CHINA Law and Practice Contributed by: Fubin Xiang, Xinyi Zhang, Mengmeng Wei and Lanmengyuan Zhang, W&H Law Firm
In addition, securities misstatement litigation, regu- latory investigations, professional negligence claims and insolvency‑related actions are important sources of financial lines exposure. Recurring policy questions include whether fines or penalties are insurable, the scope of dishonesty or personal‑profit exclusions, related claims and the interaction between D&O cover and corporate indemnification. 4.10 Casualty Coverage Trends Casualty claims nowadays increasingly involve new- energy products, automated equipment and complex supply chains – eg, lithium-ion battery incidents and construction or workplace accidents that caused bod- ily injury or property damage claims involving multiple contractors and indemnities. Coverage disputes of such casualty claims focus on occurrence and aggre- gation, whether the loss arose from a defective prod- uct or from the insured’s own work, territorial scope, limits and deductibles. Claims against insureds that commonly require a fund- ed or reimbursed defence arise under product liability, public and employers’ liability, professional indemnity, D&O, construction liability and other commercial liabil- ity covers. For liability claims, under Article 66 of the Insurance Law, unless the policy otherwise provides, the insurer shall bear the arbitration or litigation costs incurred by the insured, as well as other necessary and reasonable expenses. In practice, expenditure is heaviest in D&O and product claims, which tend to run for extended periods and might require expert examination. 5. Claims Against Insureds 5.1 Key Exposure Areas for Insureds However, the precise scope of “necessary and rea- sonable expenses” has long been disputed. Insureds and insurers might encounter disagreements in whether attorney fees and other legal fees fall within the coverage. In practice, the outcome relies on mul- tiple factors: • the specific wording of the policy; • the court’s interpretation of Article 66 in light of the facts; and
• the validity of any clause excluding attorney fees and other legal fees. An express exclusion will generally relieve the insurer of liability for such fees, but only if it satisfies the statu- tory requirements for standard‑form clauses. 5.2 Shifting Risk Landscape Technology and regulatory change are broadening the types of claims brought against insureds. Data mis- use, cyber incidents, algorithmic decisions, failures of automated systems and new energy products can give rise to contract, tort, product, privacy and regula- tory proceedings at the same time. Insurers are becoming involved earlier where one event can trigger parallel civil, administrative and reputational issues. Early involvement helps preserve technical evidence, co-ordinate experts and avoid admissions or settlements that may prejudice cover- age. It also creates more difficult allocation questions, since different allegations may fall under different cyber, D&O, professional indemnity, product liability or property policies, and some regulatory penalties or intentional conduct may be excluded even where related defence costs are potentially covered. 5.3 Defence Costs and Litigation Complexity Complex claims may involve multiple defendants, experts, jurisdictions and bodies of law. Cross-border product liability, aviation, marine, D&O and profes- sional negligence disputes can require foreign coun- sel, technical experts, translation, overseas evidence collection and parallel regulatory work. These costs can become substantial before the insured’s liability or the insurer’s ultimate indemnity obligation is resolved. The main disputes concern whether particular legal, expert or investigation fees are “necessary and rea- sonable” under Article 66, whether the policy validly modifies the statutory default and whether the insured obtained any required consent before incurring costs or settling. In practice, clear defence cost wording, budgets, regular reporting and early reservation-of- rights positions are increasingly important in control- ling both cost and later coverage litigation.
71 I NSURANCE L I T IGATI O N 2026
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