[Case Review]

Bumps are inevitable when driving a car, and many drivers may choose to negotiate the damages on their own. Wu and Liu are the parties in a traffic accident. During the Spring Festival of 2017, Wu drove his vehicle back to his hometown to visit relatives. On the way, because he did not maintain a safe distance, he accidentally collided with the vehicle that Liu was driving, causing damage to both vehicles. The traffic police department determined that Wu shall be fully liable to the accident.

After the accident, Wu personally negotiated compensation with Liu. Under Liu¡¯s proposal, Wu first paid him RMB 30,000 as compensation. After receiving RMB 30,000, Liu did not contact Wu. However, after that, Liu¡¯s vehicle insurance company (hereinafter referred to as ¡°Insurance Company¡±) appealed to the court, claiming that it had obtained and exercised the subrogation right and demanded that Wu compensate for a loss of RMB 50,000.

The plaintiff Insurance Company said that after the traffic accident, it had paid the indemnity of RMB 50,000 to Liu in accordance with the vehicle insurance contract, and obtained the subrogation right according to law. Therefore, it has the right to require that Wu who shall be fully liable for the accident compensate the Insurance Company RMB 50,000.

In this regard, Wu argued that he was wronged: he had no objection to Liu¡¯s loss of RMB 50,000, but he had already compensated Liu RMB 30,000, therefore, Wu claimed that he can only pay another RMB 20,000 as the Insurance Company claimed against him.

[Case Study]

After the trial, Shanghai Hongkou District People¡¯s Court (hereinafter referred to as ¡°Shanghai Hongkou Court¡±) held that, according to the facts found, after the traffic accident, Liu claim for compensation to the Insurance Company after he received Wu¡¯s compensation of RMB 30,000 and concealed the fact that he had received RMB 30,000. Then the insurance company paid RMB 50,000 to Liu.

In accordance with the Insurance Law of the People¡¯s Republic of China, the plaintiff the Insurance Company, as the insurer of Liu, has paid the corresponding indemnity for the insurance accident that occurred during the insurance period of Liu¡¯s vehicle, shall obtain the subrogation right according to law and have the right to recover the compensation from Wu. Therefore, Shanghai Hongkou Court supported the plaintiff¡¯s claim in accordance with the law.

Since Liu¡¯s vehicle loss totaled RMB 50,000, the liability limit that Wu shall bear for the accident should be RMB 50,000. Now that Wu had paid RMB 30,000 to Liu, such RMB 30,000 shall be deducted from the total compensation amount of RMB 50,000 that the Insurance Company claimed in subrogation. The court ruled that Wu shall pay RMB 20,000 to the insurance company.

In this case, the Insurance Company can also recover the paid RMB 30,000 from Liu by legal means.

[Relevant Laws]

Insurance Law of the People¡¯s Republic of China

Article 60 If an insured accident is caused by a third party¡¯s damage to the insured subject-matter, the insurer shall, to the limit of the amount of compensation, exercise the right that insured has to claim for compensation from the third party in subrogation from the date of compensation to the insured. If the insured has obtained damages from a third party, the insurer may deduct the amount that the insured has obtained from the third party from the indemnity that the insurer shall pay.

(Writer: Wang Jiawei, Shanghai Hongkou District People¡¯s Court)