January 2021
A recent Supreme Court decision recognizes the policy value reserve of a life insurance is a right enjoyed by the policyholder against the insurer (Taiwan)
Elva Chuang
There is no unanimous opinion among practitioners and scholars as to whether the policy value reserve under the in-force life insurance contract of the policyholder can be the subject of compulsory enforcement when the creditor seeks compulsory enforcement against the policyholder. Recently, the Supreme Court handed down its 109-Tai-Shang-1332 Decision of August 12, 2020 (hereinafter, the "Decision"), holding that the policy value reserve of a life insurance is a right enjoyed by the policyholder against the insurer. Therefore, it should be inferred that this Decision should take the affirmative view that the policy value reserve can be subject to compulsory enforcement.
According to this Decision, Article 11 of the Enforcement Rules of the Insurance Law provides that the policy value reserve referred to in the Insurance Law is the reserve calculated in the life insurance industry based on the interest rate and the peril rate of the premiums on an insurance contract and in the manner prescribed by the competent authority. Therefore, the policy value reserve is the accumulation of prepaid premiums by the policyholder and represents the cash value accumulated by the policyholder from prepaid premiums. If the policyholder takes out a loan from the insurer under the policy or requests the insurer to pay the policy value reserve for other reasons, the amount payable by the insurer is one of the rights enjoyed by the policyholder against the insurer under the life insurance contract.
Therefore, according to the Decision, the original trial court held that: "...... policy value reserve is not a specific amount of money that actually exists at the insurance company and can only be crystallized into a right to demand the payment of a certain amount of money after the insurance contract is terminated. Therefore, before the insurance contract is terminated, the insurer has the obligation to pay the policy value reserve only under certain circumstances. This further shows that policy value reserve is not based on the permanence of the insurance contract and the policyholder cannot claim to the insurer at any time. ..." Since there are in a doubt, the original decision was reversed and remanded to the Taiwan High Court.
There is no unanimous opinion among practitioners and scholars as to whether the policy value reserve under the in-force life insurance contract of the policyholder can be the subject of compulsory enforcement when the creditor seeks compulsory enforcement against the policyholder. Recently, the Supreme Court handed down its 109-Tai-Shang-1332 Decision of August 12, 2020 (hereinafter, the "Decision"), holding that the policy value reserve of a life insurance is a right enjoyed by the policyholder against the insurer. Therefore, it should be inferred that this Decision should take the affirmative view that the policy value reserve can be subject to compulsory enforcement.
According to this Decision, Article 11 of the Enforcement Rules of the Insurance Law provides that the policy value reserve referred to in the Insurance Law is the reserve calculated in the life insurance industry based on the interest rate and the peril rate of the premiums on an insurance contract and in the manner prescribed by the competent authority. Therefore, the policy value reserve is the accumulation of prepaid premiums by the policyholder and represents the cash value accumulated by the policyholder from prepaid premiums. If the policyholder takes out a loan from the insurer under the policy or requests the insurer to pay the policy value reserve for other reasons, the amount payable by the insurer is one of the rights enjoyed by the policyholder against the insurer under the life insurance contract.
Therefore, according to the Decision, the original trial court held that: "...... policy value reserve is not a specific amount of money that actually exists at the insurance company and can only be crystallized into a right to demand the payment of a certain amount of money after the insurance contract is terminated. Therefore, before the insurance contract is terminated, the insurer has the obligation to pay the policy value reserve only under certain circumstances. This further shows that policy value reserve is not based on the permanence of the insurance contract and the policyholder cannot claim to the insurer at any time. ..." Since there are in a doubt, the original decision was reversed and remanded to the Taiwan High Court.
