November 01, 2009

Supreme People's Court Interpretation (I) of Several Issues Concerning Application of the Insurance Law of the People's Republic of China

Issuing Body: Supreme People's Court

Issuing Date: September 21, 2009

Effective Date: October 1, 2009

Seeking to clarify ambiguities in China's recently amended insurance law, the Supreme People's Court (SPC) has issued the Interpretation (I) of Several Issues Concerning Application of the Insurance Law of the People's Republic of China (the Insurance Law Interpretation), which took effect on October 1, 2009, the same day as the Amended Insurance Law of the People's Republic of China (the 2009 Insurance Law). Perhaps most importantly, the Insurance Law Interpretation clarifies the limited circumstances under which the 2009 Insurance Law applies to contracts signed before October 1, 2009.

The 2009 Insurance Law effected a number of important changes from the previous version of China's insurance law, which had been in effect since 2002 (the 2002 Insurance Law), aligning the country's insurance laws with revised contract laws and providing greater protection to those who purchase insurance. Under the 2009 Insurance Law, the China Insurance Regulatory Commission also has expanded regulatory powers.

General Rules

If a dispute arises from or involves an insurance contract concluded on or after October 1, 2009, the 2009 Insurance Law shall apply in all circumstances. If the dispute arises from or involves an insurance contract concluded before October 1, 2009, the 2002 Insurance Law shall apply to the dispute. If, however, the 2002 Insurance Law is silent on the particular matter in dispute, the court should make reference to and apply the 2009 Insurance Law when hearing the dispute.

Specific Rules

If an insurance contract was concluded before October 1, 2009, but the transfer of the insurable subject matter, insured event, insurance claim settlement or subrogation claim occurred on or after October 1, 2009, the 2009 Insurance Law shall apply to any dispute that arises from such events.

If an insurance contract was concluded before October 1, 2009, and the insurer terminates the insurance contract on or after October 1, 2009, by relying on a claim that the policyholder has not faithfully performed his or her disclosure obligations, or that the policyholder did not truthfully declare the age of the insured, then the 2009 Insurance Law shall apply to such dispute. This aspect of the court's interpretation provides somewhat greater protection to purchasers of insurance even if they purchased that insurance prior to the 2009 Insurance Law taking effect.

If a court had reached its final judgment in an insurance-related dispute before October 1, 2009, but one party applies for a rehearing, or if a rehearing is triggered under procedures for supervision upon adjudication, then the 2009 Insurance Law shall not apply in such rehearing.

If an insurance contract was concluded before October 1, 2009, and that contract is recognized as invalid under the 2002 Insurance Law but would be recognized as valid under the 2009 Insurance Law, then the 2009 Insurance Law should apply and the insurance contract should be recognized as valid.

Conclusion

The SPC Insurance Law Interpretation provides Chinese courts at every level with specific and potentially important clarifications about when the older version of China's insurance law should apply and when the 2009 Insurance Law should be used to resolve disputes arising from insurance contracts. As such, it will definitely help courts to hear disputes more efficiently and effectively.

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