Insurance companies must inform when household vehicles are converted to commercial use

[3] Compiled from: Qingdao Laoshan District Court, Workers' Daily

Case Review

[4] On the evening of June 12, 2021, Wang drove a private car out to work as a ride-hailing driver. Around 1 a.m. the next day, when returning to the underground garage of his residential community, Wang collided with a vehicle driven by Liu. It was determined that Wang bore full responsibility for the accident.

[5] Previously, the vehicle driven by ride-hailing driver Wang was insured with compulsory traffic insurance and commercial insurance at Insurance Company A, while the vehicle driven by Liu was insured with compulsory traffic insurance and commercial insurance at Insurance Company B.

After the accident, Insurance Company B compensated Liu for vehicle repair costs of over 130,000 yuan. Subsequently, the insured Liu issued a motor vehicle insurance rights transfer letter, transferring the right of recourse for the compensated portion to Insurance Company B. Insurance Company B then filed a lawsuit against ride-hailing driver Wang and Insurance Company A, demanding payment of the advanced insurance compensation of over 130,000 yuan plus interest. Wang argued that his vehicle was in a parking lot at the time of the accident, with only the owner inside and no paying passengers, and the vehicle was registered as non-operational. Therefore, the liability should be borne by Insurance Company A, where he had purchased insurance.

Insurance Company A argued that, according to the insurance terms, the insurer is not liable for compensation if the insured vehicle's usage nature is altered. On the night of the accident, Wang went out to engage in ride-hailing operations, changing the vehicle's usage nature. Thus, for the losses claimed by Insurance Company B, Insurance Company A only agreed to bear liability within the 2,000 yuan property damage limit of compulsory traffic insurance.

Court Opinion

The Laoshan District Court held after trial that the focus of this case is whether Wang changed the vehicle's usage nature at the time of the accident, thereby significantly increasing the risk level of the insured vehicle.

The ride-hailing platform order records show that Wang started ride-hailing operations at 7 PM that night and had a traffic accident in the community garage at 1:26 AM the next morning while returning home. The process of returning home was an inevitable act after completing ride-hailing operations, and thus should be considered a continuation of the ride-hailing business, rather than purely for personal family use.

Therefore, since Wang failed to fulfill the obligation to notify Insurance Company A in advance when engaging in ride-hailing operations, the vehicle's risk level was significantly higher than for personal family use, and Insurance Company A should not bear liability under the commercial vehicle insurance.

In summary, the court ruled that Insurance Company A should bear 2,000 yuan in liability within the compulsory insurance coverage, and the remaining amount should be borne by Wang, meaning Wang must compensate Insurance Company B over 128,000 yuan.

Insurance Law of the People's Republic of China

Article 52

During the term of the contract, if the risk level of the subject matter insured significantly increases, the insured shall promptly notify the insurer in accordance with the contract terms. The insurer may increase the premium or terminate the contract as stipulated. If the insurer terminates the contract, it shall refund the premium collected after deducting the portion due from the start of insurance liability to the date of termination, as per the contract.

If the insured fails to fulfill the notification obligation as specified in the preceding paragraph, the insurer shall not be liable for compensation for any insured event caused by the significant increase in risk level of the subject matter insured.

[4] Author's Opinion

Vehicle owners must always inform the insurance company whether their vehicle is for personal use or for profit purposes during daily use, to ensure timely updates to the contract terms and payment of premiums matching those for commercial vehicles, thereby avoiding potential losses in the event of an accident.

In this case, Wang changed the nature of his private car from "household use" to "commercial use," significantly increasing the risk of traffic accidents. However, because he failed to fulfill his obligation to inform the insurer, he ended up with this outcome.