Jhen-Yi Chen
The Supreme Court rendered the 108-Tai-Shang-2663 Decision of March 18, 2020 (hereinafter, the “Decision”), holding that whether the clauses of an insurance contract are exceptional clauses or special clauses should be generally determined by considering the substance of such clauses in terms of the insurance coverage or liability or the obligation to perform the contract, the formation of the clauses by the parties on equal footing, the actuarial basis for the premium of the insurance at issue and the legitimate expectation of the parties and in reference to the trading practices and the principle of good faith.
According to the facts underlying this Decision, the two parties entered into the insurance contract at issue. The Appellant asserted that pursuant to the covenant under Chapter 1 of the insurance policy at issue, the scope of the insurance covered the employee dishonesty insurance. Individual A, a former employee of the Appellant, took the opportunity of receiving a bankbook and a chop from Depositor B and terminated B’s time deposit. The amount of the deposit following the termination of the time deposit was then transferred to another account set up by B. Individual A then used the chop without B’s knowledge to forge a withdrawal slip to withdraw and embezzle the money, resulting in B’s damage. The Appellant first repaid Depositor B. Since B had sustained a property loss because of Individual A’s behavior, the Appellant could claim insurance benefit. In addition, Individual C, another former employee of the Appellant, falsely stated to Depositor D that since the Appellant’s branch employees were entitled to a preferential interest rate deposit program, D could be made eligible for the preferential interest rate. As a result, D was misled into a mistake, handed over his bankbook and chop and those of his children, and authorized the appropriation of the deposits in the bank accounts to handle the preferential interest rate deposits. Individual C subsequently withdrew and embezzled the money. After D was deceased, C falsely stated to E that he could handle the ownership transfer for D. As a result, E made a mistake and handed over his bankbook and chop and those of F. C subsequently withdrew and embezzled the money. The Appellant first repaid E and F. Since the Appellant had sustained property losses because of C’s behavior, the Appellant could claim insurance benefit. Therefore, the Appellant claimed damages from the Appellee in accordance with Chapter 1 of the insurance policy at issue, the underwriting provisions of the insurance policy and Article 95-1 of the Insurance Law. The Appellee contended that the covenant under Article 1 of the additional clause on specially excluded items under the insurance contract at issue (hereinafter, the “Additional Clause at Issue”) was an exceptional clause that defined the coverage of the insurance contract at issue. Since cases involving A and C were determined by the Financial Supervisory Commission to involve serious violations of internal control requirements, not to mention that A and C put the bankbooks and chops of their customers under their custody, these cases should not be covered by the insurance contract at issue.
According to the Decision, the first part of Article 54, Paragraph 2 of the Insurance Law provides that the true intent of the parties to an insurance contract should be explored in the interpretation of the contract. The so-called “excluded items” or exceptional clause are exclusions by an insurance contract to define the scope of the insurance underwritten by the insurer by excluding from coverage specific danger items, accidents, losses or expenses which are originally covered. In addition to general enumerated exclusions, an insurer may agree with the insured on specific exclusions or exceptions based on the insured’ industry and level of moral hazard.
It was further pointed out in the Decision, the original trial court believed that the Appellee in this case first excluded the general exclusions listed in the insurance policy at issue and the special exclusions under the Additional Clause at Issue and then adjusted the premium rate and assessed the insurance premium before participating in the tender. The insurer specially added exclusions to define its scope of insurance with respect to the Appellant’s nature as a bank after assessing its moral hazard. This is different from the circumstance where a special clause is formulated by the insurer to control risks or control the risk volatility of the underwritten insurance during the insurance period by specially stipulating that the insured shall confirm the existence of the factual state in the past or at the present time in addition to the basic clauses or shall recognize a specific obligation to be performed in the future. Based on the foregoing explanation, the original decision did not violate any law or regulation. The gist of the appeal, which criticized the impropriety of the original Decision and sought to reverse the original decision, was not valid.