Insurance Contracts

Cases of Insurance Contract Disputes and Relevant Legal Issues

There are situations where a policyholder purchases insurance hastily, solely based on the “wonderful” benefits introduced by the insurer, without carefully reviewing the terms and conditions of the contract. Insurance contracts are often lengthy, and insurance products are diverse. Therefore, understanding the contractual provisions to ensure entitlement to legitimate benefits is extremely important.

In practice, disputes sometimes arise because insurance agents deliberately “skip over” or fail to clearly explain exclusion clauses. As a result, when an insured event occurs, the parties often enter into heated arguments. Likewise, when the policyholder seeks early termination of the contract, they may realize that the disadvantages are far greater than initially expected. Hence, reading, understanding, and receiving clear explanations – with both parties confirming their mutual consent at the time of contract execution – is critically important.

This article outlines several legal issues relating to insurance business activities.

Types of Insurance Contracts

1. Life insurance contract;
2. Health insurance contract;
3. Property insurance contract;
4. Indemnity insurance contract;
5.  Liability insurance contract.

Prohibited Acts

1. Conducting insurance business, reinsurance, retrocession, or insurance brokerage without a license for establishment and operation.
2. Conducting insurance business, reinsurance, retrocession, or insurance brokerage beyond the scope of the granted license.
3. Acting as an insurance agent or providing auxiliary insurance services without meeting the statutory conditions for operation.
4. Committing fraudulent acts, including:
   a) Colluding with beneficiaries to unlawfully settle claims or pay insurance proceeds;
   b) Forging documents or intentionally falsifying information in claim requests or insurance payment applications;
   c) Forging documents or intentionally falsifying information to deny claims or payments after an insured event occurs;
   d) Intentionally causing damage to one’s own property or health in order to obtain insurance benefits.
5. Threatening or coercing another person into entering an insurance contract.

Essential Contents of an Insurance Contract

An insurance contract must contain at least the following:

1. Policyholder, insured person, beneficiary (if any), and the insurer or branch of a foreign non-life insurer;
2.  Insured subject matter;
3.  Sum insured, insured property value, or insurance liability limit;
4.  Scope of coverage or insurance benefits; rules, conditions, and terms of insurance;
5. Rights and obligations of the insurer, foreign non-life insurer’s branch, and the policyholder;
6. Insurance period and effective date of the contract;
7. Insurance premium and payment method;
8. Method of claim settlement or insurance payment;
9. Method of dispute resolution.

Form and Evidence of Insurance Contracts

Insurance contracts must be made in writing. Evidence of contract conclusion may include the contract itself, an insurance certificate, an insurance policy, or other legally recognized forms.

Exclusion Clauses

Exclusion clauses specify circumstances under which insurers or foreign non-life insurer branches are not liable to pay insurance proceeds. Where such clauses exist, they must be clearly stated in the contract, explained in full to the policyholder, and the insurer must have evidence proving that the policyholder has been fully informed and understands the content at the time of contract conclusion.

If force majeure events or objective obstacles cause the policyholder to delay notification of an insured event, the insurer may not invoke the exclusion clause regarding late notification.

Interpretation of Insurance Contracts

Where a contractual clause is unclear and subject to different interpretations, it shall be construed in favor of the policyholder.

Invalid Insurance Contracts

1. An insurance contract shall be void in the following cases:
   a) The policyholder has no insurable interest at the time of contract conclusion;
   b) There is no insured subject matter at the time of contract conclusion;
   c) The policyholder is aware that the insured event has already occurred at the time of contract conclusion;
   d) The contract’s purpose or content violates prohibitions of the law or contravenes social morals;
   đ) The contract is a sham contract between the insurer (or its branch) and the policyholder;
   e) The policyholder is a minor, a person lacking legal capacity, a person with cognitive or behavioral difficulties, or a person with restricted legal capacity;
   g) The contract is concluded under a fundamental mistake, preventing one or both parties from achieving the intended purpose, unless the purpose has been fulfilled or the mistake can be immediately remedied;
   h) The contract is concluded under fraud;
   i) The contract is concluded under threat or coercion;
   k) The policyholder lacked awareness and control over their conduct at the time of conclusion;
   l) The contract fails to comply with statutory form requirements.
2. Where a contract is void, it shall have no legal effect from the time of conclusion. The insurer (or its branch) and the policyholder must return what they have received, and the party at fault causing damage must compensate accordingly.

Legal basis: Articles 9, 15, 16, 17, 18, 19, 24, and 25 of the Law on Insurance Business 2022.