Research on the Disclosure Obligations in Insurance Contracts

Author: Li Tingpeng
Publisher:
Publish Date: 2006-03-10
Features: This paper questions the general theory of the legal basis for the duty to disclose—“technical theory” and argues that “utmost good faith theory” is the direct legal basis for the duty to disclose. Regarding the legal effects of false disclosure by the insured at the time of contract formation, this paper proposes an explanatory theory of a dual-layer structural normative model. Globally, legislation has gradually strengthened restrictions on the insurer's right to terminate the contract, revealing that the normative models of no causation requirement, causation requirement, and the proportionality principle are a progressive process, reflecting an increasing trend toward consumer protection. This paper also examines the new developments in the non-disclosure clause rules in insurance-developed countries and their implications for China's insurance practice. Regarding the insured's failure to fulfill the notification obligation for the occurrence of an insurance event, this paper suggests that China's insurance law reform should design different legal effects corresponding to the facts of the damage and negligence. The research in this paper indicates that in foreign countries and other regions, a common duty to disclose by the insurer is not only reflected in concept but has also been implemented in rigorous and comprehensive corresponding legal systems. The research findings reveal that the duty to disclose system in insurance law generally shows the following patterns of development: The contradiction between integrity and fairness in modern insurance transactions has mainly shifted from the insured to the insurer. Although the utmost good faith principle still binds the insured in modern insurance law, it has moved away from the era of strict disclosure obligations and liability. The comparative legal analysis framework proposed in this paper shows that the attitudes of insurance laws in various countries toward the legal effects of the insured's failure to disclose are becoming increasingly lenient, all reflecting a tendency to sympathize with the insured. Legislative developments have introduced special requirements to limit the insurer's right to terminate the contract, such as causation, the proportionality principle, decisive influence, the facts of the damage, and non-disclosure clause rules. On the other hand, the insurer is burdened with increasingly stringent disclosure obligations, such as the duty to disclose and explain the exclusions clause at the time of contract formation, the notification obligation that limits the insurer's right to terminate the contract during the insurance period, the regulation of the substantive content of standardized insurance clauses, and the application of the rule of adverse interpretation in ambiguous clauses.