The Kaohsiung Branch of the Taiwan High Court rendered the 108-Shang-Yi-Zi-203 Decision of September 25, 2019 (hereinafter, the “Decision”), holding that a life insurance contract often involves the rights and interests of the insured and the beneficiaries. If the applicant fails to exercise the termination right and maintains the validity of an insurance contract which has been executed, if the applicant is not negligent in exercising the right, it is not appropriate for enforcement court to carry out the termination on his/her behalf.
In this Decision, the Appellant filed a complaint alleging that the original creditor Bank A had assigned its claim over Appellee X to Company B before the creditor assigned the claim to the Appellant in sequence and notified Appellee X. In addition, Appellee X applied to Insurance Company C on May 21, 2011 to change the applicant under an insurance contract (hereinafter, the “Insurance Contract at Issue”) to Appellee Y. However, the change of the insurance applicant between the Appellees is obviously detrimental to the fulfillment of the Appellant’s claim since the benefit of the surrender value would go to Appellee Y. Therefore, the Appellant sought to cancel the act of changing the applicant under the Insurance Contract at Issue in accordance with Article 244, Paragraphs 1 and 4 of the Civil Code and compel Appellee Y to change the applicant under the Insurance Contract at issue to Appellee X.
According to this Decision, Article 119, Paragraph 1 of the Insurance Law provides that in case an applicant terminates the insurance contract, if the insurance premium for at least one year has been paid, the insurer shall pay the surrender value within one month upon receipt of the notice with the payment of not less than four thirds of the policy reserve value. Now that the applicant may terminate the insurance policy and request the payment of the surrender value at any time, the applicant may also take out a loan from the insurer with the policy reserve value as the security in accordance with article 120 of the same law. In addition, in reference to Article 116, Paragraphs 6 and 7 and Article 124 of the same law, it can be concluded that although a policy reserve value is formally owned by the insurer, still the applicant has substantive right over the policy reserve value accumulated from the insurance premiums. However, with respect to a life insurance contract, the surrender value for an applicant’s termination of the insurance contract is a claim with condition precedent, and only when the applicant exercises the right to terminate the insurance contract and fulfill the condition precedent is the insurer obligated to pay the surrender value. If the applicant fails to terminate the insurance contract, then the condition precedent is not met, and it should be deemed that the applicant has no right to claim the surrender value from the insurer. Therefore, the policy reserve value and the surrender value are both monetary claims with property value, and both will exist only when the claims are subject to condition precedent or a time period and a certain condition is met or time period expires.
It was further pointed out in this Decision that under Article 242 of the Civil Code, if the obligor is negligent in the exercise of rights, the obligee may exercise the right in his/her own name in order to secure the claim. However, this restriction does not apply if the right is proprietary to the obligor. Therefore, an obligee’s exercise of a right by way of subrogation is preconditioned by the negligence of the obligor in the exercise of his/her right, by the need to secure the claim, and by the fact that such right is not proprietary to the obligor. The subrogation right does not apply to life insurance and accident insurance in life insurance since the personal pricelessness, legal interest of survival and legal interest of physical health are of personal nature. Article 119, Paragraph 1 of the Insurance Law stipulates the right of a life insurance applicant to terminate the contract at any time since the focus is on rights based on the legal interest of personality. Therefore, an applicant should be able to independently decide whether to exercise the right to terminate the insurance contract, not to mention that in addition to the applicant, a life insurance contract also involves the rights and interests of the insured and the beneficiaries. Therefore, if the applicant does not exercise the termination right and maintains the validity of an executed insurance contract, the applicant should not be deemed to be negligent in the exercise of his/her right. Since this is inconsistent with the criteria under Article 242 of the Civil Code, it is not appropriate for the enforcement court to exercise the termination right on behalf of the applicant. Therefore, the right to terminate the Insurance Contract at Issue should be proprietary to the applicant, and the subrogation right under Article 242 of the Civil Code does not apply. Therefore, even if Appellee X did not change the applicant under the Insurance Contract at Issue to Appellee Y, the Appellant should not request the applicant, or Appellee X, to terminate the Insurance Contract at Issue on behalf of the applicant, i.e. , Appellee X, by way of subrogation in the capacity of the “obligee of Appellee X.”