Precedent No. 37/2020/AL on the validity of property insurance contracts in cases where the policyholder pays the insurance premium after the expiration of the premium payment term

1. What is a precedent?

Precedents are arguments and rulings in legally effective judgments and decisions of the Courts regarding specific cases selected by the Council of Justices of the Supreme People’s Court and published by the Chief Justice of the Supreme People’s Court as precedents for Courts to study and apply in adjudication. (Article 1 of Resolution 04/2019/NQ-HDTP)

A selected precedent must meet the following criteria:

– Possess value in clarifying legal provisions that have different interpretations, analyzing and explaining legal issues and events, and pointing out principles, guidelines for handling, and legal norms to be applied in a specific case, or demonstrating equity toward issues not yet specifically regulated by law;

– Possess a normative character;

– Possess value in guiding the uniform application of law in adjudication.

2. Precedent No. 37/2020/AL on the validity of property insurance contracts in cases where the policyholder pays the insurance premium after the expiration of the premium payment term

2.1. Source of the precedent

Cassation Decision No. 28/2018/KDTM-GDT dated June 26, 2018, of the High People’s Court in Ho Chi Minh City regarding the commercial case “Insurance contract dispute” in Dong Nai province between the plaintiff, Company Limited N, and the defendant, P Insurance Joint Stock Corporation; persons with related rights and obligations including P1 Insurance Company, V Joint Stock Commercial Bank, and S Paper Joint Stock Company.

Position of the precedent’s content:

Paragraphs 4 and 5 of the “Court’s Assessment” section.

2.2. Overview of the precedent’s content

– Legal situation:

After the expiration of the insurance premium payment term as agreed upon in the property insurance contract, the policyholder pays the insurance premium to the insurance enterprise. The insurance enterprise raises no objection, provides no written notice to the policyholder regarding the termination of the contract, and continues to accept the insurance premium, issue a VAT invoice, and report taxes on the premium payment. Subsequently, an insurance event occurs.

– Legal solution:

In this case, the insurance contract remains valid and enforceable; the insurance enterprise must be held liable for compensating the insured for damages.

Legal provisions related to the precedent:

– Articles 285 and 287 of the Civil Code of Vietnam 2005 (corresponding to Articles 278 and 354 of the Civil Code of Vietnam 2015);

– Articles 15 and 23 of the Law on Insurance Business 2000 (amended and supplemented in 2010).

Keywords of the precedent:

“Property insurance contract”; “Insurance premium”; “Premium payment term”; “Validity of insurance contract”; “Insurance event”; “Compensation for damages”.

CASE CONTENT:

According to the petition, the authorized representative of the plaintiff stated:

Company Limited N (referred to as Company N) was established and operates under Enterprise Registration Certificate No. 3600686844 dated July 29, 2004, issued by the Department of Planning and Investment of Dong Nai Province, with the 6th amendment registered on September 4, 2015.

Company N is the insured and P1 Insurance Company (referred to as P1 Insurance) is the insurer. Both parties entered into 07 boiler insurance contracts and public liability insurance contracts as follows:

1. Boiler insurance contract No. P-15/DNI/XCG/3201/0005 dated March 24, 2015. The contract content includes: Boiler Insurance Certificate No. P-15/DNI/XCG/3201/0005 dated March 24, 2015; Premium collection notice dated March 24, 2015; Supplementary terms; Boiler insurance rules, under which Company N is insured by P1 Insurance for:

– Material damage: Biomass dryer (Commonly known as HOA VIET BOILER) with a sum insured of 6,500,000,000 VND.

– Third-party liability: Liability limit of 1,000,000,000 VND per occurrence and throughout the insurance period, in which:

– Regarding persons:

+ Per person: 20,000,000 VND/person/occurrence.

+ Total persons: 200,000,000 VND per occurrence and throughout the insurance period.

– Regarding property: 2,000,000,000 VND per occurrence and throughout the insurance period.

Insured location: H Paper Joint Stock Company (referred to as Company H); address: Quarter 8, L Ward, B City, Dong Nai Province. Insurance beneficiary: V Bank – B Branch (V Bank – B Branch). Insurance period from April 1, 2015, to March 31, 2016. (Hereinafter referred to as Contract No. 0005).

2. Public liability insurance contract No. P-15/DNI/XCG/3303/0009 dated March 24, 2015. The contract content includes: Public Liability Insurance Certificate No. P-15/DNI/XCG/3303/0009 dated March 24, 2015; Public Liability Insurance Contract No. P-15/DNI/XCG/3303/0009 dated March 24, 2015; Premium collection notice dated March 24, 2015; Public liability insurance rules; Supplementary modified terms for public liability insurance, under which Company N is insured by P1 Insurance for an amount of 21,000,000,000 VND per loss and for the entire year (Limit for persons: Not exceeding 20 million/person/occurrence). Scope of insurance: P1 Insurance compensates for personal injury or material damage occurring during the insurance period due to an occurrence within the geographical limits related to the business activities of Company N. Insured location: At Company H; address: Quarter 8, L Ward, B City, Dong Nai Province. Geographical scope: Vietnam. Beneficiaries of insurance benefits: V Bank – B Branch (Beneficiary 1), Company N (Beneficiary 2). Insurance period from April 1, 2015, to March 31, 2016. (Hereinafter referred to as Contract No. 0009).

3. Boiler insurance contract No. P-15/DNI/XCG/3201/0006 dated March 26, 2015. The contract content includes: Boiler Insurance Certificate No. P-15/DNI/XCG/3201/0006 dated March 26, 2015; Premium collection notice dated March 26, 2015; Supplementary terms; Boiler insurance rules, under which Company N is insured by P1 Insurance for:

– Material damage: Biomass dryer No. 03 (Commonly known as Boiler No. 3), with a sum insured of 13,000,000,000 VND.

– Third-party liability: Liability limit of 1,000,000,000 VND per occurrence and throughout the insurance period, in which:

– Regarding persons:

+ Per person: 20,000,000 VND/person/occurrence.

+ Total persons: 200,000,000 VND per occurrence and throughout the insurance period.

– Regarding property: 2,000,000,000 VND per occurrence and throughout the insurance period.

Insured location: At S Paper One Member Company Limited, now S Paper Joint Stock Company (referred to as Company S); address: M Industrial Park, T District, Ba Ria – Vung Tau Province. Insurance beneficiary: V Bank – B Branch. Insurance participation period from April 1, 2015, to March 31, 2016. (Hereinafter referred to as Contract No. 0006).

4. Public liability insurance contract No. P-15/DNI/XCG/3303/0010 dated March 26, 2015. The contract content includes: Public Liability Insurance Certificate No. P-15/DNI/XCG/3303/0010 dated March 26, 2015; Public Liability Insurance Contract No. P-15/DNI/XCG/3303/0010 dated March 26, 2015; Premium collection notice dated March 26, 2015; Public liability insurance rules; Supplementary modified terms for public liability insurance, under which Company N is insured by P1 Insurance for an amount of 21,000,000,000 VND per loss and for the entire year (Limit for persons: Not exceeding 20 million/person/occurrence). Scope of insurance: P1 Insurance compensates for body injury or property damage to third parties for which Company N is legally liable to pay, occurring during the insurance period due to occurrences related to the business activities of Company N. Insured location: At Company S; address: M Industrial Park, T District, Ba Ria – Vung Tau Province. Geographical scope: Vietnam. Beneficiaries of insurance benefits: V Bank – B Branch (Beneficiary 1), Company N (Beneficiary 2). Insurance participation period from April 1, 2015, to March 31, 2016. (Hereinafter referred to as Contract No. 0010).

5. Boiler insurance contract No. P-15/DNI/XCG/3201/0007 dated September 30, 2015. The contract content includes: Boiler Insurance Certificate No. P-15/DNI/XCG/3201/0007 dated September 30, 2015; Premium collection notice dated September 30, 2015; Supplementary terms; Boiler insurance rules, under which Company N is insured by P1 Insurance for:

– Material damage: Biomass dryer No. 01 (Commonly known as Boiler No. 1), with a sum insured of 9,300,000,000 VND.

– Third-party liability: Liability limit of 1,000,000,000 VND per occurrence and throughout the insurance period, in which:

– Regarding persons:

+ Per person: 20,000,000 VND/person/occurrence.

+ Total persons: 200,000,000 VND per occurrence and throughout the insurance period.

– Regarding property: 800,000,000 VND per occurrence and throughout the insurance period.

Insured location: At Company S; address: M Industrial Park, T District, Ba Ria – Vung Tau Province. Insurance beneficiary: V Bank – B Branch. Insurance participation period from October 1, 2015, to October 1, 2016. (Hereinafter referred to as Contract No. 0007).

6. Boiler insurance contract No. P-15/DNI/XCG/3201/0008 dated September 30, 2015. The contract content includes: Boiler Insurance Certificate No. P-15/DNI/XCG/3201/0008 dated September 30, 2015; Premium collection notice dated September 30, 2015; Supplementary terms; Boiler insurance rules, under which Company N is insured by P1 Insurance for:

– Material damage: Biomass dryer No. 02 (Commonly known as Boiler No. 2), with a sum insured of 5,400,000,000 VND.

– Third-party liability: Liability limit of 1,000,000,000 VND per occurrence and throughout the insurance period, in which:

– Regarding persons:

+ Per person: 20,000,000 VND/person/occurrence.

+ Total persons: 200,000,000 VND per occurrence and throughout the insurance period.

– Regarding property: 800,000,000 VND per occurrence and throughout the insurance period.

Insured location: At Company S; address: M Industrial Park, T District, Ba Ria – Vung Tau Province. Insurance beneficiary: V Bank – B Branch. Insurance participation period from October 1, 2015, to October 1, 2016. (Hereinafter referred to as Contract No. 0008).

7. Public liability insurance contract No. P-15/DNI/XCG/3303/0057 dated September 30, 2015. The contract content includes: Public Liability Insurance Certificate No. P-15/DNI/XCG/3303/0057 dated September 30, 2015; Insurance premium collection notice dated September 30, 2015; Public Liability Insurance Contract No. P-15/DNI/XCG/3303/0057 dated September 30, 2015; Supplementary modified terms for public liability insurance; Public liability insurance rules, under which Company N is insured by P1 Insurance for an amount of 21,000,000,000 VND per loss and for the entire year (Limit for persons: Not exceeding 20 million/person/occurrence). Scope of insurance: P1 Insurance compensates for body injury or property damage to third parties for which Company N is legally liable to pay, occurring during the insurance period due to occurrences related to the business activities of Company N. Insured location: At Company S; address: M Industrial Park, T District, Ba Ria – Vung Tau Province. Geographical scope: Vietnam. Beneficiaries of insurance benefits: V Bank – B Branch (Beneficiary 1), Company N (Beneficiary 2). Insurance period from October 1, 2015, to October 1, 2016. (Hereinafter referred to as Contract No. 0057).

At approximately 00:30 AM on November 13, 2015, at S Paper Company, an explosion of Boiler No. 3 occurred, leading to:

1. Material damage to Boiler No. 3: The entire Boiler No. 3 system was destroyed. Third-party property damage: Firefighting costs, property damage, construction costs, losses due to machinery stoppage… of Company S.

2. Human casualties: 02 workers operating Boiler No. 3, Mr. Nguyen Van C and Mr. Nguyen Thanh L, died.

3. Cleanup costs: Costs for dismantling, cleaning, transporting, and storing assets at the scene after the Boiler No. 3 explosion occurred.

4. Partial damage to Boiler No. 2 of Company N.

At 10:00 AM on November 13, 2015, P Insurance and Company N established an On-site/Working Report. The Criminal Investigation Agency – Ba Ria-Vung Tau Provincial Police requested an expert assessment of the cause. On January 13, 2016, Forensic Conclusion No. 3548/C54B from the Forensic Science Sub-Institute (C54B) – Ministry of Public Security was issued, as shown in 03 documents from the Ba Ria-Vung Tau Provincial Police dated January 26, 2016, including: Notice No. 02/TB-PC44 on the non-prosecution of a criminal case; Conclusion No. 02/KL-PC44 (D3) verifying crime reports; Notice of results for crime reports No. 02/TB-PC44; Official Letter No. 100/VKS-P2 dated January 26, 2016, from the Ba Ria – Vung Tau Provincial People’s Procuracy concluding that the cause of the Boiler No. 3 explosion was a technical fault, and Boiler No. 3 was still within its inspection period (granted by the Industrial Inspection Center II, Ministry of Industry and Trade, with the next inspection due on December 17, 2016). Therefore, the Boiler No. 3 explosion on November 13, 2015, showed no signs of a criminal offense.

P1 Insurance appointed B Inspection Joint Stock Company, address: 2.5 P, B Ward, P District, Ho Chi Minh City to conduct an assessment of the Boiler No. 3 explosion loss. The assessment took place on November 17, 18, 19, 20, and 28, 2015, documented in on-site recording reports, identifying damages including: Boiler No. 3; Boiler houses No. 1 and No. 2; shared equipment between Boilers 1, 2, and 3; mechanical and electrical damage to Boiler No. 2; property of the third party Company S; and actual scene cleanup.

Company N summarized and submitted figures requesting compensation from P Insurance Joint Stock Corporation and P1 Insurance based on legal grounds:

1. Material damage to Boiler No. 3: Company N relied on Boiler Insurance Contract No. P-15/DNI/XCG/3201/0006 dated March 26, 2015; the Boiler No. 3 explosion falls within the scope of P Insurance’s liability, including:

– Boiler No. 3 system: 13,886,965,686 VND;

– Boiler house No. 3: 1,298,476,400 VND;

– Feeding equipment and materials (Increasing fuel usage capability): 2,519,308,592 VND;

– Scene cleanup costs: Company N relied on Clause 25 regarding Scene Cleanup Terms (Limit US$ 100,000) of the Supplementary Terms of Contract No. 0006; cleanup costs from the Boiler No. 3 explosion fall within P Insurance’s liability with actual damage:

+ Dismantling and crane work for Boiler No. 3: 140,000,000 VND;

+ Transportation fees (Large trailers): 20,000,000 VND;

+ Small-scale cleaning and transport: 200,000,000 VND;

+ Storage rent for Boiler No. 3: 120,000,000 VND.

Total: 18,184,750,678 VND.

2. Human casualties: Company N relied on Contract No. 0009; Contract No. 0010; Contract No. 0057; the Boiler No. 3 explosion caused human loss (02 deaths) within the geographical scope of Vietnam, falling under P Insurance’s public liability scope with actual damage:

– For Mr. Nguyen Van C: 300,000,000 VND;

– For Mr. Nguyen Thanh L: 333,000,000 VND.

Total: 633,000,000 VND;

3. Third-party property damage: Company N relied on Contract No. 0009; Contract No. 0010; Contract No. 0057; the Boiler No. 3 explosion caused property damage to third-party S Paper Company within Vietnam, falling under P Insurance’s public liability scope with total actual damage:

– Property and construction damage: 90,804,880 VND;

– Firefighting costs: 24,943,000 VND;

– Losses due to production interruption: 332,010,000 VND;

– Compensation to S Paper Company for the price difference of replacement gas in November 2015 due to the explosion: 1,063,032,472 VND.

Total: 1,510,790,352 VND.

4. Material damage to Boiler No. 2: Company N relied on Contract No. 0008; damage to Boiler No. 2 falls under P Insurance’s liability scope with loss amounts:

– Mechanical damage: 200,000,000 VND;

– Electrical damage: 300,000,000 VND.

Total: 500,000,000 VND.

On the side of P Insurance:

1. Refused to compensate material liability for Boiler No. 3 and public liability for third-party human and property loss to Company N by denying the validity of Contract No. 0006 and Contract No. 0010, as shown in Official Letter No. 130/P-DNI-CV dated November 24, 2015, from P1 Insurance; further denied the validity of Contract No. 0005 and Contract No. 0009 via Official Letter No. 136/P-DNI-CV dated December 1, 2015. On November 26, 2015, Company N sent Official Letter No. 01/2015/PHTT-NTN-PHCO DN to P Insurance responding that it did not accept the refusal of insurance liability and requested full compensation. P Insurance continued to refuse via Official Letter No. 135/P-DNI-CV dated December 1, 2015, explaining: Company N was required to pay the premium before May 1, 2015, but P1 Insurance only received the premium on May 7, 2015. Based on the Payment Terms, these contracts automatically terminated on May 1, 2015, before the loss occurred on November 13, 2015, thus not falling under P Insurance’s liability. Disagreeing with the refusal, on December 2, 2015, Company N filed a complaint with P Insurance.

P Insurance’s refusal based on the above reason is entirely groundless.

i) Regarding the effective date of the Contract: According to Article 405 of the Civil Code, “A legally entered contract takes effect from the time of entry, unless otherwise agreed or provided by law.” Regarding the time of entry, “at the time the offeror receives the acceptance” (Clause 1 Article 404) or “at the time the last party signs the document” (Clause 4 Article 404). In reality, P Insurance issued certificates for Contract No. 0005 on March 24, 2015; Contract No. 0009 on March 24, 2015; Contract No. 0006 on March 26, 2015; and Contract No. 0010 on March 26, 2015, and issued VAT invoices to Company N, having received the premium on May 7, 2015, with a total amount of 91,179,000 VND. The parties had no other agreement on the effective date. P Insurance must be liable for losses to Company N as per Clauses 1 and 3 of Article 15 on the inception of insurance liability of the Law Amending and Supplementing the Law on Insurance Business 2010.

ii) Regarding contract termination: According to Clause 2 Article 23 of the Law on Insurance Business, an insurance contract terminates when “The policyholder fails to pay the full premium or fails to pay the premium within the term agreed in the contract, except where the parties have an agreement.”

Per the mutual agreement in the payment terms of the boiler insurance contracts (No. 0005, 0006):

“In the event the insured fails to pay the full premium or fails to pay the premium according to the payment terms of the insurance contract.” According to the payment terms: “The premium will be paid to the insurer by bank transfer in one installment.” Company N paid the premium in one installment via transfer totaling 91,179,000 VND, and P1 Insurance received it in full.

“or other payment agreements agreed upon by both parties in writing, the validity of the Insurance Contract will automatically terminate on the day following the date the insured was required to pay as per the Contract or amendments/appendices (if any).” Based on Article 23, the premium payment commitment term is a term Company N purchased additionally, applied only and only if more beneficial to Company N than the agreed terms “(but without prejudice to the rights of the parties under this policy)”. P Insurance’s interpretation to deny validity is not beneficial to Company N, so the supplementary payment term is invalid. Furthermore, the supplementary terms were part of contract No. 15/DNI/XCG/3201/0005, not contract No. 0005 (Number P-15/DNI/XCG/3201/0005); of contract No. 15/DNI/XCG/3201/0006, not contract No. 0006 (Number P-15/DNI/XCG/3201/0006).

Regarding public liability contracts No. 0009, 0010, P Insurance cited Article 5 (15-day payment commitment) to deny validity. This is groundless as it is unrelated to contracts 0009 and 0010 and disadvantageous to Company N when applying supplementary terms (if any):

– Supplementary modifications were part of Contract No. 15/DNI/XCG/3303/0009, not No. 0009 (No. P-15DNI/XCG/3303/0009); part of 15/DNI/XCG/3303/0010, not No. 0010 (No. P-15/DNI/XCG/3303/0010);

– The 15-day payment commitment is a supplementary term applied only if more beneficial than other terms in No. 0009 and 0010, but these contracts do not stipulate termination for late payment.

2. Regarding Boiler No. 2 damage: P Insurance deliberately avoided liability for Contract No. 0008 as committed in Section III of Official Letter No. 130/P-DNI-CV dated November 24, 2015.

For these reasons, Company N’s representative maintained the claim but on September 29, 2016, and at the first-instance trial, partially withdrew the claim as follows:

– Acknowledge the validity of Public Liability Insurance Contract No. P-15/DNI/XCG/3303/0009 dated March 24, 2015; P Insurance Corporation must be liable for full compensation to Company N when an insurance event occurs.

– Acknowledge the validity of Public Liability Insurance Contract No. P-15/DNI/XCG/3303/0009 dated March 24, 2015; P Insurance Corporation must be liable for full compensation to Company N when an insurance event occurs.

– Compensate Company N for human public liability in the amount of 633,000,000 VND under Contracts No. 0009, 0010, and 0057.

– Waive the 150% overdue interest in the compensation claim for P Insurance’s delay.

– Partially withdraw the claim for Boiler No. 3 explosion loss under Contract No. 0006 from 18,184,750,678 VND to only 13,000,000,000 VND plus 200,000,000 VND for scene cleanup.

The representative maintained the remaining claims and requested the Court to force P Insurance Corporation to:

1. Acknowledge the validity of Boiler Insurance Contract No. P-15/DNI/XCG/3201/0006 dated March 26, 2015; P Insurance Corporation must be liable to compensate Company N for all damages.

2. Acknowledge the validity of Public Liability Insurance Contract No. P-15/DNI/XCG/3303/0010 dated March 26, 2015; P Insurance Corporation must be liable to compensate Company N for all damages.

3. Compensate Company N for Boiler No. 3 explosion loss under Contract No. 0006 in the amount of: 13,000,000,000 VND.

4. Scene cleanup costs: 200,000,000 VND.

5. Compensate Company N for third-party property liability due to Boiler No. 3 explosion: 1,510,790,352 VND under Contracts No. 0010 and 0057.

6. Compensate Company N for Boiler No. 2 loss: 500,000,000 VND under Contract No. 0008.

7. Compensate for delay in payment after 15 days from November 19, 2015, until the trial date October 11, 2016, based on the State Bank’s basic interest rate: 15,210,790,352 VND x 10 months 07 days x 9%/year = 1,167,428,159 VND.

Total (3)+(4)+(5)+(6)+(7): 16,378,218,511 VND.

Additional supplements for the Court’s consideration:

1. Per contracts 0009, 0010, 0057, dispute jurisdiction lies with the competent People’s Court as per Clause 2.3.

2. Per boiler contracts, Company N relied on Article 17 of the Law on Commercial Arbitration 2010 and Clause 5 Article 4 of Resolution 01/2014/NQ-HDTP. Since the Boiler Insurance Rules were pre-drafted by P1 Insurance with an arbitration clause, Company N had the right to choose Arbitration or Court. Company N chose the Court.

The representative agreed with Valuation Certificate No. 2003/TDG-CT dated August 22, 2016, by D Valuation Joint Stock Company and requested the Court to resolve according to law.

The representative of the defendant stated:

A. Opinions on claims No. 1 to 7 as follows:

I. Boiler Insurance Certificate No. P-15/DNI/XCG/3201/0006 was mutually agreed and signed on March 26, 2015 (including Certificate, Payment Notice, Rules, and Supplementary Terms). However, Company N failed to fulfill commitments, causing the contract to expire before the loss:

Per the certificate and supplement No. 23, the deadline was:

1) Per the Certificate:
“Payment term: Within 15 days from March 26, 2015.
In the event the insured fails to pay full premium per payment terms or other written agreements, validity automatically terminates on the next day.”
Company N had to pay before April 10, 2015.

2) Per Supplementary Term No. 23: 30-day premium payment commitment:
Company N had to pay before May 1, 2015.

Company N paid on May 7, 2015 (7 days late per Supplement 23, 26 days late per Certificate).

Thus, based on Article 18 and Article 23 of the Law on Insurance Business and Circular 194/2014/TT-BTC, the Boiler No. 3 explosion on November 13, 2015, is not covered because Contract No. 0006 terminated on May 1, 2015.

II. Public Liability Contract No. P-15/DNI/XCG/3303/0010: Similar to Boiler No. 3, the payment was late. The contract terminated on May 1, 2015. P1 Insurance has no responsibility for third-party liability.

III. Boiler Insurance Certificate No. P-15/DNI/XCG/3201/0008 (Boiler No. 2): Company N fulfilled obligations. P Insurance will consider compensation per regulations. Currently, B Inspection Company is determining the loss value. We request the Court not to process this content while it is being resolved.

IV. Contract No. 0009: The insured location was Company H, unrelated to the loss at Company S. Request the Court to ignore this.

V. Human compensation: Deny as public liability contracts do not cover employees or hirelings of the insured.

VI. Loss related to third-party liability under No. 0057 is being assessed. Request the Court not to process yet.

B. Regarding claim No. 9 (Interest): No basis for interest because contracts 0006 and 0010 had terminated. For No. 0008 and 0057, Company N hasn’t provided full documentation per B Inspection’s instructions, so there is no delay by P Insurance.

The defendant disagreed with the Valuation Certificate as it was improper. Request the Court to resolve per law.

The person with related rights and obligations, P1 Insurance, represented by Mr. Chu Thanh T:
Agreed with the defendant’s opinions.

V Bank, represented by Ms. Ha Thi Thanh H:
Company N mortgaged the boiler systems to the Bank. The Bank was the primary beneficiary.
Total outstanding debt: 19,295 million VND.
Regarding Company N’s claims against P Insurance, the Bank requested the Court to resolve per law and had no objection to the valuation.

At the First-Instance Business and Commercial Judgment No. 50/2016/KDTM-ST dated October 11, 2016, the People’s Court of Bien Hoa City, Dong Nai Province decided:

Accepted Company N’s petition.
Forced P Insurance Joint Stock Corporation to:
1. Acknowledge Contract No. 0006 and compensate Company N.
2. Acknowledge Contract No. 0010 and compensate Company N.
3. Compensate Boiler No. 3 loss: 13,000,000,000 VND.
4. Scene cleanup: 200,000,000 VND.
5. Compensate third-party property liability: 1,510,790,352 VND.
6. Compensate Boiler No. 2 loss: 500,000,000 VND.
7. Interest for delay: 1,167,428,159 VND.
Total: 16,378,218,511 VND.
Dismissed the withdrawn parts of the claim. Forced P Insurance to refund valuation costs: 134,000,000 VND.

On October 20, 2016, the defendant appealed.

At the Appellate Business and Commercial Judgment No. 01/2017/KDTM-PT dated March 6, 2017, the People’s Court of Dong Nai Province decided:
Rejected the appeal, upheld the first-instance judgment.

Following the appeal, P Insurance requested cassation.
Per Decision No. 45/QDKNGDT-VC3-KDTM dated February 8, 2018, the Procurator General of the High People’s Procuracy in HCM City protested the appellate judgment.

COURT’S ASSESSMENT:

[1] Based on the documents and evidence in the case file:

[2] Company N installed boilers for Company S and signed 05 insurance contracts with P1 Insurance (Contracts No. 06, 10, 07, 08, 57).

[3] On November 13, 2015, Boiler No. 3 exploded due to technical faults. Damages were caused to Company N and third-party Company S. Company N is entitled to compensation per law.

[4] However, P1 Insurance argued that since the premium for No. 06 and No. 10 was paid on May 7, 2015 (instead of May 1), the contracts were void. After receiving the late payment, P Insurance and P1 Insurance raised no objection, sent no termination notice, but instead accepted the money, issued VAT invoices, and reported taxes. Therefore, P Insurance and P1 Insurance implicitly admitted the late payment and acknowledged that the two contracts were valid and enforceable.

[5] Thus, when the insurance event occurred, P Insurance is liable to compensate according to the signed Contracts.

[6] Regarding loss and compensation: Per Article 48 of the Law on Insurance Business, a loss assessment must be conducted. The lower courts relied only on asset valuation, which is incorrect per Article 4 of the Law on Price.

[7] Furthermore, Contract No. 06 stipulates a 5% deductible (minimum 10 million VND). The lower courts failed to apply this deductible, harming P Insurance’s rights.

[8] Regarding Contract No. 08: The loss assessment by B Inspection was incomplete because Company N failed to provide documents. The lower courts forced compensation without sufficient evidence.

[9] Company N provided no proof of having compensated the third party for material damage, yet the lower courts forced P Insurance to pay 1,510,790,352 VND under No. 10 and No. 57. This is groundless.

[10] There was also a discrepancy in the boiler’s production year (2013 vs 2014) that the lower courts failed to clarify.

For these reasons;

DECISION:

Pursuant to Article 337, Article 343, and Article 349 of the Civil Procedure Code.

1. Accept the Protest No. 45/QDKNGDT-VC3-KDTM dated February 8, 2018, of the Procurator General of the High People’s Procuracy in Ho Chi Minh City.

2. Vacate the entire Appellate Judgment No. 01/2017/KDTM-PT and the entire First-Instance Judgment No. 50/2016/KDTM-ST. Remand the case to the People’s Court of Bien Hoa City for retrial.

3. This cassation decision takes legal effect from the date of issuance.

PRECEDENT CONTENT

“[4]… After receiving the insurance premium from Company N, P Insurance Joint Stock Corporation and P1 Insurance raised no objection and provided no written notice regarding the late payment of the insurance premium while the two Contracts were supposed to have been void since May 1, 2015; instead, P1 Insurance still accepted the payment, issued VAT invoices, and reported taxes on these two insurance payments from Company N. Therefore, P Insurance Joint Stock Corporation and P1 Insurance implicitly admitted the late payment by Company N and acknowledged that the two insurance contracts were valid and enforceable.

[5] Therefore, when the insurance event occurred, P Insurance Joint Stock Corporation must be held liable for compensation according to the Contracts signed between the two parties.”