Life insurance is a product of insurance companies, established through life insurance contracts with clear benefits and terms to protect participants from health events or physical and life risks. Therefore, many people have been purchasing life insurance in various periodic payment forms. In practice, there are many cases where customers stop paying premiums, affecting the validity of the life insurance contract. Typically, the customer’s failure to pay the premium is the customer’s obligation fault in fulfilling the contract. However, in practice, there are cases where the customer does not pay the premium due to the fault of the insurance company. Case Law No. 23/2018/AL is a typical case of this issue. In this article, TNTP will further clarify the court’s assessment of this case.
1. Summary of the case
a) The plaintiff – Mrs. Pham Thi T presented:
Her husband, Mr. Tran Huu L, had registered to purchase life insurance from P Life Insurance Company Limited. Her husband was involved in a fatal accident. According to the contract, she is the beneficiary. Now, she is requesting the defendant to pay the insurance amount of 300 million VND and interest at the basic interest rate from August 2005 until now, which is 126 million VND, for a total of 426 million VND.
b) The defendant, P Life Insurance Company Limited, represented by Mr. Nguyen Quoc T, presented:
Mr. L was required to pay the second insurance premium on June 24, 2005, but after being granted a 2-month extension, he still did not pay the premium. Mr. L passed away on August 27, 2005, which was 3 days after the insurance contract had become invalid. Therefore, the defendant does not accept to pay the amount requested by the plaintiff.
c) The party with related rights and obligations, Ms. Vu Thi Minh N, presented:
She is the agent of the defendant and had sold the insurance to Mr. L. She had an agreement with Mr. L that she would directly collect the insurance premiums at his house when they were due. However, when the final premium was due, she had to attend a political study session in the province, so she was unable to collect the premium. The failure to pay the premium was due to objective circumstances, so she requests that the defendant pay the insurance amount to the plaintiff.
d) In the first instance civil judgment No. 38/2008/DS-ST dated August 21, 2008 of the People’s Court of District 1, Ho Chi Minh City, it was decided:
• Dismiss the request of Mrs. Pham Thi T to demand that P Life Insurance Company Limited pay the insurance amount and interest for late payment of 426.000.000 VND.
• Regarding the court fees: Mrs. Pham Thi T must bear the first instance civil court fees of 7.890.000 VND, but the 6.000.000 VND prepaid court fees according to the payment receipt No. 2185 dated June 9, 2006 of the Ho Chi Minh City Civil Judgment Enforcement Agency will be deducted. Mrs. T must still pay 1.890.000 VND.
e) On September 1, 2008, Mrs. Pham Thi T appealed.
f) At the appellate hearing:
• The plaintiff did not withdraw the lawsuit and the appeal request.
• The parties failed to reach an agreement on the resolution of the lawsuit.
• Ms. T presented the appeal request, asking the Trial Panel to accept her request to require P Life Insurance Company Limited to pay the insurance amount and interest for late payment of 426.000.000 VND. The reason is that the company’s representatives did not come to collect the insurance premium, not because she did not pay. The lawyer defending Ms. T’s legitimate rights and interests requested the Trial Panel to accept this request of Ms. T.
• Mr. Nguyen Quoc T, the representative of P Life Insurance Company Limited, along with the lawyer defending the company’s legitimate rights and interests, requested the Trial Panel to uphold the first instance judgment.
2. Assessment of the Court
• The appeal filed by Ms. Pham Thi T was made within the statutory time limit and is valid.
• Content of Case law: Based on the life insurance application dossier (pages 15-17), the address for P Life Insurance Company Limited to collect the premiums is at house number 231, Hamlet 3, B commune, G district, Ben Tre province, which is the house of Mr. L. This is also consistent with the testimony of Ms. N, who is the insurance agent and premium collector for P Life Insurance Company Limited.
• Considering the appeal request of Mrs. T, she reasons that Mr. L did not pay the insurance premiums on time because the company did not send the collector to collect the payments. This argument has its ground as evidenced by the information provided above.
• Based on the certificate of confirmation from the B commune police, it shows that Mr. L passed away on August 27, 2005 due to an accidental fall and head injury that led to his death.
• Content of Case law: Considering that Mr. L had signed an insurance contract through a life insurance application dossier with a coverage of 300.000.000 VND, and the fact that he had not paid the 2nd premium installment, as analyzed above, was not due to his fault, therefore, the appeal request of Mrs. T, requiring P Life Insurance Company Limited to pay the insurance benefit when Mr. L passed away due to an accident, has a basis to be accepted.
• Content of Case law: Considering the request of the representative of P Life Insurance Company Limited, who claimed that Mr. L did not pay the 2nd premium installment by the due date of August 24, 2005, and Mr. L passed away on August 27, 2005, thus his insurance contract had expired, this argument has no basis. As analyzed above, the reason why Mr. L did not pay the premium was because the company did not send the collector to collect the premium. This is also clearly stated on page 5 of the information for customers booklet, which mentions that premium collection at the customer’s home includes quarterly, semi-annual, or annual collection, or at an address with 2 or more contracts, which is consistent with the fact that Mr. L had signed 3 contracts with P Life Insurance Company Limited for himself, Mrs. T, and Ms. H. Therefore, the Trial Panel does not accept the request of the representative of P Life Insurance Company Limited, nor the proposal of the lawyer defending the legitimate rights and interests of P Life Insurance Company Limited.
• Considering the request of Mrs. T to require P Life Insurance Company Limited to pay interest on the late payment from August 27, 2005 until the date of the court trial, this request has no basis. Because the insurance certificate issued by P Life Insurance Company Limited to Mr. L did not state any terms about interest rates, therefore the Trial Panel does not accept this request from Mrs. T.
• Therefore, the Trial Panel partially accepts Mrs. T’s appeal request, revising the first-instance judgment to require P Life Insurance Company Limited to pay the insurance benefit of 300.000.000 VND according to the contract for Mr. L’s accidental death, with Mrs. T as the beneficiary.
3. Comment on Case law
• Based on Clause 2, Article 23 of the Insurance Business Law 2000 (as amended and supplemented in 2010) on termination of insurance contracts stipulated a situation that the insurance contract can be terminated: “The insurance purchaser does not pay the full insurance premium or does not pay the premium within the time limit agreed upon in the insurance contract, unless the parties have agreed otherwise.”
Applying this regulation to the case, the parties had a different agreement regarding the payment of the insurance premium, based on the confirmed evidence that Mr. L would pay the premium at home when the P Company staff came to collect the premium. Therefore, the fault here does not lie with Mr. L. Thus, the requirement for P Company to pay the insurance benefit when Mr. L passed away due to an accident is well-grounded and should be accepted.
• Regarding P Company’s claim that Mr. L’s insurance contract had expired, this claim has no basis. The reason Mr. L did not pay the insurance premium was because the company staff did not come to collect the premium. This is also clearly stated on the information for customers booklet, which states that premium collection at home includes quarterly, semi-annual, or annual collection, or from an address with 2 or more contracts, and since Mr. L had signed 3 insurance contracts with P Life Insurance Company Limited for himself, Mrs. T, and Mrs. H, the insurance company must send a collector to his house to collect the premiums. Therefore, the Trial Panel’s decision to not accept the request of the representative of Company P, nor the proposal of the lawyer defending the legitimate interests of Company P, is well-founded.
Above is TNTP’s article on “Case law No. 23/2018/AL regarding the validity of life insurance contract when the insurance buyer fails to pay the insurance premiums due to the fault of the insurance company“. We hope this article will be helpful to our readers.
Best regards,
