Preliminary and jurisdictional considerations in insurance litigation
In what fora are insurance disputes litigated?
In China, there are four levels of courts: the primary courts, the intermediate courts, the High Courts and the Supreme People’s Court. These courts have first instance jurisdiction over civil cases, including insurance cases. Normally, the primary court will act as the first instance court in most insurance cases. However, if the amount in dispute of a case reaches a certain level or if the case is very influential for society, the intermediate courts or even the High Courts shall have the jurisdiction to hear the case. It is rare for the Supreme People’s Court to hear a case in the first instance.
If any party is unsatisfied with the judgment or verdict of the first instance court, that party may bring an appeal to a court of a higher level within the period of time prescribed. The judgment or verdict of the appeal court shall be binding. The only remedy against the binding judgment or verdict can be found in the legal review procedure; however, it is rare and difficult to kick-start this procedure.
A lawsuit brought on an insurance dispute will fall under the jurisdiction of the people’s court where the domicile of the defendant or the insured object is located.
However, the territorial jurisdiction is subject to some exceptions. For instance, insurance disputes that occur in the Dongcheng, Xicheng, Chaoyang and Haidian districts of Beijing shall fall under the first instance jurisdiction of the Beijing Railway Transportation Court. The Fourth Intermediate Court tries the appeals from these four districts for insurance disputes. The maritime courts shall hear cases regarding marine insurance claims and related subrogation litigations.
On 9 September 2018, the Beijing Railway Transportation Court was disbanded. From thereon, first instance insurance disputes that were previously accepted by the Beijing Railway Transportation Court shall now be filed with their respective district courts. Those insurance disputes that were pending before the Beijing Railway Transportation Court at the time of its dissolution shall instead be heard and executed in the name of Beijing Haidian District People’s Court, under their existing docket numbers.
Causes of action
When do insurance-related causes of action accrue?
With respect to property insurance cases, the period of limitation of action for an insured to claim indemnification or payment of the insurance benefits against the insurer shall be two years. The period of limitation of action shall be counted from the day when the insured knew or should have known of the occurrence of the incident covered by the insurance policy.
With respect to life insurance, the period of limitation of action for an insured to claim payment of the insurance benefits shall be five years, which shall be counted from the day when the insured knew or should have known of the occurrence of the incident covered by the insurance policy.
What preliminary procedural and strategic considerations should be evaluated in insurance litigation?
The following aspects are always considered in insurance litigation.
The validity of the insurance contract
The following clauses in an insurance contract that has been concluded by using the standard clauses provided by the insurer shall be void: clauses exempting the insurer from any legal obligation or aggravating the liability of the insurance applicant or the insured, and clauses excluding any legal right of the insurance applicant, the insured or the beneficiary.
Besides these clauses, other issues that will make the policy void include, but are not limited to, fraud, violation of compulsory provisions of law and regulations, and violation of the public interest.
The insurance assessment report
An insurance assessment report made before litigation is not binding on the tribunal, but it can be used as a reference. If the tribunal deems it necessary, it can retain another loss adjuster to make an assessment again during the litigation procedure.
The disclosure obligation of the insurance applicant
In concluding an insurance contract, the insurance applicant shall make an honest disclosure when the insurer enquires about the subject matter insured or relevant circumstances concerning the insured. The insurer shall have the right to rescind the insurance contract if the insurance applicant intentionally or out of gross negligence fails to perform his or her obligation to make an honest disclosure, and thereby materially affects the insurer’s decision on whether to issue the insurance policy or whether to increase the premium rate. If an insurance applicant intentionally fails to perform his or her obligation to make an honest disclosure, the insurer shall bear no insurance obligation with regard to the insured incident occurring before the rescission of the contract, or for returning the paid insurance premiums. If an insurance applicant fails to perform his or her obligation to make an honest disclosure out of gross negligence, which has a material effect on the occurrence of an incident covered by the insurance, the insurer shall, with respect to the incidents occurring before the rescission of the contract, bear no insurance obligation, but may return the paid insurance premiums.
Where an insurer knows something that the insurance applicant fails to disclose and enters into an insurance contract with the insurance applicant, the insurer shall not rescind the contract. Further, if an insured incident occurs, the insurer shall bear the insurance obligation.
The specific explanation obligation of the insurer
For those clauses that exempt the insurer from liability in the insurance contract, the insurer shall give sufficient warning to the insurance applicant of those clauses in the insurance application form, the insurance policy or any other insurance certificate, and expressly explain the contents of those clauses to the insurance applicant in writing or orally. If the insurer fails to give a warning or an explicit explanation thereof, those clauses shall not be effective.
The decision of the insurer
The insurer shall, after receiving a claim from the insured or the beneficiary, determine the matter without delay. If the circumstances are complex, the insurer shall determine the matter within 30 days, unless the insurance contract provides otherwise.
The insurer shall inform the insured or the beneficiary of the result of the determination. If responsibility lies with the insurer, the insurer shall fulfil its obligation for such indemnity or payment within 10 days after an agreement is reached with the insured or the beneficiary on such indemnity or payment. If there are stipulations in the insurance contract on the period within which indemnification or payment should be made, then the insurer shall fulfil its obligation accordingly. After the insurer determines that the events do not fall within the scope of the insurance cover, the insurer shall, within three days, send a notice refusing to pay indemnification or insurance benefits to the insured or the beneficiary, and give reasons for such determination.
The payment of premiums
Once an insurance contract is formed, the insurance applicant shall pay the premiums in accordance with the terms of the contract. In China, the insurance contract always stipulates that the payment of premiums acts as a condition for the validity of the insurance contract.
Complaints to the China Banking and Insurance Regulatory Commission
In April 2018, the China Insurance Regulatory Commission (CIRC)and the China Banking Regulatory Commission (CBRC) officially merged to form the China Banking and Insurance Regulatory Commission (CBIRC). The functions of the original CIRC were inherited by the CBIRC.
Whether the insured or the beneficiary complains to the CBIRC (formerly the CIRC) and how the CBIRC deals with the complaint shall influence the litigation. In China, the regulator strictly monitors the insurance market, and the CBIRC has substantial influence over the claim process and result.
What remedies or damages may apply?
There are two kinds of remedies or damages in insurance litigation: payment of insurance benefits and compensation for loss, which includes repair or replacement.
In addition, the insurer will bear liability for delayed payment, which will always consist of bank interest accrued during the delay period.
In China, there is a clear difference between contractual liability and tort liability, and in an insurance dispute, even if a party violates the insurance contract with malicious intent, it will not incur tort liability or punitive damages.
Under what circumstances can extracontractual or punitive damages be awarded?
Even though an insurer is obliged to act in good faith while investigating the claim of an insured and in establishing the extent of coverage in a timely manner, the Chinese courts do not accept tort liability when claims have been wrongfully denied. Only in a situation where the insurer does not act in good faith when responding to the claim of an insured, or in a situation where the insurer denies a claim that is not fairly disputable in accordance with the terms of the insurance policy, will the insured be entitled to contractual remedies (eg, court-compelled performance, payment of insurance benefits and any damages caused by the breach). Regarding extracontractual or punitive damages, these are usually not recoverable or awarded.
Interpretation of insurance contracts
What rules govern interpretation of insurance policies?
Semantic interpretation means interpreting the policy with common knowledge in accordance with the common sense of common people. A semantic interpretation cannot deviate from the wording of the policies, and other methods of interpretation can only be applied when the outcome of the usage of the semantic interpretation is still unclear.
Other methods of interpretation
Systemic interpretation refers to interpreting the provisions in accordance with the whole content of the contract, and being aware of the connections between other provisions in the insurance contract.
Contract aim-based interpretation means interpreting the policy in accordance with the real intention of the parties of the insurance contract.
The utmost good faith interpretation is based on the utmost good faith principle, and will interpret the insurance contract using waiver and estoppel rules.
By way of special interpretation, the contents of the schedule outweigh the policy clauses; the handwritten clauses outweigh the printed clauses; and a special exception is that the contents of the application form outweigh the insurance policy and schedule, even if the application form was formed earlier than the latter two parts of the insurance contract.
The unfavourable interpretation
Where the insurer and the insurance applicant, the insured or the beneficiary have a dispute over a clause in an insurance contract concluded using the standard clauses provided by the insurer, the clause shall be interpreted as commonly understood. If there are two or more different interpretations of the clause, the people’s court or the arbitral tribunal shall interpret the clause in favour of the insured and the beneficiary.
When is an insurance policy provision ambiguous and how are such ambiguities resolved?
The policy provision becomes ambiguous when the insurer and the insured or the beneficiary have different interpretations of the policy provision. If a policy provision is found to be ambiguous, it should be interpreted in accordance with the following interpretation rules:
- semantic interpretation;
- systemic interpretation;
- contract aim-based interpretation;
- the utmost good faith interpretation;
- special interpretation; and
- the unfavourable interpretation (see question 6).
Notice to insurance companies
Provision of notice
What are the mechanics of providing notice?
The insurance applicant, the insured or the beneficiary shall, in a timely manner, notify the insurer after becoming aware of the occurrence of an incident covered by the insurance policy. Where an insurance applicant, insured or beneficiary intentionally or out of gross negligence fails to notify the insurer in a timely manner, thus making it difficult to ascertain the nature, cause and extent of the loss of the incident covered by the insurance policy, the insurer shall not be liable for indemnification or payment of the insurance benefits for the indeterminable part unless the insurer knew or should have known about the incident in a timely manner through other channels.
What are a policyholder’s notice obligations for a claims-made policy?
A frequently litigated issue pertaining to notice is the timeliness within which the insured or the beneficiary notifies its insurer of a claim. Typically, an insurance policy will require the insured or the beneficiary to notify the insurer of a claim ‘as soon as practicable’, ‘promptly’ or ‘immediately’. Generally speaking, notice is required to be given to the insurer within a reasonable period of time, taking into consideration the facts and circumstances of the specific case.
An insurance applicant also has a duty to cooperate with the insurer defending a claim on its behalf. The insurance applicant must keep the insurer informed of all major case developments, respond to the insurer’s reasonable enquiries and notify the insurer.
When is notice untimely?
In determining whether the insured has given the notice in an untimely manner, several factors are always examined, including the following:
- the wording of the policy’s notice provision;
- the insured’s sophistication regarding insurance policies;
- the insured’s awareness that an accident as defined by the policy has happened;
- the insured’s diligence in ascertaining whether policy coverage is available;
- whether the insurer was prejudiced by any late notice; and
- the nature and complexity of the insurance incident.
What are the consequences of late notice?
The insurance applicant, the insured or the beneficiary shall, in a timely manner, notify the insurer after becoming aware of the occurrence covered by the insurance policy. Where an insurance applicant, insured or beneficiary intentionally or out of gross negligence fails to notify the insurer in a timely manner, thus making it difficult to ascertain the nature, cause or extent of the loss of the incident covered by the insurance, the insurer shall not be liable for indemnification or payment of the insurance benefits for the indeterminable part, unless the insurer knew or should have known of the incident in a timely manner through other channels.
In practice, where a late notice damages the subrogation right of the insurer, the insurer may refuse the insured’s claim accordingly.
Sometimes, the policy stipulates that if an insurance applicant, insured or beneficiary fails to notify the insurer in a timely manner, the insurer has the right to refuse the insurance benefit, but such policy provision will be deemed invalid by the people’s court as a clause exempting the insurer from any legal obligation or aggravating the liability of the insurance applicant or the insured, or clauses excluding any legal right of the insurance applicant, the insured or the beneficiary.
Insurer’s duty to defend
What is the scope of an insurer’s duty to defend?
There is no specific legal provision in Chinese laws and regulations that stipulates the insurer’s duty to defend the insured. Only article 66 of the Insurance Law of the People’s Republic of China provides that if an insured in a liability insurance contract is brought to arbitration or legal proceedings due to the occurrence of an incident covered by the insurance policy that causes loss or damage to a third party, the insurer shall bear the cost of such arbitration or legal proceedings, and other necessary and reasonable expenses paid by the insured, unless it is otherwise provided for in the insurance contract.
In practice, some liability insurance policies state that when a third party sues the insured, the insurer will have control over the litigation and have the obligation to defend the insured. Under such policy, the insurer will retain a lawyer for defence, determine the settlement, and pay the legal fees and other costs related to the litigation. In the meantime, the insurer will assume liability for insurance indemnification according to the result of the litigation.
The insurer will defend the insured in the name of the insured rather than in its own name.
Failure to defend
What are the consequences of an insurer’s failure to defend?
If the insurer fails to defend, it will indemnify the insured for the loss of the litigation, including the damage stipulated by the judgment or verdict, the legal fees paid by the insured and the legal costs incurred by the insured.
If the loss stipulated by the judgment exceeds the insurance limit, the insurer will also pay the excess loss if the insured can demonstrate that the insurer unfairly failed to defend it, and the insured had put its confidence in the defence of the insurer in good faith according to the policy provisions.
If the policy prescribes a specific compensation clause for the defence violation, the insurer will pay such compensation in accordance with the valid clause.
Standard commercial general liability policies
What constitutes bodily injury under a standard CGL policy?
Bodily injury means physical damage to a person or to the health of a person that is not caused by a disease. In practice, bodily injury does not include mental damage unless otherwise stipulated in the standard CGL policy.
The purpose of liability (casualty) insurance is to cover bodily injury resulting from the negligence or omissions of an insured.
What constitutes property damage under a standard CGL policy?
CGL policies generally define property damage as follows: physical damage to tangible property, including but not limited to damage to its shape, contents and parts, and how long the damage to the property lasts; and loss of use of tangible property.
What constitutes an occurrence under a standard CGL policy?
Occurrence under a standard CGL policy means an event that results in bodily injury or property damage or any loss to a third party caused by the insured. In the claims-based policy, an occurrence means that the third party makes a claim to the insured.
An insurer may, in accordance with the provisions of the law or the terms of an insurance contract, directly indemnify a third party for loss or damage caused by the insured under liability insurance. Where an insured under liability insurance causes damage to a third party and the liability of the insured 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 insured. Where an insured 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.
How is the number of covered occurrences determined?
The following factors determine the number of occurrences:
- agreements about the number;
- definition of occurrence in the CGL policy. CGL policies frequently define occurrence as ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions’. The limit of liability provisions can play an important role in determining how many occurrences are implicated by the underlying claim. A common limit in a liability provision states that ‘Our total liability for all damages resulting from any one ‘occurrence’ will not be more than the limit of liability’;
- proximate cause: generally speaking, the same proximate cause leads to the same insurance occurrence and different proximate causes lead to different insurance occurrences; and
- the four unities test, consisting of the responsible persons, causation, timing and location, has had a significant influence on the determination of the number of covered occurrences.
What event or events trigger insurance coverage?
There are four theoretical events that trigger insurance coverage:
- exposure: a policy is triggered upon the first exposure to the injury-causing or damage-causing event;
- manifestation: a policy is triggered upon the first manifestation of injury or damage;
- injury-in-fact: a policy is triggered when the first injury or damage takes place; and
- continuous: all policies between the date of first exposure and the date of manifestation are triggered.
How is insurance coverage allocated across multiple insurance policies?
In China, double insurance means insurance where an insurance applicant enters into separate insurance contracts with two or more insurers on the same subject, the same insurable interests and the same insured incident, and the total insured amount exceeds the insurable value.
In the event of double insurance, an insurance applicant shall notify all concerned insurers of relevant information with respect to such double insurance.
For double insurance, the total amount of indemnity paid by all concerned insurers shall not exceed the insurable value. Unless specified otherwise in the insurance contract, the concerned insurers shall undertake their respective obligations for indemnity according to the proportion of the sum insured by each of them to the total amount of the sum insured.
An insurance applicant for double insurance may require the insurers to pro rata refund the insurance premium for the excess of the total insured amount over the insurable value.
In other jurisdictions, when facing the double insurance scenario, a judge will take the intention of the policyholder into account and make differentiated decisions accordingly. However, in China the law addresses double insurance without considering the intention of the policyholder and whether the policyholder intentionally or negligently bought double policies.
First-party property insurance
What is the general scope of first-party property coverage?
First-party property insurance policies generally provide coverage on an all-risk or a named-perils basis.
All-risk policies typically provide coverage for direct physical loss to covered property, subject to listed exclusions. To demonstrate the existence of the coverage under an all-risk policy, the insured is not required to demonstrate that the loss was caused by a peril that is specifically identified in the insurance policy. However, the insured generally carries the burden of demonstrating that a direct and physical loss occurred to covered property. If this burden is satisfied, the loss will be covered unless it falls within an exclusion clause. In general, the insurance company bears the burden of demonstrating that an exclusion clause applies.
Named-perils policies provide coverage for specifically listed risks, usually with a coverage grant for direct physical loss to covered property caused by a peril listed, unless the loss is excluded. This means that coverage exists if the loss, in addition to being a direct physical loss, is specifically listed in the perils specified by the insurance policy and does not fall within an exclusion clause. To obtain coverage, an insured must therefore identify a named peril that potentially provides coverage for the loss.
It is not uncommon for property insurance policies to provide all-risk coverage for some of the insured’s property and named-perils coverage for other property.
How is property valued under first-party insurance policies?
Calculation of the insurance value
Where an insurance applicant and an insurer have agreed upon and specified the insurable value of the subject matter insured in the insurance contract, it shall be the standard for calculation of indemnity when losses occur to the subject matter insured. If the insurer can demonstrate that the agreed insurance value was determined owing to fraud or misunderstanding, the people’s court could overrule such value, but this only happens in rare circumstances.
Where an insurance applicant and an insurer did not agree upon the insurable value of the subject matter insured when they entered into the insurance contract, the value of the subject matter insured shall be the actual value of the subject when losses occur, and such actual value should be assessed by a loss adjuster or another independent organisation.
The sum insured shall not exceed the insurable value. The part in excess shall be null and void, and the insurer shall refund the corresponding amount of the insurance premium to the insurance applicant.
Where the sum insured is less than the insurable value, the insurer shall bear an obligation for indemnity pro rata for the sum insured to the insurable value, unless it is otherwise provided for in the insurance contract.
Is insurance available in your jurisdiction for natural disasters and, if so, how does it generally operate?
Natural disaster risks are covered by most Chinese insurance products nowadays. Taking personal accident insurance as an example, the natural risks covered generally include, inter alia, earthquakes, tsunamis, hurricanes, floods, fires and lightning strikes. Loss caused by earthquakes or tsunamis is generally excluded in property all-risks insurances, although it may still be covered in additional risk insurances, but at a higher premium rate and within a strict scope of liability.
Natural disaster public liability insurance is a new type of insurance developed in recent years aimed at covering natural disasters. It is insurance whose contributions are made by local governments and is insured by insurance companies. Injuries and fatalities suffered by insured residents, which are caused by natural disasters such as storms, rainstorms, cliff collapses, lightning strikes, floods, tornadoes, squall lines, typhoons (tropical storms), tsunamis, debris flows, landslides and hail, are indemnified under natural disaster public liability insurance.
Directors’ and officers’ insurance
What is the scope of D&O coverage?
Under the laws of the PRC, there are no specific provisions regarding D&O insurance, except for the Guiding Principles on Governing Listed Companies, which provide that a listed company may purchase liability insurance for its directors upon the approval of the general meeting of shareholders.
The parties to D&O insurance generally define D&O policy coverage as follows:
- the insurer will pay on behalf of the insured all loss resulting from a claim first made during the policy period against an insured, except for and to the extent that the company has indemnified the insured;
- the insurer will pay on behalf of the company all loss resulting from a claim first made during the policy period against an insured to the extent that the company has indemnified the insured; and
- the insurer will pay all legal representation expenses in respect of an investigation on behalf of the insured and all legal representation expenses paid by the company on behalf of the insured.
What issues are commonly litigated in the context of D&O policies?
Issues that are commonly litigated in the context of D&O policies are those where the insurance applicant does not make an honest disclosure about any pecuniary embarrassment or investigation by the government when he or she is concluding or renewing an insurance contract.
The disclosure obligation of the insurance applicant shall be limited to the scope and the content of the inquiry made by the insurer. If the concerned parties have any dispute over the scope and the content of the inquiry, the insurer shall bear the burden of proof. In addition, in the event that the insured is a listed company, the insurer may require the insured to make a disclosure even if this kind of information is published on the government’s website or has entered the public domain.
If the insurer, after the conclusion of the insurance contract, knew or should have known that the insurance applicant failed to perform the obligation of honest disclosure but still collected the insurance premium, the concerned people’s court shall not uphold the request made by the insurer for rescission of the contract based on the disclosure obligation of the PRC Insurance Law.
Liability under another jurisdiction potentially gives rise to further dispute. Where an insured is fined or a judgment made that it should pay damages in a foreign jurisdiction, the validity of the decree, verdict and rule issued by the foreign court or the foreign government will be contentious.
What type of risks may be covered in cyber insurance policies?
According to The Interim Measures for the Supervision of the Internet Insurance Business (currently effective) issued by the CIRC (now CBIRC), insurance companies can operate cyber insurance business in the following areas:
- personal accident injury insurance, term-life insurance and whole-life insurance;
- household property insurance, liability insurance, credit insurance and surety insurance insured for applicants or insurants personally;
- property insurance business that could achieve full services of sale, underwriting and settlement of claims independently and completely online; and
- other insurance stipulated by CIRC.
According to the 2018 research report on Internet Property Insurance Users, issued jointly by the Insurance Association of China (IAC) Internet Insurance Alliance and IResearch, 32.8 per cent of such users most frequently buy automobile insurance policies that are at the top of the overall rankings. Fund account security insurance ranks in second place as most frequently bought by 20.5 per cent of users. In third place is medium-to-high-end medical insurance, which is most frequently bought by 14.3 per cent of users.
Experts and scholars are expecting the release of district restrictions on cyber dread disease insurance. However, in the Regulatory Measures on Internet Insurance (Draft) published by CBIRC in October 2018, cyber dread disease insurance is still excluded from being sold in districts, cities or provinces where the insurance company does not have any branches.
What cyber insurance issues have been litigated?
The most frequently litigated cyber insurance issues include:
- Whether the cyber insurance contract has been established. The court generally holds that an insurance contract could be established online. The key to the establishment of the insurance contract is whether the applicant and the insurer had unanimous declaration of will. The relevant cases are: China Life Insurance Co Ltd, Linli Branch v He Renqiu, Accident Injury Insurance Contract Litigation (No. 1397 Xiang 07 Minzhong, 2016) and New China Life Insurance Co Ltd, Pingxiang Center Branch v Huang Shanqiu, Insurance Contract Litigation (No. 93 Ping Miner Zhongzi, 2014).
- Whether the insurance company has properly reminded and explained the exemption clause in the insurance contract during the online underwriting process and performed its obligations regulated by the Insurance Law. The court holds that the insurance companies could operate cyber insurance businesses by entering into electronic insurance contracts, but shall obey Insurance Law and clarify the standard terms that would otherwise be invalid if exempting the responsibilities of the insurers. The relevant cases are: Jiang Weiqing v Liu Juncheng and Ping An, Wenjiang Branch, Motor Vehicle Traffic Accident Liability Litigation (No. 8021 Chuan 01 Minzhong, 2017), Yuan Huaiyuan, Shen Huifen and etc v PICC, Ningde Branch, Accident Injury Insurance Contract Litigation (No. 930 Min 09 Minzhong) and Jiang Jilian, Li Dongyu and etc v PICC, Shenzhen Branch, Accident Injury Insurance Contract Litigation (No. 691 Zhe Jia Minzhong Zi, 2015).
Is insurance available in your jurisdiction for injury or damage caused by acts of terrorism and, if so, how does it generally operate?
In 2004, the Jin Mao Tower in Shanghai, which used to be the highest building in China, was the first to purchase a terrorism insurance policy in the PRC. The People’s Insurance Company of China underwrote the policy and provided a coverage of up to US$630 million, with US$150 million earmarked to cover the liabilities arising from terrorist activities.
In the PRC, insurance companies sometimes include terrorism as an additional risk under an insurance policy. Moreover, because there have been few terrorism incidents in the PRC, Chinese insurance companies have yet to develop a comprehensive system to process and settle claims for terrorism, and the Chinese insurance companies often exclude terrorism from coverage in insurance policies.
Update and trends
Update and trends
Updates and trends
On 1 September 2018, Interpretation (IV) of the Supreme People’s Court on Several Issues concerning the Application of the Insurance Law of the People’s Republic of China came into effect (the Interpretation). The Interpretation was announced for the hot issues in practice on 1 August 2018 and includes 21 articles. It focuses on the property insurance contract. It mainly refers to the assignment of the insured subject matter (articles 1, 2, 3 and 5), significant increase of risk (article 4), insurance subrogation right (articles 6-13) and liability insurance (articles 14-20). The Interpretation further clarifies controversies in practice, including (i) that whether the property assignee enjoys the insurance interest depends on whether the insured subject matter and the risk of loss and damage have been delivered to the assignee or not; (ii) that the insurance applicant can be subrogated by the insurer; (iii) that when the insured waives the right to claim indemnity against a third party, the insurer may claim refund of the premium; and (iv) the conditions for a third party to sue the liability insurer. With the Interpretation, insurance companies will be more prudent when designing insurance articles. They may also be inspired, on account of the Interpretation, to pursue subrogation rights more actively.