Assignment of insurance policy with the transfer of the subject matter insured in property insurance under Chinese law

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

  • Zhen Jing
  • Liang Zhao

Detail(s)

Original languageEnglish
Pages (from-to)383-406
Journal / PublicationJournal of Business Law
Issue number5
Publication statusPublished - 2022
Externally publishedYes

Abstract

This article critically examines the Chinese Insurance Law and judicial rules regarding assignment of insurance policy with the transfer of the subject matter of insurance in property insurance and comparatively discusses the "conditional assignment" and the "automatic assignment" of insurance policies in common law and civil law jurisdictions. Particular attention is paid to the key issues regarding increase of risk upon assignment of subject matter and insurer’s remedies for material increase of risk. The assignee has a duty to inform the insurer of the assignment of subject matter. If the assignee fails to do so, the insurer has the right to reject the assignee’s claim for loss which is caused by the materially increased risk after the assignment, but is nevertheless liable for the loss which is not caused by the materially increased risk. Sometimes the risk has materially increased but there is no causal connection between the increased risk and the loss. The insurer would have raised premium had it become aware of the increase of risk, the insurer therefore bears higher risk but received lower premium. To resolve this problem, it is suggested that the insurer be allowed to reduce its liability proportionately by the amount that fairly represents the extent to which its interest was prejudiced.