Incoterms_® and Commercial Contracts

[Page690:]

[Page691:]

1. Introduction

Under China’s former system of central planning, the State alone financed and managed pensions, housing and social security, largely through the State enterprise system. Domestic insurance was not available during this period.¹

But the institution of a socialist market economy has required the implementation of new mechanisms to convert savings into investment. In the process, the concept of risk management has appeared in the Chinese regulatory framework.

While savings levels in China are very high, due in part to the ample provision of social services by the State through its enterprises, the share of these funds collected by insurance companies has been very low, even by the standards of other Asian countries, developed or undeveloped.²

Since the adoption of the policy of reform and opening-up, China’s insurance industry has experienced rapid growth. The market has seen a constant increase in the number of insurance products, a multiplication of insurance service networks, and the rapid development of an intermediary market. Participants in the insurance sector now include State-owned enterprises, Chinese private enterprises and foreign-invested insurers. Attention is increasingly turning to the creation of insurance products to meet broad social demands for medical care, for education, for housing, for care for the aged, etc.

On September 1, 1983, the State Council issued the regulations with respect to property insurance (the Property Insurance Regulations), which explicitly laid down the principles with respect to the making, alteration and transfer of insurance contracts as well as the obligations of policy holders and the insurer’s liabilities.³

In March l985, the State Council issued another document entitled the Provisional Regulations on the Management of Insurance Enterprises. They normalized the establishment of insurance enterprises, thus ending the previous tendency toward unbridled, uncoordinated opening of insurance enterprises. In order to guarantee a stable business environment, special emphasis was put on the solvency of all insurance enterprises.

On November 7, 1992, the Standing Committee of the Seventh National People’s Congress (NPC) passed the Maritime Law, of which chapter 12 concerns marine insurance contracts. This chapter stipulates the principles that govern the conclusion of marine insurance contracts. The Maritime Law was a forerunner of all other property insurance laws and regulations.

In order to build a strong foundation for further development of China’s insurance industry and fully protect the legitimate rights and interests of parties involved in insurance activities, the People’s Bank of China (PBOC) in October 1991 established a group to draft an Insurance Law. It was finally passed on June 30, 1995 and entered into effect on October 1, 1995.⁴ To facilitate its implementation, the PBOC, in January 1996, issued the provisional regulations on insurance management (the Insurance Management Regulations) as well as, on February 2, 1996, the regulations with respect to the management of insurance agents (the Insurance Agents Management Regulations), clarifying such matters as the qualifications, scopes of business, commission and fee structures, assessments, and the legal relationships between parties to insurance contracts.

In 1998, the China Insurance Regulatory Commission (CIRC) was established to take over the supervision and administration of the insurance industry from the PBOC. One of its main duties is to draft laws and regulations for supervising and administering the insurance industry. Rules formerly issued by the PBOC remain valid unless specifically overruled.

[Page692:]

To further the opening of the insurance industry after China’s accession to the World Trade Organization (WTO), the Insurance Law was amended on October 28, 2002.⁵ The amendments became effective on January 1, 2003.

Since China’s accession to the World Trade Organization (WTO) in December 2001, a large number of foreign insurance companies have entered the market, and formerly restricted sub-sectors have been opened to such foreign-invested insurers and brokers.

Overall, the Chinese insurance market remains contracted mostly on a non-admitted basis, that is, the market is essentially closed to the writing of policies in China without issuing a local policy, which would then be subject to local law. Examples of insurance written on a non-admitted basis include cargo risks in international trade, casualty risks for international travellers and product liability insurance on exported goods. In each case, the risks in China are considered either minor or transitory.

1.1. Hierarchy of insurance laws and regulations

Insurance laws and regulations fall into three categories depending on which of the three levels of institutions are their sources.

The highest authority is the Insurance Law in so far as it was adopted by the NPC and put into effect in the form of an order of the President of the State. Ranked second are the insurance regulations issued and implemented by the State Council. The third normative level includes insurance regulations issued during the first phase of reform by the PBOC, China’s central bank, and now by the China Insurance Regulatory Commission. Such regulations include for example the Regulations on the Administration of Foreign-invested Insurance Companies adopted on December 12, 2001 by the CIRC, which took effect on February 1, 2002.

Insurance laws and regulations provide important civil and commercial rules to ground legal relations between insurers and their insured and beneficiaries, and also to supervise the insurance industry.

According to article 153 of the Insurance Law, the Maritime Law is the primary source concerning marine insurance. For matters not covered in the Maritime Law, the provisions of the Insurance Law are applicable. Article 155 specifies that agricultural insurance is governed by separate laws and regulations.

On November 1, 2002, the State Administration of Foreign Exchange (SAFE) and the CIRC jointly promulgated temporary regulations with respect to foreign exchange in the insurance business. All property insurance in China must be written in renminbi, except:

• where the interest insured is located outside China,
• where the insured subject matter is moveable property destined to move onto and out of China’s territory,
• where both the insured and insurer are located outside China,
• where the interest in China arises from international leasing, loan or other financial facilities.

Casualty and medical insurance may be insured in foreign currencies where the insured is a Chinese national travelling abroad, or is a foreign legal entity or a foreign government, provided the beneficiary is domiciled outside China.

[Page693:]

1.2. Supervision and administration of the insurance industry

Before revision in 1998, the Insurance Law provided that the insurance industry fell under the financial supervision and administration department of the State Council. Article 4 of the Interim Regulations on the Administration of Insurance Companies explicitly designated in the role the PBOC’s insurance administration organ.

On November 14, 1998, the State Council issued the Circular on the Establishment of the China Insurance Regulatory Commission, establishing the principle of separation of the finance and insurance industries as well as of their regulatory frameworks. This Circular designates the CIRC as responsible for administration of commercial insurance and the uniform supervision of the insurance market.

According to the Memorandum of Understanding on Division of Responsibilities and Cooperation in Financial Supervision and Regulation among the CBRC, the CSRC and the CIRC, the scope of the latter’s responsibilities includes:

• formulating strategies, policies and plans for the development of the insurance industry; drafting relevant laws and regulations for the supervision and regulation of insurance activities, and enacting rules for the insurance industry;
• approving the establishment of insurance companies and their branches, insurance groups, insurance holding companies; approving in conjunction with relevant authorities the establishment of insurance asset management companies; approving the establishment of representative offices in China by overseas insurance institutions; approving the establishment of insurance intermediary companies (insurance agent companies, insurance broker companies, insurance and appraisal companies, etc.) and their branches; approving the establishment of overseas insurance institutions by domestic insurance and non-insurance entities; and approving the mergers, splits, changes, dissolutions, take-overs and assigned acceptances of insurance institutions; participating in and organizing the bankruptcy and liquidation of insurance companies ;
• reviewing and approving the qualifications of the senior managerial personnel of insurance-related institutions; formulating rules regarding the basic qualifications of insurance practitioners;
• approving the insurance clauses and premium rates of those insurance products that have a bearing on the public interest, approving compulsory insurance products and newly developed life insurance products; enforcing the filing of insurance clauses and premium rates of other insurance products;
• overseeing the solvency and conduct of insurance companies and the management policies of insurance guarantee funds; formulating regulations for and supervising the use of the insurance funds;
• overseeing the activities of self-insurance companies and mutual insurance companies; supervising insurance industry associations, insurance institutes and other insurance social organizations;
• investigating violations of insurance laws and regulations and imposing penalties in appropriate cases, including unfair competition by insurance institutions and practitioners, and investigations and sanction of non-insurance institutions’ direct or indirect operations of insurance businesses;
• supervising overseas insurance institutions established by domestic insurance and non-insurance entities;
  [Page694:]
• formulating standards for the insurance industry; improving risk assessment; tracking, analyzing, and predicting the performance of the insurance market; compiling statistics and statements concerning the insurance industry; and
• overseeing the daily activities of supervisory boards of the State-owned insurance companies according to related rules of the Central Committee of the Communist Party of China and purview of cadre administration.

The self-regulating China Insurance Trade Association was established on March 12, 2001, with the approval of the State Civil Administration. It is under the tutelage of the CIRC. Its members are insurance companies, insurance intermediaries, local insurance trade associations and actuaries. It is designed as a risk-prevention mechanism and is intended to provide self-discipline to the insurance industry. Its services to its members include the defence of their rights, coordination, communication and publishing.

1.3. Insurance market participants

Currently, there are over one hundred insurance companies with business operations in China, including both Chinese-invested and foreign-invested companies. China also counts some two hundred representative offices established by foreign insurance companies, many of which will be replaced by subsidiaries with full operational activities as the market further opens up. In addition, there are over 1,000 insurance intermediaries set up with the approval of CIRC, including insurance agents, insurance brokers and insurance loss adjustors.

1.3.1. Insurers

In China, insurers are subject to regulation along two vectors, one based on supervision and control of their activities by the CIRC and the other based on their contractual relationships with their insured.

According to article 71 of the Insurance Law, the establishment of an insurance company is subject to approval from the CIRC. Article 70 provides that insurance companies may be formed as joint-stock companies with limited liability or as wholly state-owned companies. Accordingly, article 3 of the Regulations on the Administration of Insurance Companies defines insurance companies as those commercial entities established with the approval of insurance regulatory organizations and registered in accordance with the law. Meanwhile, according to the Company Law, insurance companies can establish subsidiaries and branches.

Insurers’ contracts are characterized by the collection of premiums for promising indemnification after occurrence of the insured events.

Currently, there are four major insurance companies with nation-wide coverage.

[Page695:]

PICC Property and Casualty Company Limited. In 2002, the People’s Insurance Company of China (PICC), the oldest of China’s insurers (established in 1949), was transformed into a joint stock company with the approval of the CIRC. PICC became PICC Holding Company, which established PICC Property and Casualty Company Ltd. and PICC Asset Management Company Ltd. The holding company remains State-owned, it holds stocks in various listed companies and other financial organizations, and performs the function of asset-holder. PICC Property and Casualty Company Ltd is currently the largest non-life insurance company in mainland China. PICC is estimated to hold a 75% market share serviced by some 4,000 branches and 90,000 staff members. PICC has had shares listed on the Hong Kong Stock Exchange since 2003. AIG Group holds a 20% share of the company. China Life Insurance (Group) Company is a large State-owned financial insurance enterprise headquartered in Beijing. It evolved from PICC, People’s Life Insurance of China Co., Ltd. (1996) and China Life Insurance Company (1999). In 2003, the original China Life Insurance Company was restructured into the China Life Insurance (Group) Company, with the consent of the State Council and the approval of the CIRC. Its subsidiary, China Life Insurance Co., Ltd is China’s largest life insurer.

China Pacific Insurance (Group) Company Limited is an insurance, investment and holding group with separate operations for property insurance and life insurance (as under current regulations). It was established in 1991 and holds approximately 12% of the domestic market.

China Ping An Insurance (Group) Company Limited was founded in 1988. It is headquartered in Shenzhen. Its major wholly owned subsidiaries are Ping An Life Insurance Company of China, Ltd, Ping An Property and Casualty Insurance Company of China, Ltd and Ping An Old-age Insurance Co., Ltd. It also controls China Ping An Insurance Overseas (Holdings) Limited and Ping An Trust & Investment Co., Ltd which holds an equity interest in Ping An Bank Limited and Ping An Securities Company, Ltd. With insurance as its core business, Ping An has grown into a closely knit, efficient and diversified financial holding group that integrates securities, trusts and banking. Its foreign shareholders include Morgan Stanley, Goldman Sachs and HSBC.

Huatai Insurance Company of China Ltd is the first national joint-stock property insurance company in China, and was established on August 29, 1996. Its 60-plus initial shareholders are principally large, financially strong enterprises and enterprise groups, covering 24 industries including petroleum, power, metallurgy, electronics, chemicals, aviation, construction, light industry and shipping. The assets of Huatai’s shareholders are worth over RMB 1 trillion. Huatai was also the first property insurance company that included a foreign company as one of its shareholders. As a major shareholder and strategic cooperation partner of Huatai, ACE Limited has provided Huatai with support and assistance in many areas, enabling Huatai to adapt itself to international standards in both managerial expertise and operational standards.

New China Life Insurance Co., Ltd was founded in August 1996 with the approval of the State Council and the PBOC, and is a joint-stock life insurance company operating nationwide offering various life insurance, health insurance and accident insurance services.

[Page696:]

In September 1992, American International Group, Inc. (AIG) became the first foreign insurer permitted to carry on insurance business in China by obtaining business licences for its subsidiaries, American International Assurance Ltd and AIU Insurance Company to set up branches in Shanghai. AIA’s Shanghai Branch provides a series of life insurance products and services. AIU Insurance Company’s Shanghai Branch evolved from the property-casualty insurance organization of AIG Shanghai Branch and it provides various products, including property insurance, marine cargo insurance, liability insurance and other commercial insurance.

Allianz AG was approved to set up its first representative office in Beijing in January 1994 and subsequently established representative offices in Shanghai and Guangzhou. In 1998, it constituted Allianz Dazhong Life Insurance Co., Ltd and Dazhong Insurance Co., Ltd in Shanghai. On January 8, 2003, the first property insurance branch of the Allianz Insurance Group in China – Allianz Insurance Company Guangzhou Branch – was founded, and it formally commenced business on February 14, 2003. Allianz Insurance Company Guangzhou Branch provides clients with a series of property insurance and related reinsurance services including property loss insurance, liability insurance, transportation insurance and project insurance.

Other foreign insurance companies with offices in China include AXA, Chubb, Royal & Sun Alliance, Tokyo Marine and Fire Insurance, Wintherthur, Ming An, Mitsui Marine & Fire and Samsung Insurance, Zurich.

According to the Regulations with respect to the Establishment of Reinsurance Companies issued by the CIRC on September 17, 2002, reinsurance companies are subject to the CIRC’s approval.

The China Reinsurance Company, founded in 1999, was transformed on August 18, 2003 into China Reinsurance (Group) Company. Currently it is the only local reinsurance operator in China. The group is a financial holding company that mainly operates reinsurance business. It also is a founding investor in China Property & Casualty Reinsurance Co., Ltd, China Life Reinsurance Co., Ltd and China Continent Property Insurance Co., Ltd. Some multinational reinsurers have successively launched their China companies, such as Swiss Re and Munich Re.

1.3.2. Insurance intermediaries

Intermediaries in China’s insurance market mainly consist of insurance agents and insurance brokers.

Insurance agents are entities or individuals that have been authorized by an insurer to transact insurance business on its behalf, and that in return receive fees from the insurer.⁶

Insurance brokers are entities that provide intermediary services to applicants for insurance in the identification of insurers and the conclusion of insurance contracts, and that receive commissions for their services.⁷

[Page697:]

In order to standardize the operations of insurance agencies and their branches and protect fair competition, the CIRC issued on December 1 and 15, 2004 respectively the Provisions on the Administration of Insurance Agency and the Provisions on the Administration of Insurance Brokerage, which provide for supervision of agents and brokers in respect of their organizations, qualifications, agent relations and operations, etc. To address issues of civil liability arising from intentional torts and negligence, the CIRC issued the Circular on Matters of Applying for Career Liability Insurance by Insurance Agencies (Brokerages) on March 10, 2005, requiring agents and brokers to obtain liability insurance covering the scope of their business activities.

In addition to agents and brokers, loss adjustors intervene on the market to provide claim management and settlement as well as loss adjusting services.⁸ With the implementation of the Decision of the Standing Committee of the NPC on administration of judicial expertise,⁹ the role of insurance loss adjustors has become clearer and their influence as intermediaries on the insurance market reinforced.

1.3.3. Policyholders

Opposite insurers in insurance contracts there are the applicants, the insured and the beneficiaries. In respect of an insurance contract of cargo carriage, the contract may be transferred by endorsement. Legal persons, other organizations or individuals may subscribe property insurance. Individuals mainly contract life insurance.

[Page698:]

2. The Insurance Law

As the main legal basis for insurance activities, the Insurance Law not only provides for rights and obligations of the parties to an insurance contract, but also regulates every aspect of the insurance industry, including the establishment and management of insurance companies and the business activities of agents and brokers.

The current Insurance Law consists of 158 articles in eight chapters: general provisions, insurance contracts, insurance companies, rules governing the insurance business, supervision and control of the insurance industry, insurance agents and insurance brokers, legal liability and supplementary provisions.

2.1. Fundamental principles of the insurance regulatory framework

The objects of the Insurance Law are:

• to regulate insurance activities;
• to protect the legal rights and interests of the parties involved in insurance transactions;
• to strengthen the supervision and administration of the insurance industry;
  and
• to promote the insurance industry’s healthy development.¹⁰

Insurance activity is characterized by the act of payment of premiums in exchange for the promise of indemnification in the event of losses to property caused by a specific contingency, or death, injury or sickness of the insured before a stipulated age.¹¹

Insurance activities are to be carried on exclusively by companies set up in accordance with the Insurance Law¹² and approved by the CIRC.¹³

The Insurance Law covers commercial insurance including property insurance and insurance of individuals but does not apply to social insurance.¹⁴

All commercial insurance activities on the territory of the PRC fall within the scope of the Insurance Law.¹⁵ The law applies to Chinese-foreign joint equity insurance companies, solely foreign-funded insurance companies and branches of foreign insurance companies.¹⁶ Insurance within the territory of the PRC must be contracted with insurance companies within the territory.¹⁷

Insurance activities must be carried on in compliance with the social ethics and the principle of free will.¹⁸ Except as specially provided by law, no one may be compelled to purchase insurance. The exceptions include compulsory motor vehicle insurance covering third-party liability,¹⁹ social security (unemployment, medical, retirement), construction site accidents, and since January 1, 2004, all work-related accidents. Only locally registered insurers may write insurance relating to such compulsory programs.

[Page699:]

Insurers and their insured must abide by the principle of good faith in the exercise of their rights and the fulfilment of their obligations.²⁰ The principle of good faith permeates the whole course of insurance contracts, from the arrangements for their conclusion to claims for compensation, including claims settlement and the contract’s termination.²¹

Parties to insurance contracts must observe the principle of fair competition.²²

Insurance companies may only operate within the scope of business approved. Such a scope may include property insurance and life insurance, but no insurer may concurrently engage in both these activities. The only exception is that an insurance company engaged in property insurance may, upon approval by the CIRC, operate short-term health insurance and accidental injury insurance businesses. In addition, no insurance company may concurrently engage in business contrary to laws, regulations and rules. Insurance contracts in violation of these norms would be deemed void under article 52 of the Contract Law.

2.2. General principles applicable to insurance contracts

Insurance contracts are those whereby an insurance applicant pays premiums to an insurer, which bears an obligation of indemnification for property loss or damage caused by the occurrence of a contingent event identified in the contract, or an obligation to pay benefits when the insured person dies, is injured or disabled, suffers illness or reaches the age or time-limit agreed upon in the contract.

The insured refers to the person who is protected by the property or life insurance contract and who enjoys the right to make insurance claims. The subscriber may of course be the insured. The beneficiary refers to the party designated by the insured or the applicant as entitled to the insurance benefits. The applicant or the insured may also be the beneficiary.²³

Insurance contracts must be subscribed in accordance with the principles of fairness, mutual benefit, reaching agreements through consultation and free will without harming the public interest.²⁴

Applicants must have insurable interests in the insured subject matter (such as property and related interests or human life and body) and the existence of an insurable interest is a precondition for an insurance contract to take effect.²⁵ The primary purpose of insurable interest is to mitigate moral hazard. Although insurable interest is defined as the legally recognized interest that the applicant has in the subject matter of the insurance, it is not clear whether such an interest refers to a legal or an economic interest.

With respect to a contract of property insurance, insurable interest limits the indemnification for loss or damage, which serves to limit moral hazard. Where insurance covering individuals is concerned, insurable interest can be used to assess the propriety of the benefits. Applicants for insurance of individuals must possess an insurable interest when entering into the contract, whereas those insured on property insurance contracts must have an insurable interest on the occurrence of an insured event.

[Page700:]

2.3. Disclosure and misrepresentation

Prior to the conclusion of insurance contracts, insurers must explain terms and conditions of the contracts to their subscribers.²⁶ Also, the insurers must give precise and clear explanations to subscribers in respect of exclusion clauses lest they be of no effect.²⁷

Insurers and their staff are prohibited from:

• deceiving the applicant, the insured or the beneficiary;
• concealing from the applicant material information relevant to the insurance contract;
• preventing the applicant from making full and accurate disclosure or inducing him or her not to fulfil such an obligation;
• promising the applicant, the insured or the beneficiary to give premium rebates or other benefits that are not specified in the insurance contract; or
• fabricating insured events to obtain indemnities.²⁸

Other than the obligation to pay the premiums as due, the obligations of the insured principally arise in connection with its disclosures and representations.

While there is a theoretical divergence of views as to whether the obligation of the applicant corresponds to disclosure without limit or disclosure upon inquiry, most views incline towards the latter.

Specifically, the insurer has the right to rescind the contract if the subscriber has deliberately concealed facts or refused to make true representations or negligently failed to make representations that might materially affect the insurer’s decision to accept the contract or raise the premium. If an applicant intentionally fails to perform its obligation of honest disclosure, the insurer is relieved of its obligations of indemnification and the premiums received may not be returned. If an applicant negligently fails to perform its obligation of honest disclosure and this has a material effect on the occurrence of an insured event, the insurer may rescind the contract and is relieved of its obligations in connection with insured events that occurred prior to the revocation, but it may return the premiums paid.²⁹

2.4. Formation

Article 13 provides that an insurance contract is formed when an applicant applies for, and the insurer accepts, insurance under the terms and conditions agreed by both parties. On the surface, an insurance contract is formed when the insurer and the insured reach an agreement for the insurance. But article 13 also provides that insurers must issue policies or other certificates in a timely manner. Such policies may contain the insurance contracts. Insurance contracts may take other forms upon mutual agreement of the parties, but must in all cases be concluded in writing.

[Page701:]

2.5. Contents

The Insurance Law also provides that insurance policies or other insurance certificates must contain the contractual terms agreed upon by both parties, including the following particulars:

• the name and address of the insurer;
• the names and address of the applicant and the insured, and name and address of the beneficiary in case of insurance of people;
• the subject matter of the insurance;
• the scope of cover and exclusions;
• the period of insurance and commencement of liability of the insurer;
• the insured value;
• the amount insured;
• the premium and payment means;
• the means of payment of indemnity or insurance benefits;
• the liabilities arising from breaches of the contract and provisions for the resolution of disputes; and
• the day, month and year of the conclusion of the contract.³⁰

The parties may include other particulars, such as guarantee and deductible clauses.³¹

2.6. Modification and termination

According to article 21, during the period of validity of an insurance contract, the policyholder and the insurer may amend it by mutual agreement. Where amendments are made, the insurer must mark them on the original policy or other insurance certificates, or affix an endorsement slip thereto, or execute a written agreement with the applicant.

Except as otherwise stipulated in the Insurance Law or in their contracts, subscribers may terminate their insurance contracts at will,³² but insurers do not have that right.³³ In practice, most insurance contracts contain specific provisions on these matters.

2.7. Claims procedures

The efficiency of the claims-settlement procedure has a direct influence on whether indemnifications and payments are timely. Therefore, the law requires insurance subscribers, the insured, and beneficiaries to cooperate with insurers and requires that insurers make prompt decisions.

In the first instance, when the occurrence of an insured event is known to the policyholder, the insured or the beneficiary, they must notify the insurer in a timely manner.³⁴ In lodging claims for indemnification or benefits under insurance contracts, they must, to the best of their ability, provide the insurer with evidence relevant for ascertaining the nature, the cause and extent of the loss.³⁵

[Page702:]

On the other hand, insurers must investigate claims and notify the insured or the beneficiary of their decisions in a timely manner.³⁶ Insurers must indemnify or pay within ten days after agreement is reached with the insured or the beneficiaries on the amount of such indemnity or payment. If the insurer fails to fulfil its obligations in a timely manner, then in addition to payment of the amount insured, the insurer must compensate the insured or the beneficiaries for any consequent damage. If the insurer’s liability is certain while the amount of indemnification or of the benefits payment cannot be determined, it must make a provisional payment of the minimum amount due based on the evidence in hand within 60 days of receipt of a documented claim. The insurer must pay the balance after the amount of indemnification or of the benefits payment is finally determined.³⁷ In practice, late indemnifications are relatively rare.

If the insurer does not deem a contingency as insured, it must notify the insured or the beneficiaries.³⁸

On policies other than those for life insurance, the right of the insured or the beneficiaries to claim indemnification or payment of benefits lapses if the claim is not presented within two years from the date on which the insured or the beneficiary becomes aware of the occurrence of the insured event. The limitation period for life insurance is five years from the date on which the insured or the beneficiary becomes aware of the occurrence of the insured event.³⁹

2.8. Fraudulent claims

In the event of fraudulent claims, the Insurance Law provides for civil liability⁴⁰ as well as for criminal and administrative liabilities in serious cases.⁴¹

If the insured or the beneficiaries make claims for events that did not occur, the insurer has the right to terminate the insurance contract and not return the insurance premiums.⁴²

If subscribers, the insured or beneficiaries intentionally cause the occurrence of an insured event, except in cases of suicide,⁴³ insurers may terminate the insurance contract, they are relieved of any obligation of indemnification or benefits payment, and need not refund premiums. If, after an insured event occurs, the subscriber, the insured or beneficiaries are found to have forged or fabricated certificates or other evidence to misrepresent their causes or exaggerate the losses, the insurer need not compensate or pay the part of the claim that was falsified. Policy subscribers, the insured and beneficiaries that have obtained payments based on fraudulent claims must return the amounts received.⁴⁴

2.9. Policy interpretation

Insurance contracts are interpreted in the same manner as contracts in general. According to article 125 of the Contract Law, in the event that the parties cannot agree on the interpretation of a clause of the contract, its meaning is determined on the basis of the words and sentences used in the contract, related clauses in the contract, the contract’s object, trade practices and the principle of good faith.

[Page703:]

Considering that many insurance contracts are concluded on standard forms imposed by insurers due to their favourable negotiating position, article 31 of the Insurance Law requires that people’s courts or arbitration tribunals interpret disputed clauses in a manner “favourable to the insured and beneficiaries”. Judicial practice is generally conform with this requirement.

2.10. Reinsurance

The Insurance Law refers to reinsurance as insurance business undertaken by an insurer and partly transferred to other insurers.⁴⁵

Reinsurance underwriters may not demand payment of premiums directly from policy subscribers and the insured and beneficiaries may not lodge claims with reinsurance underwriters.⁴⁶ Insurers may not avoid or delay fulfilling their own obligations because of the non-performance of their obligations by reinsurance assignees.

Insurance companies seeking to reinsure risks must as a matter of priority contract with companies within the territory of the PRC.⁴⁷

Reinsurance companies may, with the approval of the CIRC, engage in outward reinsurance and/or inward reinsurance.⁴⁸

2.11. Assignments

An insurance contract may be assigned in any of three circumstances.

First, except as regards transportation insurance or where the parties have agreed otherwise, if the subject matter of insurance is assigned, and provided the insurer has been notified of the assignment and given its consent to continue its coverage, the parties to the contract may be altered.⁴⁹

Secondly, insurance contracts for the carriage of goods may be assigned by endorsement by the insured.⁵⁰

Thirdly, the law does not contain detailed provisions on the assignment of rights for making claims under an insurance contract. In line with basic principles of civil law, this may be considered permitted as long as laws do not provide to the contrary.

2.12. Post-contractual obligations

Prior to adoption of the Insurance Law, it was generally considered that the insured only had passive obligations, i.e. not to cause the occurrence of an insured event. The Insurance Law provides the insured with two positive obligations: the obligation “to ensure the safety of the subject matter of insurance”⁵¹ and the obligation “to notify increases in the degree of risk”.⁵²

[Page704:]

The insured must respect State standards pertaining to such subjects as fire prevention, safety, production operations and labour protection. In the event that the policy subscriber or the insured fails to fulfil these obligations, the insurer may seek an increase in the premium or it may terminate the contract. Insurers may inspect the safety conditions of the insured subject matter and they may make timely suggestions in writing so as to eliminate unsafe factors and latent risks. The insurer may also, with the consent of the insured, take preventive measures to ensure the safety of the subject matter of the insurance.

In addition, if the degree of risk relating to the insured subject matter increases during the term of the contract, the insured must notify the insurer in a timely manner, and the latter may ask for an increase in the premium or terminate the contract. If the insured fails to notify the insurer, the latter has no obligation of indemnification where the occurrence of the insured event is caused by the marginal risk.

[Page705:]

3. Property insurance

Property insurance contracts are those in which the subject matter is property and related interests.⁵³

In practice, property insurance generally covers risks of fire, thunder, lightning, explosion, bursting of water pipes, storms, hurricane, typhoon, cyclone, flood, hailstorm, rockslide, avalanche, earthquake, volcanic explosion, subsidence of ground, subterranean fire, crashing aircraft and parts/articles from aircraft. But clauses may be customized, and in some regions it would of course behove the insurer to exclude earthquakes, or floods, or typhoons as the case may be.

Foreign-owned companies may not insure risks arising from terrorism but it appears that some insurers will write policies covering such risks for Chinese companies.

3.1. Insured value

The insured value of objects insured must either be agreed upon between the policy subscriber and the insurer and specified in their contract, or be determined according to the actual value of the insured objects at the time when the insured risks occur. The insured amount may not exceed the insured value. If it exceeds the insured value, the part in excess is deemed to be invalid. If the insured amount is less than the insured value, and except otherwise provided, the insurer undertakes to pay compensation according to the proportion of the insured amount to the insured value.⁵⁴

In order to prevent the insured from purchasing insurance to obtain unjust interests, insurance subscribers entering into separate contracts with two or more insurers covering the same subject matter, the same insurable interests and the same insured event must give notice to all the insurers concerned, but no legal consequences for the failure to do so are stipulated. In the case of double insurance, the total insured value may not exceed the insurable value, and the insurers concerned indemnify in proportion to their share of the total insured amount.⁵⁵

3.2. Aversion and mitigation of insured losses

On the occurrence of an insured event, the insured must take all necessary measures to prevent or mitigate losses and damages. To encourage the prevention and mitigation of losses, the insurer is required by law to bear all necessary and reasonable expenses incurred by the insured after the occurrence of the event to prevent or mitigate losses within the limit of the insured value.⁵⁶

3.3. Termination of the contract

In the event of partial loss of the subject matter of insurance, the applicant or the insurer may choose whether or not to terminate the contract within 30 days after indemnification by the insurer. In the event that the insurer terminates the contract, the insurer must notify the applicant 15 days in advance of such termination and refund to the policy subscriber the premium for the portion of the insured subject matter that is not lost or damaged, after deducting the earned premium for the subject matter of the insurance which is not lost or damaged from the date of the commencement of the insurance liability to the date of termination of the contract.⁵⁷

A cargo insurance contract or an insurance contract covering carrier’s voyage may not be terminated by the parties subsequent to the commencement of the coverage.⁵⁸

[Page706:]

3.4. Subrogation

In order to prevent the insured from obtaining double indemnification, the Insurance Law has established a system of subrogation. The right of subrogation includes subrogation of the actual rights and subrogation of the claim.

After the occurrence of an insured event, if the insurer pays in full the insured value, it is vested with all rights pertaining to the lost or damaged insured subject matter. If the sum insured is less than the insured value, the insurer obtains rights pertaining to the lost or damaged subject matter of insurance pro rata of the amount paid to the insured value.⁵⁹

Upon the occurrence of loss or damage to the subject matter of the coverage caused by a third party, the insurer may, from the date when indemnity is paid to the insured, exercise by subrogation the right of the insured to demand indemnification against the third party up to the amount of indemnity paid. After the occurrence of the insured event, the insurer may, when paying indemnification, deduct amounts that the insured has received as compensation from third parties. The right to indemnification by subrogation exercised by the insurer may in no way affect the insured’s right to claim against third parties for the portion not covered by the insurer.⁶⁰

If, after the occurrence of the insured event and before the insurer pays the indemnity, the insured waives rights to indemnity against third parties, the insurer is relieved of the obligation to indemnify. After indemnification by the insurer, an insured’s waiver of its rights of indemnification against third parties is invalid. If the insurer is unable to exercise its right of subrogation due to the fault of the insured, it may deduct the amount of the loss from the indemnity.⁶¹

The insurer has no right of subrogation against any family member or staff member of the insured unless the occurrence of the insured event has resulted from the wilful misbehaviour of such a party.⁶²

When the insurer exercises the right of subrogation against a third party, the insured must provide it with necessary documentation and relevant information of which they have knowledge.⁶³

Subrogation for marine insurance is more particular, and covered in Section 3 (Provisions for Exercising the Right of Subrogation by Marine Insurers) of Chapter XIII (Trial Procedures) of the Special Maritime Procedure Law. Under this provision, the insurer is only entitled to claim compensation in its own name against third parties up to the amount of the indemnity paid. Therefore, subrogation of claims is considered to be of the same nature as their assignment.

[Page707:]

4. Life insurance contracts

Article 52 defines a life insurance contract as one in which the subject matter is a person’s life or body.

4.1. Insurable interest

To guard against moral hazard, the Insurance Law makes specific provisions pertaining to the insurance interest in the contract of insurance of the person. Policy subscribers must have an insurable interest that they are deemed to have with respect to:

• the policy subscribers themselves,
• their spouses, children and parents, and
• members of their families or blood relatives other than those specified in the preceding paragraph toward whom the policy subscribers have support obligations.

If the insured agrees to let the policy subscriber sign the contract, the latter is deemed to have an insurable interest in the insured.⁶⁴

4.2. Declaration of age

If the applicant does not correctly declare the age of the insured, and the actual age of the insured does not fall within the age limit specified in the contract, the insurer may, except where the contract has been in existence for more than two years, terminate the contract and refund the premiums to the subscriber after deducting service charges.⁶⁵

Errors in the calculation and collection of insurance premiums usually accompany the incorrect declaration of age. In the event that the policy subscriber has wrongly given the age of the insured, thus entailing underpayment of the premiums, the insurer may claim the balance, or when paying insurance benefits, reduce subsequent payments. In the event of overpayment of premiums, the insurer must refund the overpaid portion to the policy subscriber.⁶⁶

4.3. Payment on death

Insurance with death as a condition for payment of benefits may not be subscribed for persons without capacity for civil acts. This restriction does not apply to parents applying for life insurance for their minor children. However, the total amount of payment for death may not exceed the limit prescribed by the CIRC.⁶⁷

Contracts stipulating death as the condition for payment of benefits are invalid unless the insured agrees in writing with the amount of insurance. Such contracts may not be transferred or pledged without the written consent of the insured.⁶⁸

[Page708:]

4.4. Payment of premiums

Policy subscribers undertake to pay the premium to insurers in accordance with the contractual stipulations regarding time, place, amount and method of payment.⁶⁹

Policy subscribers may either pay the whole of the premium at once or pay by instalments in accordance with the terms of the contract, in which case the first instalment must be paid at the time of the contract’s conclusion.⁷⁰

This requirement does not, however, exclude grace periods for late payment of succeeding instalments. It is generally considered necessary to grant a grace period in cases of unintentional negligence or economic difficulties. Where contracts include such stipulations, they are applied. Otherwise, if instalments are 60 days overdue, the contract may be suspended, or the insurer may reduce the insured amount.⁷¹

Suspended contracts may be reinstated upon agreement between the insurer and the policyholder after outstanding premiums are paid. However, insurers may also terminate contracts if no agreement is reached within two years from the date of suspension. When the policyholder has paid the premiums for at least two years, the insurer must refund the cash value of the policy in accordance with the contract. If the policyholder has paid the premiums for less than two years, the insurer must refund the premiums after deducting its service charges.⁷²

Insurers may not pursue premiums by bringing suits before the people’s courts.⁷³ In this sense, insurance premiums are considered as savings. They are accumulated by the insurer in order to fulfil its obligation of paying benefits in the future. So premiums due to the insurer do not constitute debt. When required to pay premiums, the policyholder may choose to continue to pay premiums in order to maintain the contract, or decide not to pay so as to terminate the contract.

4.5. Beneficiaries

Article 22 defines beneficiaries as those designated by the insured or the policy subscriber to claim the benefits. In appointing beneficiaries, policy subscribers must obtain the approval of the insured.⁷⁴ Policyholders and the insured may change beneficiaries without their consent.⁷⁵ The policy subscriber, the insured or third parties may all be beneficiaries. However, if policyholders or beneficiaries intentionally cause or attempt to cause the death, injury or sickness of the insured, they forfeit their rights to claim benefits.

After the death of the insured, the insurance proceeds are treated as the legacy of the insured and paid to his/her heirs if:

• no beneficiaries are designated;
• all the beneficiaries die before the insured; or
• the beneficiaries lose the right to the benefits by law or by forfeiture and there are no other beneficiaries.⁷⁶

In cases of suicide by the insured within two years of subscription of the contract, the right to benefits is lost but the insurer must return the premiums.⁷⁷

[Page709:]

If the insured deliberately commit crimes that lead to their own injury or death, insurers may not pay the benefits, though, if the premiums have been paid for more than two years, they return their cash value.⁷⁸

If a person covered by life insurance is injured or becomes sick, or dies due to the acts of any third party, the insured or the beneficiaries respectively have the right to claim compensation against the third party, not the insurer.⁷⁹

If a contract is terminated by the policyholder after paying premiums for more than two years, the insurer must return the cash value of the policies within 30 days from receipt of the notice of termination. If premiums have been paid for less than two years, the insurer must return the premiums after deducting their commissions.⁸⁰

[Page710:]

5. Other types of insurance

5.1. Liability insurance

Liability insurance refers to insurance for which the subject matter is the insured’s liability to indemnify a third party.⁸¹

A key issue in liability insurance concerns direct claims of the third party. The Insurance Law briefly provides that the insurer may, in accordance with the provisions of law or the terms of an insurance contract, directly indemnify a third party for loss or damage caused by the insured. This invests the insurer with an option, but does not affirm the third party’s right to directly address claims to the insurer.

Article 168 of the Civil Aviation Law endows third parties with direct claims against the insurer. Article 97 of the Special Maritime Procedure Law affirms the direct claim of an aggrieved third party against the insurer liable for oil pollution damage.

If the insured on a liability insurance contract is brought to arbitration or court due to the occurrence of an insured event that causes loss or damage to a third party, the insurer, unless provided otherwise in the contract, bears the cost of such arbitration or legal proceedings and other necessary and reasonable expenses paid by the insured.⁸²

5.2. Credit insurance

Article 92 characterizes credit insurance as property insurance but does not give any further definition. It is commonly considered as including commercial credit insurance and guaranty insurance. In the former, the subject matter is the insurer’s liability to indemnify the creditor against defaults due to bankruptcy or dissolution of debtors, or due to governmental actions, etc. The latter contracts guarantee the fulfilment of obligations.

The Export Import Bank of China provides export credit insurance for all terms.⁸³

5.3. Marine insurance

According to its article 153, the Maritime Law applies to marine insurance. The Insurance Law applies only to fill gaps in the provisions of the Maritime Law. Contracts of marine insurance are those under which the insurer promises, in exchange for premiums paid by the insured, indemnification for losses, whether total or partial, of the insured subject matter as well as for liabilities of the insured, caused by perils at sea.⁸⁴ The covered perils mean any maritime perils agreed upon between the insurer and the insured, including perils occurring on inland rivers or on land that are related to maritime ventures.

[Page711:]

6. Insurance regulation

Chapter IV of the Insurance Law and Chapters III and V of the Regulations on the Administration of Insurance Companies stipulate the operating rules governing insurance companies and the use of insurance funds.

6.1. Scope of business

According to article 92 of the Insurance Law, the scope of business of an insurance company covers:

• property insurance, which includes insurance against loss or damage to property, liability insurance and credit insurance; and
• personal insurance, which includes life insurance, health insurance and accident and injury insurance.

An insurance company may only carry on activities within its scope of business approved by the CIRC. Similarly, reinsurance business may, subject to approval by the CIRC, be carried on in outward and inward insurance.⁸⁵

Insurers may not carry on property insurance and life insurance concurrently.⁸⁶

6.2. Insurance agents and brokers

Insurance companies must conclude written agreements with their agents⁸⁷ and they are responsible for their acts in the course of such business. In particular, where agents commit acts beyond the scope of their actual authority but in conditions of apparent authority, their insurers are liable for their acts while being entitled to claim against the insurance agent.⁸⁸

Insurance agents may not accept contracts with more than two insurers at the same time.⁸⁹

Brokers may be held liable to compensate policy subscribers for losses arising from their faults.⁹⁰

Article 131 of the Insurance law prohibits that agents and brokers:

• deceive insurers, insurance subscribers, the insured or beneficiaries;
• conceal any important information about an insurance contract;
• prevent the insurance subscriber from performing its obligation of faithful disclosure, or induce it not to perform such obligation;
• promise an insurance subscriber, insured party or beneficiary any interest other than those stipulated in the insurance contract; or
• use their administrative power, position or the advantage of their profession or any other illicit means to force or induce the insured to sign insurance contracts.

[Page712:]

Insurance agents and brokers must acquire the qualifications required by the CIRC. They must obtain specific business permits from the CIRC’s competent office as well as register with the administrations for industry and commerce. They must provide required guarantees or take out professional liability policies covering their insurance activities.⁹¹

Insurance agents and brokers must dispose of their own premises. They must keep their own accounts and records. They must accept supervision by the CIRC.⁹²

Insurance agency and broker commissions may only be paid to those with legal qualifications.⁹³

Insurance companies must provide training for their agents, including to promote their respect of professional ethics and to improve the quality of their services. They may not abet or mislead agents in violations of good faith.⁹⁴

Insurance and brokers must submit to investigations by the CIRC and must submit to it within three months of the end of each fiscal year a copy of their operations reports and financial and accounting reports.⁹⁵

6.3. Supervision and administration of insurance activities

Insurance clauses and rates for insurance that concerns the public interest or for compulsory or newly developed categories of life insurance must be submitted to the CIRC for approval. The insurance supervisory authorities render their decisions by application of the principles of protection of public interests and prevention of unfair competition. All other insurance clauses and insurance rates must be recorded with the competent CIRC department.⁹⁶

The CIRC uses an index system to monitor the minimum payment capacity of insurance companies.⁹⁷

The CIRC may investigate insurance companies and require communication of their internal documents including bank records.⁹⁸

Where an insurance company’s financial situation is in default with respect to any standards imposed by the CIRC, the latter may order remedial measures. If the default remains uncorrected, the CIRC may designate employees or send in outside personnel “to carry out its reorganisation”. The CIRC decision must state the reasons and the time limit for completion and it must be published.⁹⁹ During the CIRC intervention, business may be continued as usual under the new management,¹⁰⁰ or the CIRC may suspend policy writing or any part of the concerned company’s operations.¹⁰¹ Upon successful completion of the overhaul, a report is filed with the CIRC declaring the intervention terminated and the company may resume its independence.¹⁰²

If an insurance company has violated the Insurance Law and jeopardized the public interest and where there exists a serious threat to the company’s capacity to meet its financial obligations, the CIRC may take it over definitively. The purpose of such a takeover would be to implement measures necessary to protect the interests of the insured and return the company to normal operating condition. Its liabilities are not intended to change due to the take-over.¹⁰³ A company may be controlled in this manner for a maximum of two years.¹⁰⁴ If the take-over does not restore the health of the company, an application is filed with the court to have it declared bankrupt.¹⁰⁵

[Page713:]

Insurance companies must file with the CIRC:

• within three months after the end of each accounting year, their operations report and financial and accounting report and related statements;¹⁰⁶ and
• at the end of each month, its operational statistics of the preceding month.¹⁰⁷

Insurance companies must employ actuaries who have been approved by the CIRC.¹⁰⁸

Business reports, accounting reports, actuarial reports and the like must faithfully record insurance operations, and they may not contain any false entries, misleading statements or major omissions.¹⁰⁹

Insurers and the insured may have recourse to qualified independent appraisers, who must make impartial appraisals and who are liable for deliberate wrongs and negligence in carrying out their duties.

6.4. Prudential norms

Insurance companies must be managed in a steady and safe manner while seeking to maintain or increase the values of their assets.¹¹⁰

In order to safeguard the interests of the insured and insurers’ capacity to meet their indemnification liabilities, insurers are obligated to constitute reserves for contingent liabilities,¹¹¹ reserves for losses on outstanding contracts,¹¹² shareholder reserves¹¹³ and special insurance reserves.¹¹⁴ In addition, insurance companies must maintain a minimum capital (“actual assets minus actual liabilities”) set down by the CIRC in proportion to the size of its business.¹¹⁵

Under article 99 of the Insurance Law, net annual retained premiums of property insurers must not exceed four times their total paid-up capital and shareholder reserves.

According to provisions of article 84 of Regulations on the Administration of Insurance Companies, the amount of actual reimbursement capacity of insurance companies is calculated as the balance after deduction of approved liabilities from approved assets. To improve the technical supervision of reimbursement capacity, the CIRC published reports on December 25, and December 26, 2004 respectively on the Regulations on Editing and Dissemination of Reimbursement Capacity and the Practical Guide for Editing and Dissemination of Reimbursement Capacity. The rate of reimbursement capacity equals the actual reimbursement capacity divided by the amount of minimum reimbursements.¹¹⁶

In order to promote steady and healthy operations, article 100 integrates the requirements of reinsurance. The liability borne by an insurance company for each risk unit, that is, the liability of an insurance company that might arise from the maximum loss or damage caused by the occurrence of a single insured event, may not exceed 10% of the total of its paid-up capital and its accumulated funds. Reinsurance must be arranged for the portion in excess of this amount. In addition, plans for managing very large calamities should seek to limit and spread their risks.

[Page714:]

6.5. Uses of funds

Insurance companies’ uses of funds are limited to: bank deposits, government bonds, financial bonds, enterprise bonds, securities investment funds, and other uses allowed by the State Council.¹¹⁷

On October 24, 2004, the CIRC and the China Securities Regulatory Commission (CSRC) jointly issued the Provisional Regulations on the Administration of Stock Investments of Insurance Institutional Investors, allowing insurance capital to directly enter the securities markets. The CIRC and SRC published together on February 15 – 17, 2005 the Circular Concerning Relevant Problems of Stock Investment and Transaction by Insurance Institutional Investors, the Business Guide of Insurance Investment Registration and Settlement by Insurance Institutional Investors, the Guidance on Trusteeship of Stock Assets of Insurance Companies (for trial implementation), and the Circular Concerning Relevant Problems of Stock Investment of Insurance Funds, addressing such issues as the administration of securities accounts, transactions in securities, clearance procedures, asset trusteeship, ratios applicable to direct investments of insurance funds, risk supervision over insurance funds invested on stock markets.

6.6. Liabilities for insurance infractions

Finally, in addition to respecting the principle of good faith and fulfilling their disclosure obligations, insurance companies and their staff must not commit any of the following acts:

• deceiving insurance subscribers, the insured or beneficiaries;
• preventing subscribers from carrying out their obligations of making a full and accurate disclosure or inducing them not to fulfil such obligations;
• promising subscribers, insured or beneficiaries to give them premium rebates or other benefits that are not specified in the contract; or
• making up an insured event that never occurred to obtain the insured amount.¹¹⁸

In addition, under the Regulations on the Administration of Insurance Companies, insurance companies and their staff members may not:

• force in any manner or in disguised form a subscriber to purchase insurance¹¹⁹;
  or
• persuade or induce a subscriber or an insured party to cancel an insurance contract with other insurance institutions.¹²⁰

The administrative fines range between RMB 50,000 and RMB 300,000 for insurance companies and insurance agents and brokers, and from RMB 20,000 to RMB 100,000 for their delinquent employees.¹²¹

[Page715:]

Those who carry on insurance activities without the required approvals are exposed to criminal pursuits in serious cases. Otherwise, the administrative penalties include confiscation of the illegal gains, fines ranging from one to five times the illegal gains, or if the illegal gains are less than RMB 200,000, fines ranging from RMB 200,000 to RMB 1,000,000.¹²²

Insurance companies and their staff that carry on activities outside the scope of the company’s approved objects may in serious cases be pursued under the criminal law. Otherwise, they must return any wrongfully collected premiums, illegal gains will be confiscated and they face administrative penalties including fines ranging from one time to five times the illegal proceeds, or if the illegal proceeds are less than RMB 100,000, a fine ranging from RMB 100,000 to RMB 500,000. If the violations are not corrected within a prescribed time limit or have caused serious consequences, the insurance company’s operations may be ordered to be suspended or its insurance business permit may be revoked.¹²³

In any of the following violations of the Insurance Law, the CIRC may order remedial measures and concurrently impose fines ranging from RMB 50,000 to RMB 300,000 and, where the case is serious, the violator’s business scope may be limited or new operations may be suspended or the insurance operation permit may be revoked:

• a failure to draw and deposit guarantee funds or the use of guarantee funds in violation of the regulations;
• a failure to fund various kinds of liability reserves or failure to fund reserves for outstanding losses according to the provisions of the Insurance Law;
• a failure to draw insurance guarantee funds or public accumulation funds;
• conduct of re-insurance business contrary to the regulations;
• the operation of funds of an insurance company in violation of applicable rules;
• the establishment of subsidiaries or representative offices without approval;
• partitions or consolidations without approval; and
• failure to submit to the CIRC insurance clauses or rates of the categories of insurance subject to examination and approval.

Anyone who provides false reports, statements, documents or materials or who refuses or obstructs the supervision according to law are subject to criminal sanctions in serious cases and, in other cases, to administrative fines ranging from RMB 100,000 to RMB 500,000. In serious cases, the business scope of insurance companies may be limited or new operations suspended or the insurance operation permit may be revoked.¹²⁴

Any violation of a provision of the Insurance Law that causes damages to others gives rise to civil responsibility.¹²⁵

---

---