DeHeng Won a 100-mln-yuan Expressway
Property Insurance Contract Dispute
2020-01-13
In a recent contract dispute between Expressway Company A and Insurance Company B over the property all risks insurance policy, the court of second instance rejected the appeal of petitioner Company A and affirmed the original judgement. DeHeng represented Company B in the first and second instances and helped it save the cost of nearly 100 million yuan. For expressway slope engineering projects, the geological conditions are often complicated and the repair irreversible. When the reconstruction standard of disaster relief projects clashes with the loss compensation principle of the insurance policy, dispute might arise over how to correctly apply the insurance law and principles to determine the compensation standard and basis for the road property loss. This case provides references in this regard.
Case summary:
Expressway Company A signed a property all risks insurance contract with Insurance Company B for the road property of its expressways. During the insurance period, an expressway slope was damaged by a heavy storm. Company A hired design and engineering experts to repair and reconstruct it in a once-and-for-all manner, which cost over 100 million yuan. After the loss occurred, Company B hired an insurance survey and loss adjustment agency to survey and determine the loss. After survey, the agency found Company A had made multiple changes to the insurance object, added and improved its functions, the engineering cost of which is not covered by the insurance, and believed that the actual loss should be determined based on the original design drawings, construction contract and bills of quantities of the project before the loss occurred. Company A did not agree with the survey and loss adjustment results and filed the lawsuit, demanding Company B to compensate for the 100-million-yuan engineering cost accrued.
Hired by Company B, the DeHeng team was led by Jia Hui, a partner of its Beijing office, and He Wei, a partner of its Guangzhou office, with support from lawyers Liang Weilin, Luo Mei and Huang Xiaobing. They conducted extensive legal research, consulted engineering experts, invited legal experts to do demonstrations, and reported the case to the Ministry of Housing and Urban-Rural Development, and produced thorough, detailed and professional defense opinions.
The dispute focused on two issues: first, how to determine the road property loss of expressways; second, whether the insurance survey and loss adjustment report can serve as the basis for loss determination.
As to the first issue, DeHeng lawyers mainly resorted to contract terms and insurance principles, including the loss compensation principle, the definition of insurance object, insurance liability scope, actual loss scope and the definition of replacement value, and held that the direct physical loss should be limited to the actual cash value of the damaged object when loss occurred and the replacement should refer to the repair or fix with the same or the same kind of materials with the original object, excluding improvements and refinement.
As to the second issue, DeHeng lawyers argued that the survey and loss adjustment agency was hired by both Company A and B, the surveyors and adjusters had the required credentials and qualifications, the survey records were comprehensive, omission-free and signed by the representative of Company A for confirmation, but Company A refused to provide the original design drawings and construction contract for loss verification, so it should rule against Company A according to Clause 22 of The Insurance Law and the evidence rules of civil actions.
The courts of first and second instants adopted DeHeng's defense opinions and ruled based on the survey and loss adjustment results, saving Company B nearly 100 million yuan.
