CASE LAW NO. 23/2018/AL On the validity of life insurance contracts when the policyholder fails to pay the premium due to the fault of the insurance company (Please note that this image is not related to the specific case being discussed).

CASE LAW NO. 23/2018/AL

On the validity of life insurance contracts when the policyholder fails to pay the premium due to the fault of the insurance company

Approved by the Judicial Council of the Supreme People’s Court on October 17^th, 2018, and published under Decision No. 269/QD-CA on November 6^th, 2018, by the Chief Justice of the Supreme People’s Court.

Source of the Case Law:

The Appellate Civil Judgment No. 538/2009/DS-PT dated March 31^st, 2009, of the Hồ Chí Minh City People’s Court regarding the case of “Insurance Contract Dispute” between the plaintiff, Mrs. Phạm Thị T, and the defendant, Limited Liability Life Insurance Company P; the interested person is Mrs. Vũ Thị Minh N.

Location of the Case Law’s Content:

Paragraphs 4,7 and 8 of the “Court’s Opinion” section.

Summary of the Case Law:

– Case Background:

The life insurance application form indicated that the policyholder chose to have the premium collected at the policyholder’s home address. When the premium was due and during the grace period, the insurance company’s staff did not come to collect the premium from the policyholder.

– Legal Resolution:

In this situation, it must be determined that the policyholder was not at fault for not paying the premium. The life insurance contract does not lose its validity because the policyholder did not pay the premium within the agreed time frame.

Relevant Legal Provisions:

Article 23 of the Law on Insurance Business 2000, amended and supplemented in 2010.

Keywords:

“Life insurance contract”; “Validity of life insurance contract”; “Premium payment term”; “Premium payment grace period”.

CASE DETAILS

Plaintiff Mrs. Phạm Thị T stated: Her husband, Mr. Trần Hữu L, had purchased insurance from Limited Liability Life Insurance Company P. Her husband died in an accident. According to the contract, she is the beneficiary. She now requests the defendant to pay the insurance amount of VND 300 million and interest calculated at the basic interest rate from August 2005 to now, totaling VND 126 million, making a total of VND 426 million.

The defendant, Limited Liability Life Insurance Company P, represented under authorization by Mr. Nguyễn Quốc T, stated: Mr. L had to pay the second insurance premium on June 24^th, 2005, and was given an additional two-month grace period but still did not pay. Mr. L died on August 27^th, 2005, at which time the insurance contract had been invalid for 3 days. Therefore, the defendant does not agree to pay the amount claimed by the plaintiff.

The interested person, Mrs. Vũ Thị Minh N, stated: She was the agent of the defendant and had sold the insurance to Mr. L. She had agreed with Mr. L that she would directly collect the premium at his house. However, at the last collection period, she had to attend a political training in the province and could not collect the premium. The non-payment was due to objective reasons, so she requested the defendant to pay the insurance amount to the plaintiff.

At the First-Instance Civil Judgment No. 38/2008/DS-ST dated August 21^st, 2008, of the People’s Court of District 1, Hồ Chí Minh City, it was decided:

1. The request of Mrs. Phạm Thị T for Limited Liability Life Insurance Company Pto pay the insurance amount and interest for late payment totaling VND 426,000,000 is not accepted.
2. Regarding court fees: Mrs. Phạm Thị T must bear the first-instance civil court fee of VND 7,890,000, but this amount is offset by the advance court fee of VND 6,000,000 paid according to receipt No. 2185 dated June 9^th, 2006, of the Hồ Chí MinhCity Civil Judgment Enforcement Department. Mrs. T still has to pay VND 1,890,000.

The first-instance judgment also ruled on the right to appeal of the litigants.

On September 1^st, 2008, Mrs. Phạm Thị T appealed.

At the Appellate Court:

The plaintiff did not withdraw her lawsuit and her appeal. The litigants could not reach an agreement on the resolution of the case. Mrs. T stated her appeal request, asking the Appellate Panel to accept her request to compel Limited Liability Life Insurance Company P to pay the insurance amount and interest for late payment totaling VND 426,000,000. She argued that the company’s staff did not come to collect the premium, not that she did not pay. Mrs. T’s legal counsel requested the Appellate Panel to accept her request.

Mr. Nguyễn Quốc T, representing Limited Liability Life Insurance Company P, with the legal counsel requested the Appellate Panel to uphold the first-instance judgment.

COURT’S OPINION:

[1] After reviewing the case file and evidence at the trial and based on the results of the trial, the Appellate Panel finds:

[2] Regarding the formality: Mrs. Phạm Thị T’s appeal is within the statutory deadline and is valid.

[3] Regarding the merits:

[4] The life insurance application (Exhibit 15-17) designates Mr. L’s house, at No. 231, Hamlet 3, Commune B, District G, Bến Tre Province, as the premium collection address for Limited Liability Life Insurance Company P. This aligns with the testimony of Mrs. N, the company’s insurance agent and premium collector.

[5] Considering Mrs. T’s appeal that Mr. L did not pay the insurance premium on time because the company did not send anyone to collect it, this is supported by the above evidence.

[6] The confirmation letter from Commune B’s police shows that Mr. L died on August 27^th, 2005, due to an accidental fall causing head trauma.

[7] Given that Mr. L signed the insurance contract for VND 300,000,000 and, as previously established, the non-payment of the second premium was not his fault, the plaintiff’s appeal for Limited Liability Life Insurance Company P to pay the insurance benefit due to Mr. L’s accidental death is valid and should be granted.

[8] Regarding the request of the representative of Limited Liability Life Insurance Company P, which claims that Mr. L failed to pay the second premium by the deadline of August 24^th, 2005, and that Mr. L died on August 27^th, 2005, thereby rendering his insurance contract invalid, this argument is unfounded. As previously analyzed, the reason Mr. L did not pay the premium was that the company’s staff did not come to collect the fee.

This is clearly stated on page 5 of the booklet “Essential Information For Policyholder,” which specifies that premium collection at home includes quarterly, semi-annual, annual payments, or when there are two or more contracts at the same address, fitting Mr. L’s case as he had three contracts with Limited Liability Life Insurance Company P (for himself, Mrs. T, and Mrs. H). Therefore, the Court does not accept the request of the representative of Limited Liability Life Insurance Company P, nor the arguments of the legal counsel for Limited Liability Life Insurance Company P.

[9] Regarding Mrs. T’s request for Limited Liability Life Insurance Company P to pay late interest from August 27^th, 2005, until the Court’s trial date, this request is unfounded. The insurance policy issued by Limited Liability Life Insurance Company P to Mr. L does not specify any interest rate clause; therefore, the Court does not accept this request of Mrs. T.

[10] Consequently, the Court accepts part of Mrs. T’s appeal, modifying the first-instance judgment to compel Limited Liability Life Insurance Company P to pay the insurance amount of VND 300,000,000 for the accidental death of Mr. L, with Mrs. T being the beneficiary.

[11] Regarding the first-instance civil court fees, Mrs. T and Limited Liability Life Insurance Company P must bear the fees according to Clause 2, Article 7 of Decree 70/CP. Specifically, Mrs. T must bear the fee for the unaccepted interest amount, totaling VND 6,040,000. Limited Liability Life Insurance Company P must bear the fee for the amount payable to Mrs. T, totaling VND 12,000,000.

[12] As the first-instance judgment has been amended, Mrs. T does not have to pay the appellate civil court fees according to Clause 2, Article 132 of the Civil Procedure Code.

In light of the foregoing, 

IT IS DECIDED:

– Pursuant to Clause 2, Article 275 of the Civil Procedure Code.

To adjudicate:

– Accepting part of Mrs. Phạm Thị T’s appeal.

– Amended the first-instance judgment No. 38/2008/DS-ST dated August 21^st, 2008, of the People’s Court of District 1, Hồ Chí Minh City.

1. Accepting part of Mrs. Phạm Thị T’s request.

* Compelling Limited Liability Life Insurance Company P to pay the insurance amount of VND 300,000,000 (Three hundred million dong) to Mrs. Phạm Thị T immediately after the judgment takes legal effect.

* From the date of the plaintiff’s request for judgment enforcement, if the defendant fails to execute the aforementioned amounts, they must bear interest at the basic interest rate set by the State Bank, corresponding to the time of non-enforcement.

2. Regarding first-instance civil court fees:

– Mrs. Phạm Thị T must bear a fee of VND 6,040,000 (Six million forty thousand dong), but this amount is offset by the advance court fee of VND 6,000,000 (Six million dong) paid according to receipt No. 002185 dated June 9^th, 2006, of the Hồ Chí Minh City Civil Judgment Enforcement Department. Mrs. T still has to pay VND 40,000 (Forty thousand dong).

– Limited Liability Life Insurance Company P must pay a fee of VND 12,000,000 (Twelve million dong).

3. Mrs. T does not have to pay the appellate civil court fees; VND 50,000 (Fifty thousand dong) of the advance court fee paid will be refunded to her according to receipt No. 004852 dated September 9^th, 2008, of the Civil Judgment Enforcement Department of District 1, Hồ Chí MinhCity.

The appellate judgment takes legal effect from the date of the judgment pronouncement.

CONTENT OF THE CASE LAW:

“[4] The life insurance application (Exhibit 15-17) designates Mr. L’s house, at No. 231, Hamlet 3, Commune B, District G, Bến Tre Province, as the premium collection address for Limited Liability Life Insurance Company P. This aligns with the testimony of Mrs. N, the company’s insurance agent and premium collector.

[7] Given that Mr. L signed the insurance contract for VND 300,000,000 and, as previously established, the non-payment of the second premium was not his fault, the plaintiff’s appeal for Limited Liability Life Insurance Company P to pay the insurance benefit due to Mr. L’s accidental death is valid and should be granted.

[8] Regarding the request of the representative of Limited Liability Life Insurance Company P, which claims that Mr. L failed to pay the second premium by the deadline of August 24^th, 2005, and that Mr. L died on August 27^th, 2005, thereby rendering his insurance contract invalid, this argument is unfounded. As previously analyzed, the reason Mr. L did not pay the premium was that the company’s staff did not come to collect the fee.

This is clearly stated on page 5 of the booklet “Essential Information For Policyholder,” which specifies that premium collection at home includes quarterly, semi-annual, annual payments, or when there are two or more contracts at the same address, fitting Mr. L’s case as he had three contracts with Limited Liability Life Insurance Company P (for himself, Mrs. T, and Mrs. H). Therefore, the Court does not accept the request of the representative of Limited Liability Life Insurance Company P, nor the arguments of the legal counsel for Limited Liability Life Insurance Company P.”

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