The Taiwan High Court rendered the 108-Shang-Zi-228 Decision of December 11, 2019 (hereinafter, the “Decision”) to deny the insurable interest asserted by the parties over an insurance contract based on a borrowed name contract.
According to the facts underlying this Decision, Individual A, an uncle of the parties, sold his land and building to the Appellee for NT$2.8 million in 2014 and, in order to apply for subsidies for moderate disabilities and with the permission of the Appellee, asked the Appellee to serve as the nominal insurance applicant and the insured and use NT$2.2 million out of the above payment to obtain a variable annuity insurance policy from an insurance company. Therefore, the relationship of a borrowed name contract existed among them with respect to the insurance at issue. Individual A indicated on January 9, 2018 that he had intended to give the insurance at issue to the Appellant after he died, entered into a donatio mortis causa contract with the Appellant, and assigned to the Appellant the claim over the Appellee after the borrowed name relationship over the insurance contract is over. Individual A subsequently passed away on January 17, 2018. The Appellant asserted that since the donatio mortis causa contract had become effective and the borrowed name relationship between Individual A and the Appellee over the insurance at issue was alsoterminated, the Appellant could apply, by analogy, Article 541, Paragraph 2 of the Civil Code and the legal relationship of claim assignment to request the Appellee to return the surrender value it had received following the rescission of the insurance at issue in November 2017.
According to the Decision, Article 72 of the Civil Code provides that a legal act which violates public policy or good social morals shall be invalid. The so-called “violation of public order or good social morals” means that a legal act violates the general requirements or interest of the country and society or ordinary moral concepts in society. As to whether good social morals are violated, this should be generally determined by considering the nature of the legal act, its ancillary circumstances, the motives and objectives of the party and other factors. In addition, the so-called “insurance applicant” under the Insurance Law refers to the person who has insurable interest in the object of insurance, applies to the insurer to enter into an insurance contract and is obligated to pay the insurance premiums. Therefore, only an applicant has the right to dispose of insurable interest. Moreover, an insurance contract involves insurable interest and moral hazards. If a borrowed name contract is permitted, the insurer’s insurable risk and interest assessment will be undermined. The normal operation of an insurance system has a huge impact on social and financial order. If an insurer erroneously assesses insurance risks to the extent of causing improper indemnification, benefit payment or premium collection, the social and financial order will be seriously undermined. Therefore, if an insurance contract is an object of a borrowed name contract, the borrowed name contract should be deemed invalid for its violation of public policy.
Therefore, even if Individual A indeed obtained the insurance at issue by agreeing with the Appellee to borrow his name, such borrowed name contract should be deemed invalid for its violation of public policy. Moreover, Individual A obtained the insurance at issue in the name of the Appellee to hide his assets in advance in preparation for his subsequent application for disability subsidies, and Individual A’s motives and objectives to borrow the name as asserted by the Appellant also violate good social morals. Therefore, it can hardly be concluded that the borrowed name contract is valid. If a donatio mortis causa contract did exist between Individual A and the Appellant, since Individual A had no disposal right over the insurance at issue, the Appellant certainly has no basis for asserting any claim over the Appellee with respect to the insurance at issue based on his donatio mortis causa contract with Individual A. The Appellant’s claim asserted against the Appellee for the benefits from the insurance at issue based on his donatio mortis causa contract with Individual A is certainly groundless.