CHINA Law and Practice Contributed by: Fubin Xiang, Xinyi Zhang, Mengmeng Wei and Lanmengyuan Zhang, W&H Law Firm
4.3 Cyber and Technology-Related Coverage Issues Cyber claims in China are generating disputes over whether ransomware, data theft, system interrup- tion, vendor failure and privacy liability fall within the insured event, and whether business interruption, regulatory investigations, third-party liability or ran- som-related payments are covered. Systemic events create additional questions where one cloud, software or infrastructure failure affects many insureds. The Cybersecurity Technology—Guidelines for Appli- cation of Cybersecurity Insurance (GB/T 45576-2025), effective from 1 November 2025, now provides a rec- ommended national standard for covered events, losses, risk assessment and claims handling. Publicly available policy wordings also show a trend towards more clearly defined coverage triggers, aggregation rules and exclusions for systemic risks, technology failures and regulatory liabilities. 4.4 Aggregation and Limits of Liability Aggregation disputes are becoming more visible in large property, liability, catastrophe and technology claims. A typhoon, flood, defective product, common software vulnerability, cloud outage or repeated mis- conduct can generate multiple losses across sites, claimants or policy periods. The dispute lies in wheth- er those losses aggregate into one deductible and one limit or remain separate losses. Published PRC insurance cases have not yet devel- oped a single detailed test comparable to some mature common law markets. The result therefore depends heavily on the wording used. For example, a court would interpret “occurrence”, “event”, “acci- dent”, “cause”, “series of related acts” or similar lan- guage under the general contract rules and Article 30 of the Insurance Law as ambiguous standard terms. 4.5 Sanctions and Illegality Issues Sanctions A sanctions limitation or exclusion clause may relieve the insurer of the obligation to indemnify. However, its enforceability must now be tested against the Anti- Foreign Sanctions Law, which allows a Chinese party harmed by another party’s implementation of foreign discriminatory restrictive measures to sue in a PRC
court for cessation of the infringement and damages. Therefore, an insurer that simply imports a foreign uni- lateral sanctions clause and declines coverage on that basis runs a considerable risk. Where the underlying sanction is found to constitute improper extraterritorial jurisdiction, the clause may be held ineffective, and the insurer may itself incur liability. Illegality In case of life insurance, the insurer is not liable where the loss results from the insured’s intentional commis- sion of a crime or from resistance to criminal compul- sory measures. However, not every unlawful act on the part of the insured automatically excuses the insurer from liability. In property and liability insurance, courts generally give this exclusion a restrictive interpreta- tion, holding that minor breaches, such as ordinary traffic offences, do not justify a denial of coverage unless the breach directly caused the loss and was expressly listed in the exclusion clause. Public Policy Considerations A contract that offends public order and good morals, or that threatens financial security, may be held void from the beginning. Where a policy is used to conceal a crime, or a fake insured object is created in order to obtain credit fraudulently, the courts may set the contract aside under Article 153 of the Civil Code. The insurer is then under no obligation to indemnify, and any premium already received may be recoverable. 4.6 Late Payment and Claims Handling Practices Under the Insurance Law in China, insurers must assess claims promptly. In complex cases, they are required to complete the assessment within 30 days unless the policy provides otherwise. The insured must be notified of the outcome, and where the claim falls within cover, payment is to be made within ten days of an agreement on the amount. Where the claim is declined, a notice with reasons needs to be served within three days of the determi - nation. Where the final amount cannot be determined within 60 days after receipt of the claim and support- ing materials, the insurer must pay the amount that can be ascertained based on the evidence available.
69 I NSURANCE L I T IGATI O N 2026
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