maritime academics
57 and judges. In China Shipowners Mutual Assurance Association’s Application for Constitution of Fund of Limitation of Liability for Maritime
Claims,
58 the Xiamen Maritime Court and the High People’s Court of Fujian
Province, both clarified and confirmed that according to Article 206 of the CMC,
the liability insurer’s right of limitation is based on the premise that his assured was
entitled to limit liability in the first place.
Incidentally, two items of legislative provisions are pertinent in this regard. These
are set out below.
Article 65 Paragraph 2 of the Insurance Law of the People’s Republic of China
(CIL) provides thatWhere an assured in liability insurance causes any damage to a third party and the liability of
the assured for indemnity to the third party has been determined, the insurer shall directly
pay insurance benefits to the third party according to the request of the assured. Where an
assured is negligent in making a request, the third party shall have the right to directly
request the insurer to pay the insurance benefits for the damage with respect to which the
third party shall be indemnified.
Article 97 Paragraph 1 of the Special Maritime Procedure Law of the People’s
Republic of China provides thatAn aggrieved party may claim for oil pollution damage caused by a ship either against the
owner of the ship causing oil pollution damage or directly against the insurer who is
answerable for the liabilities of the owner of the ship causing oil pollution damage, or
against the person who provides financial security therewith.
It is not clear whether the principle of statutory transfer of creditor’s rights is
adopted by the above two items of legislative provisions. Accordingly, it is as yet
uncertain whether the defences under the insurance contract and the relevant legislation can be invoked by the insurer of liability. Even though the aforesaid principle
is established, the actual defences under insurance legislation or the contract might
not be adequate to protect the interests of the liability insurer in a direct action against
him. For example, by virtue of Article 242 of the CMC
59 and Article 27 paragraph
2 of the CIL,
60 the insurer is only entitled to reject the assured’s insurance claim
where the loss is caused by his intentional act. This means that where in the case of
“a reckless act or omission done with knowledge that the loss would probably
result”, the assured would also forfeit his right to limit liability, the insurer unfortunately is not entitled to reject the claim of the assured and cannot limit liability.
57 See Hu (2016), p. 634; He and Xie (2008), p. 138.
58 Jin (2005), p. 554.
59 Article 242 of the CMC provides that: “the insurer shall not be liable for the loss caused by the
intentional act of the assured.”
60 Article 27 Paragraph 2 of the CIL provides that: “If the policy holder or the assured fabricates the
occurrence of an incident covered by insurance on purpose, the insurer is entitled to terminate the
insurance contract, and not to bear obligation for indemnity or payment of insurance benefits, and
except as otherwise provided in Article 43 of this Law, not to refund the premiums either.”
672
Y. Xia
57 and judges. In China Shipowners Mutual Assurance Association’s Application for Constitution of Fund of Limitation of Liability for Maritime
Claims,
58 the Xiamen Maritime Court and the High People’s Court of Fujian
Province, both clarified and confirmed that according to Article 206 of the CMC,
the liability insurer’s right of limitation is based on the premise that his assured was
entitled to limit liability in the first place.
Incidentally, two items of legislative provisions are pertinent in this regard. These
are set out below.
Article 65 Paragraph 2 of the Insurance Law of the People’s Republic of China
(CIL) provides thatWhere an assured in liability insurance causes any damage to a third party and the liability of
the assured for indemnity to the third party has been determined, the insurer shall directly
pay insurance benefits to the third party according to the request of the assured. Where an
assured is negligent in making a request, the third party shall have the right to directly
request the insurer to pay the insurance benefits for the damage with respect to which the
third party shall be indemnified.
Article 97 Paragraph 1 of the Special Maritime Procedure Law of the People’s
Republic of China provides thatAn aggrieved party may claim for oil pollution damage caused by a ship either against the
owner of the ship causing oil pollution damage or directly against the insurer who is
answerable for the liabilities of the owner of the ship causing oil pollution damage, or
against the person who provides financial security therewith.
It is not clear whether the principle of statutory transfer of creditor’s rights is
adopted by the above two items of legislative provisions. Accordingly, it is as yet
uncertain whether the defences under the insurance contract and the relevant legislation can be invoked by the insurer of liability. Even though the aforesaid principle
is established, the actual defences under insurance legislation or the contract might
not be adequate to protect the interests of the liability insurer in a direct action against
him. For example, by virtue of Article 242 of the CMC
59 and Article 27 paragraph
2 of the CIL,
60 the insurer is only entitled to reject the assured’s insurance claim
where the loss is caused by his intentional act. This means that where in the case of
“a reckless act or omission done with knowledge that the loss would probably
result”, the assured would also forfeit his right to limit liability, the insurer unfortunately is not entitled to reject the claim of the assured and cannot limit liability.
57 See Hu (2016), p. 634; He and Xie (2008), p. 138.
58 Jin (2005), p. 554.
59 Article 242 of the CMC provides that: “the insurer shall not be liable for the loss caused by the
intentional act of the assured.”
60 Article 27 Paragraph 2 of the CIL provides that: “If the policy holder or the assured fabricates the
occurrence of an incident covered by insurance on purpose, the insurer is entitled to terminate the
insurance contract, and not to bear obligation for indemnity or payment of insurance benefits, and
except as otherwise provided in Article 43 of this Law, not to refund the premiums either.”
672
Y. Xia