ABSTRACT
For insurance policies purchased and sold through a third-party platform, the platform may fulfill the insurer’s obligations of notification and explanation to policyholders based on the tripartite agreement between them and its legal relationships with the insurer (such as an agency or authorized performance arrangement), with the resulting legal consequences to be borne by the insurer. Pursuant to the agreement between the platform and the policyholder, such obligations may be performed through one-to-many means such as system notifications, group announcements, or group training sessions, or through other communication channels reasonably ascertainable by the policyholder. In all cases, the contents of these notification and explanation should be sufficiently clear and conspicuous to the policyholders and allow them to fully understand the true implication and legal consequences of all standard exclusion clauses. These obligations should be performed within a reasonable period before new exclusion clauses are added to daily policies, to give policyholders sufficient time to accept or reject them.
FACTS
Duo X Xing Network Technology (Shanghai) Co., Ltd. (“DXX”), the Plaintiff, was a delivery service provider for a food delivery platform operated by La X Si Network Technology (Shanghai) Co., Ltd. (“LXS”), a non-party. The agreement between them obligated DXX to purchase employer’s liability insurance for its delivery workers through the computer system of the platform (“System”). There were three policy tiers: Basic, Premier, and Unlimited. The types of policy and coverage plans were negotiated directly between LXS and Ping X Property & Casualty Insurance Company of China, Ltd. Shanghai Branch (“PX Shanghai”), the Defendant, without the involvement of DXX. DXX chose the Premier tier. Following the initial policy purchase, the System would, by default, automatically generate a daily policy under the same tier whenever a delivery rider accepted their first order of the day.
On March 7, 2023, LXS and PX Shanghai entered into a new Cooperation Agreement, which amended the third-party property damage clauses under the “Employer’s Liability Insurance – Additional Third-Party Liability Insurance” section to the following: For the Basic and Premier tiers, the previous arrangement of no specific sub-limit (where the indemnity amount was included within the overall third-party liability insurance limit of RMB 450,000 per person) was modified to a sub-limit of no more than RMB 50,000. The Unlimited Premium tier remained unchanged, i.e., still without a specific sub-limit, and the indemnity continues to be included within the RMB 450,000 per person coverage limit under the third-party liability insurance.
On March 20, 2023, LXS issued an announcement via a DingTalk group, an instant messaging software, notifying members that a livestream session explaining the changes to the employer’s liability insurance plan would be held on March 21, and that the changes would come into effect in late March. On March 21, under the coordination of LXS, personnel from PX Shanghai conducted the training session within the group , where the presentation document clearly outlined the change in payout amounts between the old and new insurance plans. DXX staff also attended the session and asked for a copy of the presentation file. The session, however, did not mention when the new insurance plan would be implemented on the online platform.
From March 21 to 22, 2023, the platform system in the Shanghai region completed the online update of the employer’s liability insurance product. The updated insurance plan officially came into effect on March 23, 2023.
On March 23, 2023, Li X, a delivery rider for DXX, accepted an order and was automatically enrolled in that day’s Premier-tier employer’s liability insurance through the System.
The Ping X Employer’s Liability Insurance – Additional Third-Party Liability Insurance (Section A) provided that “This policy covers personal injuries, death, or the property damage of third parties (excluding the insured and its employees), arising from accidents or negligence caused by employees engaged in the insured’s business activities, as specified in this policy during the policy period. The insured amount is RMB 450,000 per person.” The “Special Provisions” section of the policy, in bold font, stated: “… (7) Third-party property damage: payout for third-party property damage shall not exceed RMB 50,000…” On that day, Li X was involved in a traffic accident with a non-party. The police determined that Li X was solely responsible for the damage to the non-party’s vehicle. As a result, DXX paid RMB 97,000 to the non-party for vehicle repairs.
On March 24, 2023, LXS issued a pinned, high-priority announcement to all its logistics service providers nationwide, including DXX, on the System. The announcement stated that: (1) the original employer’s liability insurance plan would be upgraded between March 24 and March 31. The upgrade would start with Shanghai, where changes to the policies had already been completed between March 21 and 22; and (2) any logistics service providers intending to adjust their insurance plan after the upgrade should promptly update their selected policy tier in the System to complete re-enrollment.
After failing to reach an agreement with PX Shanghai regarding the payout amount, DXX filed this lawsuit, petitioning the court to order PX Shanghai and its parent company, Ping X Property & Casualty Insurance Company of China, Ltd., to pay RMB 97,000 as reimbursement for the vehicle repair costs.
PX Shanghai argued that pursuant to the third-party property damage clause of the updated Premier-tier policy, the payout amount was capped at RMB 50,000 .
HOLDING
The Shanghai Jingan District People’s Court rendered civil judgment (2023) Hu 0106 Min Chu No. 26403 on October 17, 2023, ordering PX Shanghai and Ping X Property & Casualty Insurance Company of China, Ltd. to pay DXX RMB 97,000 as indemnity. PX Shanghai then appealed to the Shanghai Financial Court.
The Shanghai Financial Court rendered civil judgment (2024) Hu 74 Min Zhong No. 34 on August 12, 2024, dismissing the appeal and affirming the original judgment.
REASONING
The Shanghai Financial Court held as follows:
First, while the third-party property damage clause at issue appeared under the “Special Provisions” section of the policy, it was not a negotiated outcome between the policyholder DXX and PX Shanghai. Instead, it was unilaterally agreed upon between the platform operator, LXS, and PX Shanghai. LXS executed the Cooperation Agreement in its own name rather than as an agent of DXX. Therefore, its acceptance of the clause could not be deemed as an acceptance by the policyholder. For DXX, the clause constituted a standard term pre-drafted by PX Shanghai for repeated use, without consultation or negotiation with the policyholder. The clause reduced the payout receivable by the policyholder—limiting indemnity for third-party property damage from the previously full amount to a maximum of RMB 50,000. Accordingly, it constituted a standard exclusion clause that diminished the insurer’s liability.
Second, PX Shanghai had an obligation to notify the policyholder about the newly added standard exclusion clause and explain its meaning and implications. The purpose of this notification and explanation is to ensure that the policyholder is informed of and fully understands the true implications and legal consequences of the exclusion clause—a material term that could significantly affect the policyholder’s decision whether to proceed with the insurance. Given that the platform adopts a large-scale automated enrollment model under which the initial insurance plan is automatically renewed on a daily basis by default, the policyholder had neither the necessity nor the obligation to monitor whether the terms of each policy had changed. Therefore, merely boldfacing the clause was not an adequate notice on the existence and details of the newly added standard exclusion clause. Instead, the insurer or its designated platform operator was required to notify the policyholder about the new clause and clearly explain its content through the method established in the agreement or other accessible channels acknowledged by the policyholder. Furthermore, this should be done within a reasonable period before the new clause was incorporated into the daily policy, and in a manner that is conspicuous, explicit, and fully comprehensible to a reasonable person. Only after the expiration of such reasonable notice period, and if the policyholder chose to continue with automatic enrollment, could such continued participation be deemed as acceptance of the newly added clause through conduct.
Third, the facts of the case indicate that PX Shanghai failed to fulfill its obligations of notification and explanation. In this case, LXS was to provide notifications and explanations on behalf of PX Shanghai per the agreement between them, but the legal consequences were still to be borne by PX Shanghai. LXS issued the specific content of the newly added standard exclusion clause in the form of a pinned, high-priority announcement. This one-to-many notice is consistent with its agreement with DXX, and therefore should be deemed valid in that respect. However, because it was issued after the new insurance plan had already come into force, it did not serve as an effective notification and explanation. Moreover, although LXS arranged an internal training session delivered by PX Shanghai on March 21, 2023, the event similarly did not supply that effective notification and explanation because first, it did not explicitly state when the updated insurance plan would take effect and second, it did not give DXX sufficient time to complete the decision-making process for accepting or rejecting the new terms. For these reasons, the standard exclusion clause was not legally binding on the DXX, and PX Shanghai and Ping X Property & Casualty Insurance Company of China, Ltd. shall pay the full amount of RMB 97,000 in insurance indemnity.
SIGNIFICANCE
Against the backdrop of the digital economy, platform-based insurance has rapidly emerged as a new model of insurance distribution, such as employer’s liability insurance for the delivery riders of delivery service providers. In contrast to the traditional one-to-one policy writing process, the platform-based model is characterized by the central role of the platform, with the following new features: (1) a three-party process with deep platform involvement in the underwriting process; (2) mandatory enrollment in a uniform insurance plan; (3) automatic renewal of the initially selected plan; and (4) daily enrollment based on whether deliver riders have orders on that day. These new characteristics in turn have significantly altered how insurers fulfill their obligations of notification and explanation.
This case arose when a policyholder challenged the validity of an exclusion clause newly added into a policy that was automatically renewed each day.
The judgement, after clarifying the legal relationships among the platform, the policyholder, and the insurer, for the first time established the basic principles and four key elements to be considered in judicial review of an insurer’s duty of notification and explanation under the platform-based insurance model (namely, the party responsible for performance, the method of performance, the content of the disclosure, and the timing of performance).. Thus, this judgment will provide guidance in the adjudication of similar cases.
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