Discuss On The Liability Insurer's Duty Of Defence

The liability insurer's duty of defence, considered to be the most characteristic system of the liability insurance field in 20th century, originated from the case law of the U.S. It refers to the basic duty which the liability insurer owes to the person insured, it is not depending on the duty of insurance payment. There exists no rules about the liability insurer's duty of defence in the Chinese current law of insurance and its research as the theory basis of the system is absent. In order to adapt to the insurance's own development of our country and solve the specific problems about the liability insurer's duty of defence in the liability insurance practice, the author think we should draw lessons from the system in the country such as Great Britain and America, etc and construct it in our country. This text reaches the duty with the insurer's right and then it is from duty to liability, having a key introduction and analysis of the content of the system in the U.S., such as its concept, theoretical and practical basis, criterion of judgment, range of effect and methods of remedy, etc. Furthermore, the author puts forward the preliminary imagination of the system content of the duty of defence. In the part of this text's foreword the author proposes that in the insurance practice of our country, the insurer has stipulated the control clause of defending and conciliating through the contract of insurance and acquired right to participate in third person's claim lawsuit, it makes the insurer have an extraordinary place in the definite respect about the insured's compensation responsibility. The insurer could decide whether to conciliate or defend in terms of the actual fact that the insured damaged someone. If the insurer decides not to take part in defending, when the insured are opposing the victim's claim, on one hand he should take interests of the insurer into account—everything should have the consent or approvement of insurer; On the other hand, because of the limitation of the insured's own experience and ability, he is obviously weaker than the insurer in opposing the victim's claim; these factors make the insured quite passive in opposing victim's compensation. Therefore, that how to relieve the insured and whether to impose the duty to defend for the interests of the insured on the insurer has already become a question we have to face in the insurance legislation and practice of our country. In the part one, the author will introduce the right to participate stipulated in the practice of insurance contract. What the liability insurance covers is the damages responsibility to the third party of the insured, when the insured damaged someone, responsibility that the insurer will bear is relevant directly with third party's claim results to the insured. Therefore, when the third party sues the insured for compensation, that who takes control of defending the claim of the third party has a direct relation to the insurer's vital interests. In order to protect this interest, the insurer stipulated the clause of control of defending and conciliating and the right to participate of controlling the course of defence in contract of insurance. It is not difficult to find that in fact the right to participate is a right of defence stipulated by the insurer for his own interest. Otherwise, right and duty always combine, there is no duty without right and vice versa, the exercise of right should observe principle of honesty and not abuse of right. Therefore, the writer thinks that while the insurer enjoys the right of defence, he should also sufficiently consider the interest ofthe insured, namely assuming the duty of defence. In the part two, the author demonstrates the concrete content of the system of duty of defence. Firstly, I illustrate the theoretical basis of the duty of defence, namely principle of honesty and principle of forbidding abuse of right. The traditional theory of liability insurance argues that the duty of defence to the claim of the third party that the insurer assumes for the interest of the insured is from the stipulation of the contract. At this time, the duty of defence is a contractual obligation stipulated voluntarily, its theoretical basis is principle of freedom of contract and doctrine of consideration. With the development of the insurance theory, modern insurance theory argues that even if the duty of defence of the insurer is not stipulated in the liability policy, the insurer still owes the duty to the insured. Under this situation, the duty of defence is the duty that the liability insurer separately owes to the insured except for the duty of insurance payment. Therefore, in modern liability insurance, the duty has increased to a type of implied duty or statutory duty based upon principle of honesty and principle of forbidding abuse of right. There are no other provisions concerning the duty of defence except for provision as to the defence fee in the Chinese current law of insurance. Therefore, In order to adapt to the insurance's own development of our country and solve the specific problems about the duty of defence of the liability insurer in the liability insurance practice, the author think we should draw lessons from the Anglo—American case law and construct it in our country. If the right of controlling defence belonging to the insurer is provided voluntarily in the contract, while the insurer enjoys the defence interest of controlling the lawsuit that the insurance clause provided, he could not damage the interest ofthe insured and should pay considerable attention to the interest of the insured, it should be as the duty provided expressly under principle of honesty and principle of forbidding abuse of right. If the provision of the contract is unidentified or invokes disputes, we could identify the insurer's duty of defence according to the interpretation principle of contract. If the third party request damages against the insured, the insurer owes the duty to assume the burden of proof and take use of it to defend the third party's proposals, we called it the duty of defence of the liability insurer. Although the duty of defence derives from the provisions of the liability insurance contract, it is not the inherent content of the liability insurance contract and not the pure contractual duty of the liability insurer either, but a type of implied contractual duty or statutory duty based upon principle of honesty and principle of forbidding abuse of right. Its theoretical basis is principle of honesty and principle of forbidding abuse of right, its criterion of judgment is the combination of the theory of the third party's pleadings content and the theory of action fact. It starts at the insurer's notice and ends at the termination of the case. Although the duty of defence is from the provision of the contract, it is not just a promissory duty and also an implied statutory duty. So it is not exempted by the party's convention. In the part three, the author illustrates the legal result that the liability insurer should assume if he breaks the duty of defence. There exist two theories concerning the nature of responsibility that the insurer assumes breaking the duty of defence, namely theory of breach of contract and theory of coincidence of breach of contract and tort. Because this text holds that the duty of defence has both promissory and statutory nature, the author adopts the...