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insurer rejected claim for broken front tooth of student covered by ¡°student safety insurance¡± court: insurer should warn applicant of exemption clausesexplain them to make them effective
[2019-05-05]

A school organized all the students to purchase the Student Safety Insurance. One student broke his front tooth from playing during a break at school. His parents filed a claim with the insurance company, but the company rejected their claim saying that it didn¡¯t fall within the coverage. The two parties went to court after the negotiation failed. The Qingpu District People¡¯s Court of Shanghai (hereinafter referred to as ¡°Shanghai Qingpu Court¡±) tried the case prudently and finally ruled that the insurance company should pay indemnity.

[Case Review]

Wang Xiaoming is a primary school student who purchased the ¡°Primary and Secondary School Students¡¯ Safety Insurance,¡± shortened as ¡°Student Safety Insurance,¡± under the organization of his school. It is a group insurance. Parents give their premiums to the school, and the school delivers all the premiums to the insurance company. Then the insurance company returns the school with insurance policies, provisions and others. Xiao Ming¡¯s parents paid the money too, but did not receive the related documents.

One day, during a break at school, Xiaoming accidentally stepped into a dustpan by a wall and fell down when playing with his classmates. His front tooth hit the ground and half was broken apart. His teacher immediately sent him to the school infirmary for treatment. Fortunately, Xiaoming suffered no serious injury, but his front tooth was already a permanent tooth and couldn¡¯t be restored. Xiao Ming¡¯s parents had to take him to a clinic and had the tooth fixed. It cost them over RMB 5,000. Then Xiao Ming¡¯s parents remembered that they had purchased the ¡°Student Safety Insurance¡±. So they filed a claim with the insurance company. To their surprise, the insurance company rejected the claim, saying that the medical expenses caused by fixing a broken tooth do not fall within the coverage according to the exemption clauses. After the negotiation failed, Xiaoming¡¯s parents filed a lawsuit with the court.

Xiao Ming¡¯s parents held that they had never been informed of the exclusions by the insurance company.

But the insurance company argued that the school as the remitter of the premiums for the ¡°Student Safety Insurance¡± could be considered as the representative of the insurance applicants, and as the defendant had informed the school of the exclusions in the insurance provisions, the exemption clauses should be effective.

[Case Study]

After hearing the case, Shanghai Qingpu Court concluded that the insurer has the obligation of giving a warning about the standard clauses and the exemption clauses and explaining them to the insurance applicants according to Article 17 of the Insurance Law of the People¡¯s Republic of China. In this case, both parties agreed that the applicant of the insurance involved was the student himself. As for the identity of the school as a remitter, although the school had fulfilled some of the work of remitting the premiums on behalf of the students, it had not been explicitly authorized and shouldn¡¯t be considered as the representative of the insurance applicants or their legal representatives. Therefore, the insurer should still give a warning about the standard clauses and the exemption clauses and explain them to the students who were the insurance applicants (or their legal representatives). Otherwise, these clauses should be considered ineffective. Given the above reason, the court ruled that the insurance company should pay indemnity.

The ¡°Student Safety Insurance¡± is a personal accident insurance for primary and secondary school students. Although it is a group insurance and covers a large number of people, the students, as the insurance applicants, stand at a disadvantage the same as the other kinds of insurance applicants because of information asymmetry during the making of the insurance contracts. The insurer cannot waive the obligation of giving a warning about the exemption clauses and explaining them to the insurance applicants. The insurer can achieve it by handing out policies and clauses through the school and having the legal representatives of the insurance applicants sign for confirmation or some other means that won¡¯t evidently increase the insurer¡¯s burden. Otherwise, the exemption clauses may not be applicable due to invalidity.

[Relevant Laws]

Insurance Law of the People¡¯s Republic of China

Article 17 Where an insurance contract is entered into by using the standard clauses of the insurer, the insurer shall provide an insurance policy with the standard clauses attached and explain the contents to the contract to the insurance applicant. For those clauses exempting the insurer from liability in the insurance contract, the insurer shall sufficiently warn 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 verbally. If the insurer fails to make a warming or express explanation thereof, those clauses shall not be effective.

Article 23 After receiving a claim of insurant or beneficiary for paying indemnity or insurance money, the insurer shall assess the claim in a timely manner. If the circumstances are complex, the insurer shall complete the assessment within 30 days, unless it is otherwise agreed upon in the insurance contract. The insurer shall notify the insurant or beneficiary of the assessment result. For a claim which falls within the insurance coverage, the insurer shall perform the obligation of paying indemnity or insurance money within 10 days after reaching an agreement on payment of indemnity or insurance money with the insurant or beneficiary. If the insurance contract provides otherwise for the time limit for payment of indemnity or insurance money, the insurer shall perform the obligation of paying indemnity or insurance money as agreed upon therein.

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(Writers: Shen Yuehong and Luo Yue of Shanghai Qingpu Court)

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