万力轮胎股份有限公司 v. 中国出口信用保险公司广东分公司

At a glance

Parties

Wanli Tire Co., Ltd. (万力轮胎股份有限公司), appellant and first-instance plaintiff, v. China Export & Credit Insurance Corporation, Guangdong Branch (中国出口信用保险公司广东分公司), appellee and first-instance defendant

Case no.

(2020)粤01民终20937号; first instance: Guangzhou Conghua District People's Court (2020)粤0117民初2320号

Court

Guangzhou Intermediate People's Court, Guangdong (second instance, sole judge)

Forum and rules

Chinese civil appeal (property insurance contract dispute)

Sector

Export credit insurance; tyre exports

Outcome

Appeal dismissed and first-instance judgment upheld (3 November 2020). The clause deferring loss assessment until the insured had an arbitral award or judgment against the guarantor and had applied to enforce it is valid.

Amount

Claimed: RMB 3,066,164.23 in insurance indemnity plus interest. Awarded: nothing. First-instance fee RMB 15,665 and appeal fee RMB 31,330, both borne by Wanli.

The dispute

Wanli Tire exported tyres to Southern California Tire Connections, INC. BITE AMERICA, CORP guaranteed the buyer's payments up to USD 2,000,000 under a guarantee of 7 July 2016. The guarantee provided for arbitration before the Guangzhou Arbitration Commission. Wanli insured the trade with the Guangdong Branch of China Export & Credit Insurance Corporation. When the buyer failed to pay USD 495,462.42, the insurer declined to process the claim. It relied on Article 13(1) of the Comprehensive Terms, as amended by endorsement item 2(5) of the policy schedule: where a sale is guaranteed, the insurer does not assess or pay the loss until the insured has obtained an effective arbitral award or court judgment against the guarantor and applied to enforce it. Wanli argued that this was an invalid standard-form clause that increased its liability and could not be performed, because a Guangzhou award could not be enforced in the United States. It also argued that the insurer had not drawn its attention to the clause. The insurer replied that the clause was a specially negotiated term and that it had flagged the clause in several documents. It also argued that a Guangzhou award could be enforced in the United States under the New York Convention, since both China and the United States are parties.

Key holdings

1. The 'dispute-first' clause does not exclude the insured's right to claim and does not exempt the insurer from its duty to pay. Once the insured establishes its claim against the guarantor through litigation or arbitration and applies for enforcement, the insurer must pay. The purpose of the insurance is therefore not defeated. p. 10
2. Under Article 13(3), litigation and arbitration costs are shared by insurer and insured in proportion to their interests when the insured wins and the loss is covered. The clause therefore does not clearly increase the insured's liability. It is not void under Article 40 of the Contract Law or Article 19 of the Insurance Law. pp. 10–11
3. The clause is not a 'clause exempting the insurer from liability' under Article 17(2) of the Insurance Law. Its validity therefore does not depend on whether the insurer drew attention to it and explained it. Wanli's earlier policies with the insurer also contained the same requirement, so Wanli's denial was rejected. p. 11
4. Under the Supreme People's Court's Reply on export credit insurance disputes, courts may apply the Insurance Law by analogy, but where the export credit insurance contract provides otherwise, the contract governs. The insurer was entitled to rely on the clause to refuse payment. p. 11
5. Appeal dismissed and first-instance judgment upheld. The appeal fee of RMB 31,330 is borne by Wanli. The judgment is final. pp. 11–12

Procedural history

1. 7 July 2016BITE AMERICA, CORP issues a maximum-amount guarantee (up to USD 2,000,000) for the buyer's payments, with arbitration before the Guangzhou Arbitration Commission.
2. 23 October 2017The insurer approves a revolving credit limit of USD 1,300,000, conditional on the guarantee.
3. 27 November 2017The policy schedule is signed, covering 23 October 2017 to 22 October 2018.
4. 5 July 2018Wanli gives notice of a possible loss of USD 495,462.42 for shipments made between 28 March and 2 May 2018.
5. 14 March 2019The insurer declines to accept the claim because Wanli has not provided an effective award or judgment against the guarantor and an application to enforce it.
6. 19 May 2020Wanli sues in the Conghua District People's Court.
7. 24 August 2020The first-instance court dismisses Wanli's claims.
8. 29 October 2020Appeal heard in public before a sole judge.
9. 3 November 2020Guangzhou Intermediate People's Court dismisses the appeal.

Tribunal, counsel and experts

For the claimant

广东连越律师事务所 (Guangdong Lianyue Law Firm)

For the respondent

上海市方达（广州）律师事务所 (Fangda Partners, Guangzhou)

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Keywords

• export credit insurance
• Sinosure
• standard-form clause
• condition precedent to indemnity
• guarantor
• Guangzhou Arbitration Commission
• New York Convention
• enforcement in the United States
• Insurance Law Article 17
• Insurance Law Article 19
• Contract Law Article 40
• duty to explain exemption clauses
• Southern California Tire Connections
• BITE America
• tyres
• China

Summary generated with AI from the published documents — refer to the award for the authoritative text.