Exemption clauses are restrictions on the insurer’s insurance liability, and define the scope within which an insurer bears no liability to compensate or pay the insurance proceeds. Article 19 of new Insurance Law provides that the insurer shall, when concluding an insurance contract, provide on the application form, insurance policy document or other insurance certificate a reminder sufficient to draw the attention of the proposer to the exemption clauses in the insurance contract and shall expressly explain the contents of such clauses to the proposer in writing or orally. If no such reminder or express explanation is given, such clauses shall not enter into effect. The old Insurance Law provided a similar provision on this issue, but less practicable. This provision, in practical, has become an ultimate weapon to insurance companies. As of the occurrence of accident which is included in exemption clauses, lots insureds use this provision to claim their rights. They claim that the insurance company did not give them sufficient notice to draw their attention to the exemption clauses. The court, in practical, also adopts strict interpretation on these clauses to insurance companies.
A case Nanyun XX Information Company V. XX Property Insurance Company may demonstrate this theory clearly. Jin Yuan Lee is a self-employed business man who bought a Dongfeng brand dump wagon. He gave the title of this dump wagon to Nanyun XX Information Company (hereinafter “the Information Company”). On July of 2009, Lee use the name of the Information Company to bought vehicle damage insurance for this dump wagon in XX Property Insurance Company (hereinafter “the Insurance Company”). On 6, September 2009, when Lee was driving this dump wagon in Jialing District, Nanyun City, this dump wagon was damaged because of vehicle rollover. Lee immediately called the Insurance Company and the staffs of the Insurance Company examined and checked the accident circumstance in a timely manner. At last, the staffs refused to pay because the carriage of the dump wagon was in a lifting state, which just belongs the circumstances listed in a item of exemption – “The insurer shall not be liable for any losses, expenses or liabilities caused by … (5)dump vehicle was derived and operated in a lifting state;” But Lee did not remember that he saw this item in the insurance contract. After checking whole articles of the insurance contract, Lee found this item was double printed with another article and is too blurred to recognize. Lee told this information to the Information Company. Then the Information Company sued the Insurance Company to claim for compensation as the item of exemption was invalid. The plaintiff claimed that the defendant intended to print the key-point item blurred so it can evade its responsibility. The defendant defended that the insured known this item of exemption and the print mistake was introduced in oral to the insured when they signed the insurance contract. Unfortunately, the Insurance Company could not provide enough evidence to support its opinion. Finally, the Court applied strict interpretation on the item of exemption and the judgment was against the defendant. The Court believed the item of exemption must be printed clearly enough to draw insured’s attention and the insurer must provide enough evidence to prove that it has sufficiently notified the insured the exemption clauses.
In practice, many insurance companies have tried to solve this problem. They print those clauses in black and bold to draw insured’s attention. Besides telling the insured orally, they also print those exemption clauses solely and design questionnaire under those items to examine whether or not the insured know those clauses. Or some insurance company sent a handbook of exemption clauses freely to their customers. However, even by using such manners, the insured may not be notified the importance of those exemption clauses or the really meaning of those exemption clauses and some courts may don’t recognize the effectiveness of those claims or introductions. Insurance companies still need improvement on solving this problem.