident liability insurance because his policy had lapsed. The insurance contract stipulated that the coverage would be effective from midnight the following day for a period of one year. After renewing his insurance, Mr. Liang was driving home when he struck Ms. Huang (the accident occurred at 5:57 p.m. on May 11, 2017), resulting in injuries to Ms. Huang. After negotiations between the parties failed, Ms. Huang filed a lawsuit against Mr. Liang.
After Liang compensated Huang in accordance with the final judgment, he requested that the insurance company assume its insurance liability; however, the insurance company refused to pay, citing the policy’s provision that coverage takes effect at “00:00” the following day. In desperation, Mr. Liang filed a lawsuit against the insurance company in court.
The court of first instance held that:
Case No.: (2018) Yue 06064 Min Chu 28599 Hao
First, whether the insurance period specified in the compulsory traffic accident liability insurance contract at issue constitutes an agreement between the insured and the insurer. According to Article 14 of the Insurance Law of the People's Republic of China: "After the insurance contract is concluded, the policyholder shall pay the insurance premium as agreed, and the insurer shall assume insurance liability at the agreed time."
According to the provision, the insurance period shall commence from the time agreed upon by both parties. So-called agreements imply that both parties have reached a consensus through negotiation. In this case, the defendant argued that the insurance period is calculated in accordance with industry practice, commencing at midnight on the day following the payment of the premium.Based on this, it can be inferred that the insurance period clause in the compulsory traffic accident liability insurance contract at issue was unilaterally drafted by the defendant.
In the litigation, the plaintiff stated that it received the insurance policy two days after paying the premium, while the defendant was also unable to submit, within the time limit set by the court, evidence demonstrating that the policy was delivered to the plaintiff immediately upon payment. Therefore, this Court accepts the plaintiff’s assertion that the insurance policy was delivered two days after the premium was paid. Although the “Important Notices” section of the policy states: “2. Upon receipt of this insurance policy, please verify it immediately; if there are any discrepancies or omissions, promptly notify the insurer and arrange for the necessary amendments or supplements.”
However, the traffic accident in question occurred 44 minutes after the plaintiff paid the premium but before the plaintiff received the insurance policy. In the absence of any evidence from the defendant demonstrating that it informed and obtained the plaintiff’s acknowledgment regarding the commencement date of the insurance period,It cannot be presumed that the insurance period specified in the compulsory traffic accident liability insurance contract at issue was the result of mutual agreement reached through negotiation between the plaintiff and the defendant.。
Second, the effective date of the compulsory traffic accident liability insurance contract in question.Article 13, Paragraph 1 of the Insurance Law of the People's Republic of China stipulates: "When an applicant submits an insurance request and the insurer agrees to provide coverage, the insurance contract is established." The insurer shall promptly issue an insurance policy or other insurance certificate to the insured.
"Accordingly, the time when the insurance contract is formed shall be the time when the insurer agrees to provide coverage; specifically in this case, it shall be the time when the defendant printed the policy, namely 17:14 on May 11, 2017.Article 13, paragraph 3 of the Insurance Law of the People's Republic of China also stipulates: "An insurance contract established in accordance with the law shall become effective upon its establishment."
The policyholder and the insurer may agree to subject the validity of the contract to a condition or a time limit."Accordingly, the effective date of the insurance contract shall be as agreed upon by the parties. Based on the foregoing discussion, the insurance contract in question stipulates that its effective date shall be 00:00 hours on May 17, 2017.However, the defendant failed to provide evidence that this effective date was an agreement reached through negotiation between the parties., shall bear the adverse consequences of failing to produce sufficient evidence.
Therefore,At the time when the compulsory traffic accident liability insurance contract in question becomes effective, it should also be presumed that no specific agreement exists; accordingly, the statutory rule that the contract takes effect upon its formation shall apply.It should take effect immediately upon the defendant’s agreement to provide coverage and the issuance of the policy.
Third, the insurance period—defined as the start and end dates of the insurer’s liability—is of paramount importance to the insured. In this case, the plaintiff’s compulsory traffic accident liability insurance policy for the preceding year expired at 15:56 on May 6, 2017; in other words, when the plaintiff paid the premium for the insurance policy at issue, the policy was no longer in effect.
In this situation, the plaintiff’s original intention in taking out the insurance should be that it takes effect immediately upon issuance; otherwise, there is a risk that coverage will not be available during the period before the new policy has officially come into force. The purpose of insurance is to protect the parties involved and to distribute social risks. As the insurer, the defendant should have a more professional understanding of the risks that may arise when a policy does not take effect immediately. In such cases, if the insurance contract is not effective upon issuance, the insurer should, in consultation with the insured, clearly specify the insurance period.
In this case, there is no evidence to show that the insurance period stated in the policy was agreed upon by both parties. To determine the commencement of the insurance liability based solely on the defendant’s unilateral declaration would be unfair.
In summary, in the absence of evidence demonstrating that the insured and the insurer reached a mutual agreement on the insurance period under the insurance contract at issue, the insurance period stated in the contract constitutes solely the insurer’s unilateral expression of intent and is not binding on both parties; accordingly, it cannot be used to determine the insurance period of the contract.
As the insured and the insurer did not make any special stipulation regarding the insurance period in the insurance contract at issue, the contract became effective upon its formation; accordingly, the insurance period shall be calculated from the time when the defendant printed the policy.Therefore, the insurance company shall assume its insurance liability within the scope of the policy.
After the first-instance court rendered its judgment, the insurance company, dissatisfied with the ruling, filed an appeal.
The second-instance court held that
Case No.: (2019) Yue 06 Min Zhong 2987
The court finds that, in light of the arguments and defenses presented by both parties, the central issue in this case during the second-instance proceedings is whether the insurance company is required to pay the insurance benefit to Mr. Liang. The insurance company contends that the accident in question occurred outside the policy period; therefore, it is not obligated to pay insurance benefits to Mr. Liang.According to Article 13, Paragraph 1 of the Insurance Law of the People's Republic of China, when an applicant submits an insurance request and the insurer agrees to provide coverage, the insurance contract is established.
Therefore, the time when an insurance contract is formed shall be the time when the insurer agrees to provide coverage. In this case, the establishment of the insurance contract does not necessarily coincide with the commencement of the insurance period.According to Article 14 of the Insurance Law of the People's Republic of China, after the insurance contract is concluded, the insured shall pay the insurance premium as agreed, and the insurer shall assume insurance liability at the agreed time.
Mr. Liang paid the premium at 17:13 on May 11, 2017. The insurance policy in question indicates that the insurance period runs from 00:00 on May 12, 2017, to 24:00 on May 11, 2018. It is in line with industry practice for an insurance company to commence its liability at midnight on the day the insured, Mr. Liang, pays the premium. As a rational commercial entity who has previously purchased compulsory traffic accident liability insurance, Mr. Liang should have been aware of the commencement date of the insurance period when conducting insurance transactions, and his payment of the premium should be regarded as an acknowledgment of the insurance period stipulated in the policy at issue.
Mr. Liang claims that he did not receive the policy until two days after paying the premium and only then became aware of the aforementioned insurance period; however, he has failed to submit any evidence to substantiate this claim, and such a contention is inconsistent with the customary practices of insurance transactions. Therefore, this Court does not uphold Mr. Liang’s assertion. Although Liang contends that the insurance period should commence upon his payment of the premium, he has failed to submit any evidence demonstrating that he and the insurance company reached a specific agreement to amend the commencement date of the insurance period to after the premium was paid. Consequently, he shall bear the adverse consequences of failing to meet his evidentiary burden.
Therefore, the insurance period agreed upon by both parties runs from 00:00 on May 12, 2017, to 24:00 on May 11, 2018. The court supports the insurer’s claim that it should bear insurance liability in accordance with this insurance period, as such a determination is consistent with both statutory provisions and the contractual terms. Since the accident in question occurred outside the insurance period, the insurer’s claim that it is not required to pay the insurance benefit to Mr. Liang is legally justified, and this Court upholds such claim. The original court’s judgment ordering the insurer to pay the insurance benefit to Mr. Liang was improper, and this Court hereby corrects that ruling.
After the second-instance court rendered its judgment, Liang filed a request for retrial, expressing dissatisfaction with the decision.
The retrial court holds that
Case No.: (2021) Yue Min Zai No. 108
This Court holds that, under the compulsory traffic accident liability insurance contract at issue, the insurer’s period of liability shall commence from the time it agrees to provide coverage, for the following reasons:
(I)Article 13, paragraphs 1 and 3 of the Insurance Law stipulates: “When an applicant submits an insurance request and the insurer agrees to underwrite it, the insurance contract is formed. The insurer shall promptly issue an insurance policy or other insurance certificate to the applicant. An insurance contract duly formed shall become effective upon its formation. The insurer and the insured may agree on conditions or time limits regarding the effectiveness of the contract.”，Article 14 stipulates: “After the insurance contract is concluded, the insured shall pay the insurance premium as agreed, and the insurer shall commence assuming insurance liability at the time agreed upon.”。
On May 11, 2017, Mr. Liang purchased compulsory traffic accident liability insurance from the insurance company. The premium was paid at 17:13, and the policy was printed at 17:14. At that time, both parties had reached a mutual agreement to conclude the compulsory traffic accident liability insurance contract, and the policy in question became effective. The parties did not make any special agreement regarding the effective date of the insurance policy. In accordance with the aforementioned provisions, the policy in question became effective upon its formation; however, the policy states that “the insurance period shall be from 0:00 on May 12, 2071, to 24:00 on May 11, 2018.” Based on this provision, between the time when the insured, Mr. Liang, paid the premium at 17:13 on the day of application and midnight of the following day, the insured vehicle would be uninsured, which would have a significant adverse impact on the interests of the insured and potential victims of traffic accidents.
The provisions regarding the insurance period were provided by the insurance company. However, the insurance company failed to prove that it had adequately notified and clearly explained to the insured the coverage lapse resulting from such provisions. In accordance with Article 17, paragraph 2, of the Insurance Law, “With respect to clauses in an insurance contract that exempt the insurer from liability, the insurer shall, at the time of concluding the contract, conspicuously mark such clauses on the application form, policy, or other insurance certificates, and provide a clear written or oral explanation of their contents to the insured; if no such notice or explanation is given, such clauses shall be deemed invalid.” Therefore, the provision in the policy concerning the insurance period is not binding on the insured, Mr. Liang. The insurance company’s liability shall be calculated from the time the insurance contract is formed and becomes effective, namely from the moment the insurance company prints the policy and indicates its consent to provide coverage.
The second-instance court held that the provision in the insurance policy concerning the insurance period is binding on both parties; however, its application of the law was erroneous, and this Court hereby corrects it.
(II) From the perspective of its function, compulsory traffic accident insurance not only helps disperse the risks of policyholders but also serves as an important mechanism for protecting the legitimate rights and interests of victims of road traffic accidents involving motor vehicles. The China Insurance Regulatory Commission has noted the issues arising from the provision in compulsory traffic accident liability insurance that sets midnight of the day following premium payment as the start of the insurance coverage period.In the “Notice on Strengthening the Management of Compulsory Motor Vehicle Liability Insurance Underwriting” (Document No. [2009]91 of the General Office of the China Insurance Regulatory Commission), issued in 2009, it was stated: “Due to the provision in compulsory motor vehicle liability insurance policies that coverage takes effect at midnight on the day following the date of purchase, some policyholders are not covered by such insurance during the period between the time of purchase and the official effective date of the policy.”
To ensure that victims of motor vehicle traffic accidents are effectively protected and to better leverage the role of compulsory traffic insurance in promoting road safety, insurers may include a special note in the “Special Provisions” section of the compulsory traffic insurance policy, specifying or affixing wording such as “effective upon issuance,” so that the policy takes effect immediately upon its issuance.
All companies shall strictly comply with the relevant provisions of the Regulations on Compulsory Motor Vehicle Traffic Accident Liability Insurance, shall not refuse or delay underwriting, and shall strengthen the management of compulsory motor vehicle liability insurance underwriting. They should also adopt appropriate measures to clearly define the start and end dates of the insurance period, so as to safeguard the interests of policyholders. From the perspective of fully realizing the functions of the compulsory motor vehicle liability insurance system, in principle, the insurer’s period of liability should commence upon the effective date of the insurance contract, unless otherwise agreed by the insured and the insurer.
In summary, the compulsory traffic accident liability insurance policy in question became effective when the insurance company printed the policy and thereby indicated its consent to provide coverage (at 17:14 on May 11, 2017). As the traffic accident occurred during the period of insurance liability, the insurance company is obligated to assume the corresponding insurance liability and shall pay the insurance benefit to Mr. Liang.
Ultimately, this case was concluded with a final judgment rendered by the Guangdong Provincial Higher People’s Court, pursuant to which the insurance company is obligated to pay the insurance proceeds to the insured.
Reference to similar Supreme People’s Court rulings supporting the insurer’s obligation to pay insurance benefits:
1. Guangdong Provincial Higher People’s Court: Cases (2017) Yue Min Re No. 124, (2017) Yue Min Re No. 443, and (2017) Yue Min Shen No. 1456.
2. Anhui Provincial Higher People’s Court: Case No. (2020) Wan Min Shen 184
3. Shandong Provincial Higher People’s Court: Case No. 96 of the Lu Min Ti [2015], Case No. 313 of the Lu Min Ti [2014]
4. Shanxi Provincial Higher People’s Court: Case No. (2018) Jin Min Re 96
5. Sichuan Provincial Higher People’s Court: Case No. (2019) Sichuan Min Zai 45
6. Guizhou Provincial Higher People’s Court: Case No. (2018) Qian Min Re 19
7. Jiangxi Provincial Higher People’s Court: Cases No. (2016) Gan Min Re 72, (2016) Gan Min Shen 565, and (2017) Gan Min Re 286.
8. Hubei Provincial Higher People’s Court: Case No. (2017) E Min Shen 844, Case No. (2015) E Min Shen Zi 01637
9. Fujian Provincial Higher People’s Court: Case No. (2017) Min Min Shen 782
10. Zhejiang Provincial Higher People’s Court: Case No. (2017) Zhe Min Shen 1182
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Introduction
Lawyer Luo Bingwen
Zhiheng (Foshan) Law Firm
Secretary-General of the 10th Foshan Lawyers Association Committee on Culture and Publicity
Secretary-General of the 11th Foshan Lawyers Association Committee on Rural Revitalization and Urban-Rural Social Governance
Member of the Eleventh Committee on Bankruptcy and Liquidation Law of the Foshan Lawyers Association
Member of the Industry Development Department, Zen District Lawyers Working Committee, 11th Foshan Municipal Lawyers Association
Since commencing practice in 2016, Attorney Luo Bingwen has provided comprehensive legal services to over 40 financial institutions, real estate enterprises, and growth-stage companies. His practice focuses on three core areas: compliance governance for financial institutions, end-to-end risk management for real estate enterprises, and the development of corporate legal advisory frameworks. Adopting a dual “law–business” perspective, he helps clients resolve complex practical challenges, addresses legal issues throughout the entire corporate lifecycle, and facilitates the balanced implementation of business objectives and regulatory compliance.
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