The issue of “bad faith” has plagued the insurance market in China and has proven to be a major hurdle in the Chinese insurance market’s development. Below is a case which provides insight into the presence of bad faith at the local level.

In February 2009, a defendant (the insured) was sentenced to eight months imprisonment for refusing to transfer insurance proceeds to the injured party. The ruling was given by Haidian local court, Beijing, China.

In 2007, a car accident occurred in Beijing, involving the defendant and claimant, Mr. Sun. The claimant sued the defendant in a Chinese local court and the Chinese court issued a judgment in favor of claimant; ruling the defendant assumed full responsibility and should indemnify the claimant for the loss of 43,000 RMB ( approximately 6,300 USD).

The defendant received the proceeds form his insurer, resulting from the car accident, however, he refused to pay the proceeds to claimant. Furthermore, to escape enforcement of the judgment, the defendant fraudulently transferred property titles in his name, including the title to a car.

The enforcement department of the local Chinese court stated the actions of the defendant violate the Criminal Law of the People’s Republic of China. The case was then transferred to the Criminal Division in the court.

The case provides an example of the problem of “bad faith” within the Chinese insurance market. As many Chinese Insurance lawyers would agree, the issue surrounding and the problems arising from “bad faith” in the Chinese insurance market must be resolved. A suitable start would involve the Chinese courts strengthening enforcement of their judgments which would discourage immoral behavior.