A Porsche broke down on a rainy night, and was towed away by a wrecker. The wrecker suddenly stopped at a traffic light and collided with the Porsche. Is the collision covered in the insurance contract? Should the insurance company be liable for compensation?

[Case Review]

 One rainy night in 2020, Ms. Dai¡¯s Porsche broke down because of the bumpy road. A wrecker came to tow the Porsche away, and when it suddenly stopped at a traffic light, there was a collision between the wrecker and the front of the Porsche, causing damage to the latter. It turned out that Li, the driver of the wrecker, only fixed the Porsche with a safety strap between the front end and the wrecker, but did not fix the four wheels. So the vehicle traction service company to which the wrecker belongs paid Ms. Dai vehicle maintenance fee of more than RMB 14,000 yuan. As the vehicle traction service company had covered the road cargo insurance, it reported to the insurance company for a claim.

The insurance company said that according to their insurance contract, the loss caused by the collision of the means of transport shall be paid by the Insurer, and such collision shall be understood as one between the wrecker and other vehicles on the road, not as one with the vehicles towed by the wrecker. The contract also stipulates that the Insurer shall not be liable for any damage caused by improper packing of the insured goods. And it shall be considered ¡°improper packing¡± of the vehicle traction service company for not fastening the four wheels of the rescued vehicle firmly. So the insurance company denied the claim. The vehicle traction service company then sued the insurance company for a compensation of more than RMB 14,000 yuan.

After being rejected by the court of first instance, the vehicle traction service company appealed to the Shanghai Financial Court (SFC).

[Case Study]

The SFC held that there are two focuses of the dispute: 1. whether the incident involved is covered by insurance; and 2. whether the insurance company¡¯s deductible grounds are established.

First, as to whether the incident involved is covered by insurance. The insurance clauses stipulate that the loss caused by the collision of the means of transport is covered by the insurance. In this case, the rescued vehicle was damaged in the collision with the wrecker due to an emergency braking. The loss was caused by the ¡°collision¡± of means of transport.

Second, as to whether the incident involved shall be deemed as ¡°improper packing¡± in the exception rules. According to the Code of Operation for Road Vehicles¡¯ Removal and Rescue, there are two types of vehicle towing: flat and lift, which should be selected according to the type of the damaged vehicle and the state of damage... If the damaged vehicle cannot be towed by the winch of a flat wrecker, auxiliary devices or lifting equipment will be used to put the vehicle on the flat wrecker, and the four wheels of the vehicle should be fixed firmly to prevent its displacement on the flat. In this case, the rescued vehicle was only fixed with safety straps between its front end and the wrecker, with nothing done about the four wheels, which did not meet the requirements mentioned above. So there is a contractual and legal basis for the insurance company to refuse the claim according to the exception rule of ¡°improper packing¡± in the insurance contract.

Accordingly, the SFC dismissed the appeal and upheld the original judgment.

The ¡°collision¡± of vehicles in this case is rather special. Normally, ¡°collision¡± of means of transport refers to the collision between one vehicle and other vehicles on the road or road facilities. In this case, it happened between the vehicle (the wrecker) and the ¡°cargo¡± (the rescued vehicle). According to the insurance company, ¡°collision¡± can only happen between the vehicle and an object ¡°outside it¡±, not ¡°on it¡±. Therefore, the collision between the wrecker and the rescued vehicle in this case shall not be covered by the insurance. In this regard, the court held that according to Article 30 of the Insurance Law of the People¡¯s Republic of China, ¡°Where an insurance contract is concluded based on the standard terms provided by the insurer, and there is any dispute between the insurer and the applicant, the insured or the beneficiary over the contract terms, the contract should be interpreted in accordance with the general understanding. Where there are two or more interpretations of the terms of the contract, the people¡¯s court or the arbitration institution shall give an interpretation in favor of the insured and the beneficiary.¡±

In this case, the definition of ¡°collision¡± is not specifically stipulated in the insurance contract. From the perspective of contract interpretation, the vehicle traction service company has insured wreckers and rescued vehicles respectively for motor vehicles and road shipment. And the insurance company has seen them as two independent subject matters for underwriting and issued two insurance policies. So the wrecker and the rescued vehicle should be an ¡°external object¡± for each other physically and legally. Therefore, the ¡°collision¡± may mean either a collision between the means of transport and other vehicles or road facilities outside it, or a collision between the means of transport and the rescued vehicle carried by it. According to the above law, if there are two reasonable interpretations of the contract, the interpretation shall be made in favor of the insured. Therefore, the loss caused by the collision between the wrecker and the rescued vehicle should be covered by the insurance under the contract. However, the vehicle traction service company¡¯s failure to perform the obligation of proper packing conforms to the exception rules in the insurance contract, so the insurance company has the right to refuse the claim. It is common that after a rescued vehicle is loaded on the wrecker, only its front is fixed with the wrecker, and nothing is done to fix its four wheels. It may be okay if the road is safe and everything is fine, but if it rains and the road gets slippery, as in this case, the rescued vehicle is likely to hit the wrecker because of a sudden brake. Drivers of wreckers should operate in compliance with the Code of Operation for Road Vehicles¡¯ Removal and Rescue and fix the rescued vehicle firmly to prevent displacement. At the same time, car owners should never sit in the car when their cars break down and need to be towed by a wrecker, so that they can get away from any personal danger if their cars hit the wrecker.

[Relevant Laws] ¡¡

I. Several Provisions of the Supreme People¡¯s Court on the Retroactivity in the Application of the Civil Code of the People¡¯s Republic of China¡¡¡¡

Article 1 Cases of civil disputes arising from the legal facts occurring after the Civil Code comes into force shall be governed by the Civil Code.¡¡¡¡

Cases of civil disputes arising from the legal facts occurring before the Civil Code comes into force shall be governed by the laws and judicial interpretations in force at that time, except as otherwise provided for by any law or judicial interpretation.¡¡¡¡

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II. Contract Law of the People¡¯s Republic of China (1999)¡¡

Article 60 Each party shall perform its obligations as agreed upon.¡¡¡¡

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¢ó. Insurance Law of the People¡¯s Republic of China¡¡¡¡

Article 51 The insured shall abide by the national regulations on fire protection, safety, production and operation, labor protection, etc., and ensure the safety of the subject matter of insurance.¡¡¡¡

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(By: Zhu Rui and Zheng Qian, Shanghai Financial Court)