CHINA Law and Practice Contributed by: Fubin Xiang, Xinyi Zhang, Mengmeng Wei and Lanmengyuan Zhang, W&H Law Firm
Unjustified delay may expose the insurer to liability for losses caused by the delay. The supervisory assessment regime for consumer protection puts more pressure on insurers. Insurers are graded on different levels, and the grade deter- mines the intensity of supervision. Where improper claims handling is identified, the insurer can expect a risk warning letter, an order to rectify within a fixed period and a requirement of internal accountability, with public disclosure where the regulator considers it warranted. Failure to remedy the position may result in restric- tions on launching a new business and opening new branches. The measures now require the result to be reported to the board and senior management, which has moved claims handling from a departmental con- cern to a governance issue. 4.7 ESG and Climate-Related Coverage ESG-Related Coverage ESG considerations have played a more important role in coverage dispute analysis. For example, where a liability claim arises out of pollution, ecological dam- age or an employment matter, a court or tribunal will look at how the insured conducted itself, and in par- ticular whether it held the necessary permits, met the applicable discharge or safety standards and met its reporting obligations. Non‑compliance with ESG obli- gations may trigger an exclusion of unlawful conduct, which may give the insurer a strong coverage defence. Climate-Related Coverage Extreme weather has made catastrophe, property, business interruption and agricultural cover the most exposed lines. Disputes in this area typically concern: • the causal relationship between the weather and a pre‑existing defect or inadequate maintenance; • the scope of flood, storm and pollution exclusions; • the operation of deductibles and sub‑limits; and • whether a business interruption claim requires insured physical damage as its trigger. Insurers are responding principally through policy design, tightening the definition of insured incidents and giving closer attention to sub‑limits, deductibles,
waiting periods and aggregation clauses in order to control cumulative risks across a single weather event. 4.8 Delegated Authority and Claims Responsibility Delegated underwriting and claims handling raise a basic agency question regarding which act or rep- resentation is legally attributable to the insurer. An insurance agent acting within actual authority can bind the insurer, while Civil Code principles on appar- ent authority may also become relevant where the insurer’s conduct gave the policyholder reasonable grounds to believe authority existed. Claims disputes become more complex where a third- party administrator gives an inconsistent coverage position, misses a claims-handling deadline, requests excessive documentation or settles beyond its author- ity. The issues are whether that conduct binds the insurer and whether it affects coverage, claims dead- lines or the insurer’s ability to rely on policy defences. Outsourcing does not remove the insurer’s own claims-handling obligations. The insurer may remain responsible to the insured for authorised or attrib- utable conduct, while separately seeking damages against the delegate for exceeding authority, negli- gence or breach of the service agreement. 4.9 Financial Lines Coverage Trends Financial lines disputes are developing alongside the revised Company Law, effective from 1 July 2024, which has increased the duties and potential liability of directors, supervisors and senior management and allowed shareholders of a parent company to sue the directors of its wholly owned subsidiaries. This has heightened focus on D&O insurance. Coverage dis- putes commonly concern: • who qualifies as an insured person; • what constitutes a wrongful act; • when a claim is first made; notice and prior‑circum- stance provisions; • defence‑cost advancement; and • the allocation of costs between covered and uncovered parties.
70 I NSURANCE L I T IGATI O N 2026
CHAMBERS.COM
Powered by FlippingBook