Focusing on Accidental Injury Insurance
I. Introduction of the Issue to Be Discussed
Article 25 of the Judicial Interpretation III of the Insurance Law stipulates that “Where it is difficult to determine whether the insured’s losses are caused by a covered event, a non-covered event or a disclaimer, if the parties concerned request that the insurer makes insurance payout, the People’s Court may support in accordance with the corresponding ratio.” Through searching by the author, this judicial interpretation is frequently applied, and People’s Courts often rely on this article to order the insurer to bear certain insurance liabilities. However, the contexts in which this article is applied vary significantly. This article aims to explore and analyze the correct conditions for the application of Article 25 to clarify the accurate application conditions of the above judicial interpretation.
Case 1: The Death of Han from Choking[1]
On October 1, 2018, Geng insured his mother Han with an accidental injury insurance policy from M Life Insurance Company. On November 22, 2019, Geng reported that his mother Han died from choking while dining during a trip and applied for accidental injury insurance claims. After investigation by M Life Insurance Company, the pre-hospital examination report issued by the hospital at the scene of death indicated: “No foreign objects in the mouth, suspected Sudden Cardiac Death.” Subsequently, M Life Insurance Company refused to pay the claim on the grounds that Sudden Cardiac Death was caused by illness and did not constitute an accidental injury.
During the litigation, Geng did not provide evidence to prove his claim that “Han died from choking while dining” and only made an oral statement. M Life Insurance Company argued that “There is no evidence to prove that Han was dining, choking, or that it led to her death. Moreover, the pre-hospital examination report indicates Sudden Cardiac Death, and the liability for accidental injury insurance does not arise.” The Beijing Dongcheng Court investigated the hospital that attended the scene, which stated: “When we arrived at the scene, Han was already dead. Based on the husband’s statement, we conducted a surface examination and found no foreign objects in the mouth, so we suspected that the death was caused by a heart disease. Since we did not conduct a thorough examination, we could not be certain of the cause of death, hence the question mark after sudden death from heart disease.” After the trial, the Beijing Dongcheng Court ordered M Life Insurance Company to bear 50% of the insurance liability for the accidental injury insurance amount in accordance with Article 25 of the Judicial Interpretation III of the Insurance Law.
Case 2: The Death of Xu While in Bed[2]
On March 1, 2019, Xu insured himself with an accidental injury insurance policy from P Life Insurance Company. On August 15, 2020, Xu’s wife, Sun, reported that her husband Xu died from an accident and applied for accidental injury insurance claims. After investigation by P Life Insurance Company, Xu was found dead in a rental apartment in Zhuozhou City on August 2, 2020. His body was highly decomposed and could not be subjected to an autopsy. The public security authorities, after investigation, determined that “Xu’s death was neither suicide nor homicide.” Subsequently, P Life Insurance Company refused to pay the claim on the grounds that Xu’s death did not constitute an accidental injury insurance liability.
During the litigation, Sun argued that “Xu’s death was completely unexpected and was an accident.” P Life Insurance Company argued that “There is no evidence to prove that an accidental injury as stipulated in the insurance contract occurred and that this accident caused Xu’s death. Therefore, the liability for accidental injury insurance does not arise.” During the trial, the presiding judge asked P Life Insurance Company, “Since Xu’s death was neither suicide nor homicide, isn’t it an accident?” P Life Insurance Company replied, “According to the insurance contract, an accidental event should have four elements: sudden, external, non-intentional, and non-disease. This event acts on the insured’s body, causing bodily harm and death. The result of death is not equivalent to the nature of the accident, and whether it is an accident is not determined by the family’s subjective perception or whether it is beyond the family’s anticipation.” During the litigation, P Life Insurance Company provided evidence that Xu had been hospitalized for illness several times before his death. After the trial, the Beijing Fangshan Court ordered P Life Insurance Company to bear 50% of the insurance liability for the accidental injury insurance amount in accordance with Article 25 of the Judicial Interpretation III of the Insurance Law.
The above two cases are just one of the application scenarios of Article 25 in judicial practice, and the frequency of occurrence in practice is very high. So, is it correct for the court of first instance to apply the principle of proportional compensation in accordance with Article 25 based on the case circumstances?
After further searching, the author found that in many People’s Courts, when it is impossible to determine whether the accident falls within the scope of insurance liability, they habitually apply Article 25 to order the insurer to bear a certain proportion of insurance liability, mostly concluding the case by ordering the insurer to bear 50% of the insurance liability.
Returning to the core issue of this article, how should the principle of proportional compensation stipulated in Article 25 be applied, how to apply it correctly, and how to prevent the wrong application of the law to avoid the insurer improperly bearing insurance liability?
II. Understanding and Application of Article 25 of the Judicial Interpretation III of the Insurance Law
The principle of Proximate Cause is one of the four basic principles of insurance law. In insurance claims practice, the principle of proximate cause should also be followed, that is, only when the “Proximate Cause” is an insurable risk, the insurance liability may arise. As defined in insurance law, the principle of Proximate Cause[3] means that only when a cause has a decisive significance for the occurrence of the damage result, and this cause is the risk covered by the insurance contract, will the insurer bear the insurance liability. Although the principle of Proximate Cause has not been explicitly stipulated in China’s Insurance Law, it has consistently been observed in judicial practice and is universally recognized as a basic principle of insurance law globally. Its fundamental purpose in insurance law is to exclude other non-insurable risks or exempted risks, ensuring that the insurer makes the most correct and accurate compensation. Otherwise, improper compensation will seriously damage the interests of other insured persons in the risk pool.
In claims practice, it is relatively easy to determine the relationship between a single cause and the damage result. If the cause is an insurable risk, the insurance liability arises. Conversely, it does not arise. If a damage result is caused by multiple causes (insurable risks, non-insurable risks, exempted reasons) (that is, there is a so-called net or belt state of causality), and each cause may lead to the damage result, how should the insurance liability be determined in this case? In this situation, the traditional Proximate Cause theories (e.g., the condition theory, adequate causation theory, proportional causation theory, and nearest causation theory) may prove insufficient or one-sided in such cases, or simply adopting any one of these methods to determine insurance liability may not be comprehensive and cannot effectively protect the interests of the insured to the greatest extent. Therefore, it is necessary to provide a method for determining insurance liability for the People’s Courts to apply in hearing cases, to solve the problem of “difficulty in judicial practice,” and to balance the interests of the insurer and the insured to the greatest extent, instead of simply ordering “full compensation” or “no compensation”..
Therefore, Article 25 solves the issue of how the People’s Courts should determine the insurance liability when there are multiple causes and one result. From the content of Article 25, when it is difficult to determine whether the damage result is caused by a covered accident or a non-covered accident or an exempted reason, the People’s Courts shall determine the insurance liability that the insurer should bear in whole, in part, or not at all, based on the size of the causative force of each of the three circumstances.
III. Correct Conditions for the Application of Article 25 of the Judicial Interpretation III of the Insurance Law
Pursuant to Article 22 of the Insurance Law[4], when the claimant requests the insurer to compensate or pay the insurance monies in accordance with the insurance contract, he shall provide the insurer with all the evidence and materials that he can provide to confirm the nature, cause, and extent of the insurance accident. That is, the burden of proof for the nature and cause of the accident lies with the claimant, which is consistent with the spirit of Article 67, Paragraph 1 of the Civil Procedure Law[5]. If the insurer claims to refuse compensation based on an exempted reason, it shall bear the burden of proof for the existence of the exempted reason (including causality). In summary, according to Article 90[6] of the Explanations of the Application of the Civil Procedure Law, “he who asserts must prove.”
Since Article 25 is a rule for determining the liability of the insurer in cases of multiple causes and one result, it does not exempt the insurance contract parties from the burden of proving the covered accident or non-covered accident or exempted reason[7]. On this basis, the application of Article 25 should be based on the premise that the insurance contract parties have completed the burden of proof for the covered accident or non-covered accident or exempted reason in the litigation. After completing the burden of proof, if both the covered accident and the non-covered accident or exempted reason form a possible causal relationship, causing the people’s court to have difficulty in determining the true causative force of the accident, the People’s Court shall determine the insurance liability based on the ascertained case circumstances, in accordance with the size of the causative force of the covered accident or non-covered accident or exempted reason for the occurrence of the damage result.
If only the claimant proves that a covered accident has occurred, but the insurer fails to provide evidence that the exempted reason is established, the People’s Court only needs to determine the insurance liability based on the claimant’s completion of the burden of proof, and there is no need to apply Article 25 to make a judgment. Conversely, if only the insurer proves that a non-covered accident or exempted reason is established, but the claimant fails to prove that a covered accident has occurred, the people’s court only needs to determine that the insurance liability does not arise based on the insurer’s completion of the burden of proof for the defense. In this case, there is also no need to apply Article 25 to make a judgment.
It should be noted that if the claimant has not proved that a covered accident has occurred, even if the insurer proves that a non-covered accident or exempted reason does not exist, it cannot be ordered that the insurer loses the case or that Article 25 is applied to make a judgment. After all, when the claimant has not completed the burden of proof, the burden of proof does not shift to the insurer, and the insurer does not therefore bear the burden of proof, nor does it need to bear the adverse consequences of “failure to prove.”
Returning to the two aforementioned cases, regarding “death from choking,” Geng, as the claimant, did not complete the burden of proof, and even the “choking” was not proved. On the contrary, the pre-hospital examination showed that there were no foreign objects in Han’s mouth. Regarding the case of death in bed, although the investigation concluded that Xu’s death was neither suicide nor homicide, it does not mean that Xu’s death was caused by an accidental injury. As for what kind of sudden, external, non-intentional, and non-disease event caused Xu’s death, Sun did not complete the burden of proof. Therefore, the two cases mentioned earlier do not meet the conditions for the application of Article 25. The court of first instance applied Article 25 to make a judgment in the case where the claimant had not completed the basic burden of proof. That is, the court of first instance applied Article 25 on the grounds that the cause of death could not be determined, without paying attention to the fact that both the covered accident and the non-covered accident or exempted reason should have evidence to prove in a case.
IV. Practical Suggestions for the Insurer’s Defense in Litigation
Regarding the correct application of the law, the insurer should first develop a clear and accurate understanding of the relevant legal provisions and correctly and actively inform the court of first instance and the presiding judge to guide them, so that the involved case can be correctly applied to the law and avoid improperly bearing insurance liability. When the insurer defends in the litigation, if the claimant claims to apply Article 25 for proportional compensation, the insurer should first examine whether the claimant has completed the basic burden of proof for the occurrence of the insurance accident (whether the agreed insurable risk has occurred and whether this risk has caused the insured to suffer injury or death). If not, it should clearly inform the court of first instance that the case does not meet the conditions for the application of the proportional compensation principle stipulated in Article 25 and that the claimant’s entire litigation request should be dismissed.
If during the defense process, it is found that the court hearing the case has a tendency to apply Article 25 actively, it should also actively and clearly inform the court of first instance, based on the claimant’s failure to complete the basic burden of proof for the occurrence of the insurance accident (whether the agreed insurable risk has occurred and whether this risk has caused the insured to suffer injury or death), that the case does not meet the conditions for the application of Article 25 and that the claimant’s entire litigation request should be dismissed.
[1] (2020) Jing 02 Min Zhong No. 6145
[2] (2022) Jing 0106 Min Chu No. 13657
[3] The proximate cause is the decisive, effective, and direct reason for the loss covered by the insurance. See Wang Weiguo (ed.), Insurance Law, China Financial and Economic Publishing House, 2003, p. 46.
[4] Article 22, Paragraph 1: Upon occurrence of an insured event, the policyholder, the insured party or the beneficiary shall, at the time of making a claim for compensation or payment of insurance monies pursuant to the insurance contract, endeavour to provide the relevant proof and materials for ascertaining the nature, reason, extent of damages, etc, of the insured event to the insurer.
[5] Article 67, Paragraph 1:Litigants have the burden of proof for the claims they make.
[6] Article 90: Each party concerned shall provide evidence to prove the facts based on which such party concerned makes a claim or contradicts the claim of the other party, unless otherwise provided by the law.
Where any party concerned fails to provide evidence or provides insufficient evidence to prove the facts before a judgment is made, the party with the burden of proof shall bear adverse consequences.
[7] Understanding and Application of the Judicial Interpretation III of the Insurance Law, edited by the Civil Division No. 2 of the Supreme People’s Court, edited by Du Wanhua, People’s Court Press, p. 589.