Assessing the implications of short-term exemption clauses for insurers in Chinese fishery mutual insurance contracts

Abstract

The exemption clauses in China’s Insurance Law delineate the scope of obligations, performance standards, and certification requirements pertaining to fishery mutual insurance and supplementary coverage. However, the legal validity of time-limited exemption clauses remains contentious in Chinese legal theory, with judicial practice evidencing inconsistent interpretation standards. This paper argues that the application of such clauses enables insurers to potentially restrict or deny liability to some extent, promoting moral hazard and violating public order and good customs. Through analysing current theories and judicial judgments, the paper examines threats and rationale underlying the incorporation of these clauses in fishery mutual insurance policies. It contends that time-limited exemption clauses essentially function as implicit coverage exemptions and should, therefore, be deemed invalid, precluding insurers from refusing claims based on time limits. The paper concludes by recommending insurers fully disclose the liability time restrictions imposed by this clause when formulating contracts to ensure policyholder awareness.