August 2017
The subrogation system in which an insurer seeks to recover from the insured under Article 29 of the Compulsory Automobile Liability Insurance Law was designed to ensure the insurer's subrogation right, not to extinguish the subrogation rights or to prevent the insurer from asserting any claim(Taiwan)
Erica Chiu
The Hualien Branch of the Taiwan High Court rendered the 104-Shang-38 Decision of December 29, 2015 (hereinafter, the "Decision"), holding that the subrogation system in which an insurer seeks to recover from the insured under Article 29 of the Compulsory Automobile Liability Insurance Law was designed to further protect the insurer by securing its subrogation right, not to extinguish the subrogation rights or to prevent the insurer from asserting any claim.
According to the facts underlying the Decision, the Appellant was an insurance company who filed a complaint, alleging that it was the insurer of the automobile liability insurance for the vehicle at issue, and that Appellee A had provided the vehicle at issue to Appellee B, who drove the vehicle at issue and resulted in an accident that led to the death of another person, even though Appellee A was obviously aware that Appellee B's driver's license had been suspended. The Appellant paid a death benefit under the compulsory insurance to the victim's bereaved family in accordance with Article 27, Paragraph 1 of the Compulsory Automobile Liability Insurance Law. After indemnifying the claimant pursuant to the Compulsory Automobile Liability Insurance Law, the Appellant exercised the subrogation right under Article 29, Paragraph 1, Subparagraph 5 of the same law in asserting a claim against Appellee B and requesting that Appellee A assume joint and several liabilities.
According to the Decision, since Article 29 of the Compulsory Automobile Liability Insurance Law defines an insurer's exercise of the subrogation right, it is only reasonable that the insurer should assume insured's rights and obligations vis-a-vis the claimant when exercising the subrogation right. It will be unreasonable if the claimant can claim insurance indemnification from the insurer pursuant to this law while entering into an agreement on settlement, waiver or other matters with the insured to the extent of undermining the insurer's exercise of the subrogation right. Therefore, Article 30, which was added when the Compulsory Automobile Liability Insurance Law amended on February 25, 2015 to ensure the insurer's subrogation right, provides: "If a claimant enters into an agreement on settlement, waiver or other matters with the insured without the consent of the insurer to the extent of undermining the insurer's assertion of a claim against the insured as the subrogation claimant, the insurer shall not be bound by such agreement." Therefore, if an claimant's agreement on settlement, waiver or other matters with the insured "undermines" the insurer's assertion of a claim against the insured by way of subrogation under Article 29 of the Compulsory Automobile Liability Insurance Law and is not consented by the insurer, the insurer is not bound by such agreement and may still exercise the subrogation right.
However, the Appellant's appeal was rejected, because it was ultimately held that since there was no way to conclude that Appellee A had previously allowed Appellee B to use or manage the vehicle at issue when his driver's license was suspended, Appellee B was not the "insured" in this matter, and Appellant could not recover from Appellant B by way of subrogation under Article 29, Paragraph 1, Subparagraph 5 of the Compulsory Automobile Liability Insurance Law, and it was difficult to conclude that Appellee A should be liable for damages due to his violation of any law that protects others.
The Hualien Branch of the Taiwan High Court rendered the 104-Shang-38 Decision of December 29, 2015 (hereinafter, the "Decision"), holding that the subrogation system in which an insurer seeks to recover from the insured under Article 29 of the Compulsory Automobile Liability Insurance Law was designed to further protect the insurer by securing its subrogation right, not to extinguish the subrogation rights or to prevent the insurer from asserting any claim.
According to the facts underlying the Decision, the Appellant was an insurance company who filed a complaint, alleging that it was the insurer of the automobile liability insurance for the vehicle at issue, and that Appellee A had provided the vehicle at issue to Appellee B, who drove the vehicle at issue and resulted in an accident that led to the death of another person, even though Appellee A was obviously aware that Appellee B's driver's license had been suspended. The Appellant paid a death benefit under the compulsory insurance to the victim's bereaved family in accordance with Article 27, Paragraph 1 of the Compulsory Automobile Liability Insurance Law. After indemnifying the claimant pursuant to the Compulsory Automobile Liability Insurance Law, the Appellant exercised the subrogation right under Article 29, Paragraph 1, Subparagraph 5 of the same law in asserting a claim against Appellee B and requesting that Appellee A assume joint and several liabilities.
According to the Decision, since Article 29 of the Compulsory Automobile Liability Insurance Law defines an insurer's exercise of the subrogation right, it is only reasonable that the insurer should assume insured's rights and obligations vis-a-vis the claimant when exercising the subrogation right. It will be unreasonable if the claimant can claim insurance indemnification from the insurer pursuant to this law while entering into an agreement on settlement, waiver or other matters with the insured to the extent of undermining the insurer's exercise of the subrogation right. Therefore, Article 30, which was added when the Compulsory Automobile Liability Insurance Law amended on February 25, 2015 to ensure the insurer's subrogation right, provides: "If a claimant enters into an agreement on settlement, waiver or other matters with the insured without the consent of the insurer to the extent of undermining the insurer's assertion of a claim against the insured as the subrogation claimant, the insurer shall not be bound by such agreement." Therefore, if an claimant's agreement on settlement, waiver or other matters with the insured "undermines" the insurer's assertion of a claim against the insured by way of subrogation under Article 29 of the Compulsory Automobile Liability Insurance Law and is not consented by the insurer, the insurer is not bound by such agreement and may still exercise the subrogation right.
However, the Appellant's appeal was rejected, because it was ultimately held that since there was no way to conclude that Appellee A had previously allowed Appellee B to use or manage the vehicle at issue when his driver's license was suspended, Appellee B was not the "insured" in this matter, and Appellant could not recover from Appellant B by way of subrogation under Article 29, Paragraph 1, Subparagraph 5 of the Compulsory Automobile Liability Insurance Law, and it was difficult to conclude that Appellee A should be liable for damages due to his violation of any law that protects others.
