The Kaohsiung Branch of the Taiwan High Court rendered the 108-Shang-146 Decision of August 21, 2019 (hereinafter, the “Decision”), holding that after the applicant is changed, the entitlement to the policy value reserve is obtained by the applicant as changed as part of the original applicant’s assignment or disposal of his/her property, but if the creditor’s claim over the original applicant is undermined, the creditor may certainly file suit to cancel the change.
According to this Decision, the Appellee received the transfer of the claim assertable by a company not a party to this lawsuit against the Appellant on January 1, 2016 and informed the transfer of the claim to Appellant A. Appellant A obtained an insurance contract with a certain insurance company not a party to this lawsuit. The policy value reserve of NT$3.19 million as of September 1, 2016 was the responsibility property of Appellant A. Appellant A changed the applicant in the insurance contract to Appellant B and transferred the interest in the policy value reserve to Appellant A (B?) without compensation on June 8, 2017, resulting in the reduction of the responsibility property. The Appellee requested to cancel the uncompensated change of the applicant between the Appellants and to request Appellant B to change the insurance applicant to Appellant A in accordance with Article 244, Paragraphs 1 and 4 of the Civil Code.
Article 244, Paragraphs 1 and 2 of the Civil Code specifically provide that if the uncompensated act between debtors undermines the claim, the creditor may apply to the court to cancel the act. In case it is obviously known at the time of act that a compensated act between debtors will undermine the rights of the creditor, the creditor may apply to the court to cancel the act only if the beneficiary is also aware of the benefits when they are received. Under Article 119, Paragraph 1 of the Insurance Law, when an applicant terminates an insurance contract with at least one year’s insurance premium paid, the insurer shall make the surrender payment in one month upon receipt of the notice in an amount not less than three fourths of the policy value reserve the applicant is entitled to. An applicant may terminate the insurance contract, claim surrender payment arbitrarily at any time, and pledge the policy value reserve for a loan from the insurer in accordance with Article 120 of the same law. In addition, Article 116, Paragraphs 6 and 7 of the Insurance Law provide that if the insurance premiums are not paid when they are due, the insurer has the right to terminate the contract after the period for reinstating an insurance contract expires. When an insurance contract is terminated, if more than two years’ insurance premiums have been paid, the insurer shall “return” the policy value reserve, if any. Based on the above provisions, it can be concluded that although the policy cash reserve is formally owned by the insurer, still the applicant has substantive rights over the policy value reserve accumulated in the course of the applicant’s premium payment.
According to this Decision, the policy value reserve is the responsibility property of the applicant. When the applicant is changed, the entitlement to the policy value reserve will be obtained by the applicant as changed as part of the property transfer and disposal acts of the original applicant.
Applicant A’s responsibility property was not sufficient to repay the debt to the Appellee. When Appellant A changed the applicant to Appellant B without compensation, resulting in Appellant B’s acquisition of the right over the policy value reserve and impairment to the Appellee’s claim over Appellant A, the Appellee could certainly file suit to cancel such change in accordance with Article 244, Paragraphs 1 and 2 of the Civil Code to secure its claim.
It was further mentioned in this Decision that the Appellee filed a complaint on March 28, 2018 to cancel the change of applicant on June 8, 2017 between the Appellants, as evidenced by the seal indicating the receipt of the complaint. Therefore, the Appellee’s filing of the cancellation action still does not exceed the one-year preclusive period.
Based on the foregoing reasons, the Taiwan High Court rendered a decision to conclude that since the change of the entitlement to a policy value reserve falls within the scope of property transfer and change, if such a change impairs the claim of a creditor, the creditor may seek to cancel such act. With respect to the act of changing the applicant in the insurance contract between the Appellants, the Appellee’s request in this Decision to cancel the act of changing the applicant between the Appellants on June 8, 2017 in accordance with Article 244, Paragraphs 1 and 4 of the Civil Code and to change the insurance applicant from Appellant B back to Appellant was well-grounded.