The assignment of insurance subject has always been an important concept in the insurance law, but there have been a variety of disputes over the issue. The assignment of the subject of property insurance was one of the key issues for revision of the PRC Insurance Law in 2009. Another was Interpretation IV of the Supreme People’s Court on several issues concerning the application of the PRC Insurance Law. These issues raise the question, can every insurance subject be assigned? In the business, covering guarantee insurance, credit insurance and liability insurance, can the subjects thereof be assigned and in what way can they be assigned? This article discusses these questions, using credit insurance as an example.
SUBJECTS AND SUBJECT MATTERS
From the existing perspective, Insurance Law only provides the definition of the insurance subject. In particular, property insurance is where the property and its related interests are the subjects that matter. There is neither further definition of the subject of property insurance nor any definition of subject matter thereof. When it comes to credit insurance, according to the China Insurance Regulatory Commission’s notice, named Issuing the Interim Measures for Regulating the Credit Guarantee Insurance, it is an insurance with credit risks as the subject.
Court practice shows that mainstream opinions are consistent with the opinions of the CIRC. There were different opinions in only a few judgments, such as the one that held the accounts receivable to be the subject of trade credit insurance. In such a case, the writer definitely concurs with the opinions and provisions of the CIRC, but the specific issue needs to be analysed on a case-by-case basis. The writer sees the reason for the minority opinions is that, under PRC laws, there is no strict differentiation between the insurance subject and the insurance subject matter. Also, there is no legal definition of the insurance subject matter. In practice, there are numerous cases where these two concepts are mixed. If there are express provisions, they shall prevail.
ASSIGNMENT OF SUBJECT
The so-called credit definitely involves a particular subject. As such, the credit risks are also related to a particular subject. For example, credit risk in the trade credit insurance in China involves the credit risk of a particular debtor. Under the circumstances, the writer believes it is not proper for such an insurance subject to be assigned. In other words, it is objectively impossible to assign such an insurance subject. There are also views that Article 49 of the Insurance Law has to be understood as being one where the “assignable” subject matter insured is assigned, while the assignee shall succeed to the rights and obligations of the insured. Furthermore, because of the link between such insurance subjects and the particular subject, there is no so-called “remarkable rise in the degree of peril”, which further proves that Article 49 does not apply to credit insurance.
It is interesting that after looking for judgments on cases of the assignment of subjects of credit insurance, the writer could not find any confirmation made of the court of any feasible assignment method on the subject of such insurance. The writer believes this is also further proof that, as such insurance subjects do not have the condition of assignment, they cannot be assigned.
OTHER WAYS OF ASSIGNMENT
It is not absolutely indisputable whether the subject of credit insurance may be assigned. At present, without referring to any court decisions, the writer does not advice obtaining rights and obligations of the insured under an insurance contract by assigning the insurance subject in accordance with Article 49 of the Insurance Law. A more reliable method would be assigning interests of the insurance contract to allow the assignee to obtain the interests thereunder.
In the case of the dispute over insurance contract between China Export & Credit Insurance Corporation, Shanghai branch, and Evolet International Trade (Shanghai) , the latter was the initial insured under the export credit insurance contract, while Yongfu International Trade (Shanghai) was added as the co-insured through an endorsement. The insurance contract insured 10 businesses between Evolet and Cygne Designs (a US company) and two businesses between Yongfu and Cygne. Later, Evolet, as plaintiff, applied to the insurance company for compensation for the 12 businesses. The court of first instance held that Evolet could not claim compensation in its name on behalf of Yongfu, because the insurance of the two businesses thereof did not involve Evolet, but what Evolet claimed was the substantive right of the insurance claims. The court of second instance affirmed the judgment. However, at the retrial, Evolet presented a right assignment agreement it entered into with Yongfu. Under this agreement, Yongfu assigned to Evolet its right to claim for compensation and the litigious right under the insurance contract. Accordingly, Shanghai Higher People’s Court held that Evolet had the right to claim against CECIC for insurance interests with regards to the two businesses in the name of Yongfu.
Although there are disputes over the method of obtaining the rights and obligations of the insured under an insurance contract directly by assigning the insurance subject of the credit insurance, the said judgment provides another way of assignment, i.e., assigning the interests under the insurance contract directly by the insured. Of course, there are two issues that need to be noted:
- It is obvious that the assignee’s rights shall not exceed the scope of rights of the original the insured;
- It is important to pay attention to whether there is any provision restricting the assignment of the insurance interests in the insurance contract.
Michael Wang is an associate at MHP Law Firm