April 2022
Pei-Ching Ji and Jiselle Ong
Under Article 5 of the Insurance Act in Taiwan, the proposer or the insured may designate himself/herself or a third party as the beneficiary in the insurance contract that is entitled to claim compensation. In addition, an insurance contract executed between the proposer and the insurer mostly contains a consensual jurisdiction clause. In case of an insured peril occurred and the beneficiary is a third party, if the beneficiary seeks to file a lawsuit against the insurance company to claim for the insured amount, is s/he bound by the consensual jurisdiction clause of the insurance contract? Or the beneficiary may revert to the general principles under the Code of Civil Procedure and bring an action at the court of the defendant’s domicile? In practice, it is common that the domicile of the defendant (insurer) is close to the domicile of the plaintiff (beneficiary), but the competent court stipulated in the insurance contract is not located near both domiciles. It is even likely that the domiciles of the beneficiary and the insurer are in the same county or city, but the competent court stipulated in the insurance contract is located in another county or city to accommodate the insurance proposer’s need at the time of stipulation. As a result, the beneficiary has to file a lawsuit at a distant court, which is extremely inconvenient. Therefore, a beneficiary has a need to clarify the issue and determine if s/he is not required to be bound by the consensual jurisdiction clause. This article summarizes the practical opinions for reference as below.
The Taiwan High Court held in its decision[1] in 2013 that a beneficiary should be bound by the consensual jurisdiction clause of the insurance contract since the beneficiary claims insured amount based on the legal relationship raised from the insurance contract. The same opinion can be found in several district court rulings during 2005 through 2012[2] and in 2021.[3] It was opined in these court rulings that if a third party other than the proposer is the beneficiary, such an insurance contract is a third-party beneficiary contract. Under Article 269, Paragraph 1[4] of the Civil Code, such a third party may claim compensation directly from the insurer after the insured peril occurs. Therefore, the beneficiary should certainly be bound by the consensual jurisdiction clause.
In 2008,[5] however, the Taiwan High Court held a different opinion, stating that since the legal status of the beneficiary is based on a separate legal relationship designated by the proposer in accordance with law, the beneficiary does not take assignment of proposer’s right to claim for the insured amount; in other words, the beneficiary is not an assignee of the proposer under the insurance contract, thus the beneficiary is not a party to the contract and is not subject to the jurisdiction clause of the insurance contract. Since 2012, the opinions of the Taiwan High Court have gradually changed[6] with the following conclusion after the gist of two Supreme Court rulings[7] is incorporated: (1) an insurance contract is a contract of creditor’s rights entered into by the proposer and the insurer; and if the proposer designates a third party as the beneficiary, the third party is not a party to the contract; and (2) the binding effect of consensual jurisdiction only extends to the parties to the consensual jurisdiction agreement, but not to the third party. Therefore, it is presumed that since the beneficiary is not a party to the insurance contract, s/he is not bound by the jurisdiction clause of the contract. The same opinion is found in several district court rulings.[8] Another Taiwan High Court ruling[9] suggests that even in a case where the proposer is also the beneficiary and his/her inheritor becomes the legal beneficiary after his/her death, since the insurance contract is the kind of contract that is exclusive to the proposer, the inheritor does not inherit the legal relationship under the insurance contract. Consequently, the binding effect of the consensual jurisdiction agreement in such a contract certainly does not extend to the inheritor.
The aforementioned rulings suggest that the courts have changed their opinions in recent years and opined, instead, that “the beneficiary is not bound by the consensual jurisdiction clause in the insurance contract.” We also acknowledges such a change and believes that the beneficiary is not a party to the insurance contract since his/her legal status is separately designated by the proposer pursuant to law, rather than as one of the parties jointly enter into the insurance contract at the beginning, and a person who is not a party to the contract is certainly not bound by the consensual jurisdiction clause of the contract. Furthermore, the jurisdiction clause is usually formulated for the convenience of both parties to the contract. However, in the case where the beneficiary is a third party, the beneficiary did not involve in the formulation process of the insurance contract and could not voice his/her opinion during the process. Therefore, it is unreasonable to require the beneficiary to be bound by the jurisdiction clause.
In conclusion, the current court opinion suggests that, an insurance beneficiary is not bound by the consensual jurisdiction clause of the insurance contract, and may revert to general civil principles that a lawsuit should be filed with the court of the defendant’s domicile.
[1] The (102) Kang-Zi No.378 Civil Ruling of the Taiwan High Court.
[2] (Rulings in 2005) the (94) Bao-Xian-Zi No.88 Civil Ruling of the Taipei District Court of Taiwan, and the (94) Bao-Xian-Zi No.137 Civil Ruling of the Taipei District Court of Taiwan; (rulings in 2007) the (96) Bao-Xian-Zi No.20 Civil Ruling of the Taipei District Court of Taiwan, the (96) Bao-Xian-Zi No.44 Civil Ruling of the Taipei District Court of Taiwan, the (96) Bao-Xian-Zi No.133 Civil Ruling of the Taipei District Court of Taiwan, the (96) Bao-Xian-Zi No.139 Civil Ruling of the Taipei District Court of Taiwan, and the (96) Bao-Xian-Zi No.146 Civil Ruling of the Taipei District Court of Taiwan; (rulings in 2008) the (97) Shen-Bao-Xian-Zi No.52 Civil Ruling of the Taipei District Court of Taiwan, and the (97) Bao-Xian-Zi No.80 Civil Ruling of the Taipei District Court of Taiwan; (rulings in 2009) the (98) Shen-Bao-Xian-Zi No.4 Civil Ruling of the Taipei District Court of Taiwan, the (98) Bao-Xian-Zi No.13 Civil Ruling of the Chiayi District Court of Taiwan, the (98) Shen-Bao-Xian-Zi No.24 Civil Ruling of the Taipei District Court of Taiwan, the (98) Shen-Bao-Xian-Zi No.53 Civil Ruling of the Taipei District Court of Taiwan, the (98) Shen-Bao-Xian-Zi No.59 Civil Ruling of the Taipei District Court of Taiwan, the (98) Shen-Bao-Xian-Zi No.101 Civil Ruling of the Taipei District Court of Taiwan, the (98) Shen-Bao-Xian-Zi No.109 Civil Ruling of the Taipei District Court of Taiwan, the (98) Shen-Bao-Xian-Zi No.119 Civil Ruling of the Taipei District Court of Taiwan, and the (98) Shen-Bao-Xian-Zi No.168 Civil Ruling of the Taipei District Court of Taiwan; (rulings in 2010) the (99) Bao-Xian-Zi No.7 Civil Judgement of the Shilin District Court of Taiwan, the (99) Shen-Bao-Xian-Zi No.27 Civil Ruling of the Taipei District Court of Taiwan, the (99) Bao-Xian-Zi No.37 Civil Ruling of the Taichung District Court of Taiwan, and the (99) Shen-Bao-Xian-Zi No.39 Civil Ruling of the Taipei District Court of Taiwan; (ruling in 2011) the (100) Bao-Xian-Zi No.10 Civil Ruling of the Taipei District Court of Taiwan; and (rulings in 2012) the (101) Bao-Xian-Zi No.14 Civil Ruling of the Taipei District Court of Taiwan, and the (101) Bao-Xian-Zi No.31 Civil Ruling of the Taipei District Court of Taiwan.
[3] The (110) Bao-Xian-Zi No.3 Civil Judgement of the Tainan District of Taiwan.
[4] When it is provided in a contract that an payment shall be made to a third party,, the offeror may request the debtor to make the payment to a third party, and such third party also has the right to request the payment directly from the debtor.
[5] The (97) Kang-Zi No.1840 Civil Ruling of the Taiwan High Court.
[6] The (101) Kang-Zi No.122 Civil Ruling of the Taiwan High Court, the (102) Kang-Zi No.190 Civil Ruling of the Taiwan High Court, the (102) Kang-Zi No.1500 Civil Ruling of the Taiwan High Court, the (103) Kang-Zi No.1819 Civil Ruling of the Taiwan High Court, the (106) Kang-Zi No.1667 Civil Ruling of the Taiwan High Court, the (108) Kang-Zi No.967 Civil Ruling of the Taiwan High Court, and the (109) Kang-Zi No.776 Civil Ruing of the Taiwan High Court.
[7] The (76)Tai-Shang-Zi No.180 Civil Judgement of the Supreme Court, and the (97) Tai-Kang-Zi No.110 Civil Ruling of the Supreme Court.
[8] The (101) Bao-Xian-Zi No.2 Civil Ruling of the Penghu District Court of Taiwan, the (103) Bao-Xian-Zi No.4 Civil Judgement of the Taipei District Court of Taiwan, and the (107) Bao-Xian-Zi No.17 Civil Ruling of the Kaohsiung District Court of Taiwan.
[9] The (106) Kang-Zi No.1667 Civil Ruling of the Taiwan High Court.