Viewpoint | Should Insurance Companies Bear Responsibility for Vehicle Downtime Losses in Traffic Accidents?
Published:
2025-12-15
In traffic accidents involving collisions with commercial vehicles such as taxis and ride-hailing cars, the owners of these commercial vehicles typically claim compensation from the party at fault for the loss of income incurred during the vehicle’s repair period. However, if the owner of the vehicle causing the accident has purchased commercial insurance, the insurance company often refuses to pay out, citing that the insurance contract explicitly excludes indirect losses from coverage. So, should the insurance company be responsible for covering the loss of income due to vehicle downtime? This article will analyze this issue in conjunction with specific case examples.
Introduction: In traffic accidents involving collisions with commercial vehicles such as taxis and ride-hailing cars, the owners of these commercial vehicles typically claim compensation from the party at fault for the loss of income incurred during the vehicle’s repair period. However, if the owner of the vehicle causing the accident has purchased commercial insurance, the insurance company often refuses to pay out, citing that the insurance contract explicitly excludes indirect losses from coverage. So, should the insurance company be responsible for covering the loss of income due to vehicle downtime? This article will analyze this issue in conjunction with specific case examples.
I. Relevant Cases
(1) Civil Second-Instance Judgment in the Dispute over Liability for Motor Vehicle Traffic Accidents Involving China某某 Insurance Co., Ltd. **Branch**, Cao **, and Others—Shijiazhuang Intermediate People’s Court
The central issue in this case is whether the appellant, a certain insurance company, is justified in asserting that it should not be held liable for loss of business interruption under the commercial insurance coverage. Regarding whether commercial third-party liability insurance should cover such losses, Article 17, Paragraph 2 of the Insurance Law of the People’s Republic of China provides: “With respect to clauses in the insurance contract that exempt the insurer from liability, the insurer shall, at the time of concluding the contract, make a conspicuous notice thereof on the application form, the insurance policy, or other insurance certificates, and provide the insured with explicit explanations of the contents of such clauses, either in writing or orally. If no such notice or explicit explanation is provided, such clauses shall have no legal effect.” Article 11 of the Supreme People’s Court’s Interpretation (II) on the Application of the Insurance Law of the People’s Republic of China further stipulates: “When an insurance contract is concluded, if the insurer has made a conspicuous notice—using bold typeface, distinctive fonts, symbols, or other obvious markings—of clauses in the insurance contract that exempt the insurer from liability on the application form, the insurance policy, or other insurance certificates, the people’s court shall deem that the insurer has fulfilled its obligation to provide notice as prescribed in Article 17, Paragraph 2 of the Insurance Law. Moreover, if the insurer provides the insured, in writing or orally, with explanations of the concepts, contents, and legal consequences of clauses exempting the insurer from liability in a manner understandable to the average person, the people’s court shall deem that the insurer has fulfilled its obligation to provide explicit explanations as prescribed in Article 17, Paragraph 2 of the Insurance Law.” In this case, the appellant claims that it has fulfilled its obligation to notify and explain the exclusion clauses to the insured, rendering those exclusion clauses valid and thus placing the responsibility for compensating Cao’s loss of business interruption squarely on the tortfeasor, Li**. However, the appellee, Li**, disputes this claim. This court holds that, under the electronic insurance subscription model, the “Explanation of Exclusion Clauses for Motor Vehicle Commercial Insurance” provided by the appellant features extensive use of boldfaced text. Of the total 19 pages, 13 pages have portions of their content highlighted in bold, while 4 pages have their entire content highlighted in bold. Furthermore, the page containing the exclusion clause relevant to the loss of business interruption—the very issue in dispute between the parties—is entirely highlighted in bold. Additionally, the fifth section of the explanatory document, titled “Definitions of Terms Related to Exclusions of Insurer’s Liability,” does not provide any definition for the term “indirect loss.” Based on the existing evidence, it cannot be established that the appellant, the insurance company, has fulfilled its obligation to provide clear and explicit notification and explanation to Li** regarding the exclusion clause in boldface that pertains to indirect losses resulting from the loss of business interruption.
(2) Second-Instance Civil Judgment in the Dispute over Liability for Motor Vehicle Traffic Accidents Involving Sunshine Property & Casualty Insurance Co., Ltd. Yantai Central Branch, Guo **, and Others—Yantai Intermediate People’s Court
This court holds that Article 17, Paragraph 2 of the Insurance Law of the People’s Republic of China stipulates: With regard to clauses in an insurance contract that exempt the insurer from liability, the insurer shall, at the time of concluding the contract, provide conspicuous notice of such clauses on the application form, the insurance policy, or other insurance documents, and shall clearly explain the contents of these clauses to the insured either in writing or orally. If no such notice or explicit explanation is provided, such clauses shall be deemed ineffective. The appellant argues that the insurance clause stipulating compensation for loss of operation constitutes an indirect loss, and thus the appellant is not liable for compensation. This court finds that the disputed insurance clause can be classified as a standard-form clause that exempts or mitigates the appellant’s liability, and accordingly, the appellant had a legal obligation to provide both notice and explicit explanation regarding this clause. The obligation to provide notice means that the insurer must highlight the exclusion clauses using text, font, symbols, or other conspicuous indicators sufficient to attract the insured’s attention, and must proactively present these clauses to the insured, thereby drawing the insured’s attention to their existence. The obligation to provide explicit explanation means that, in addition to drawing the insured’s attention to the exclusion clauses on the insurance policy, the insurer must also explain the concept, content, and legal consequences of these clauses—either orally or in writing—to the insured, ensuring that the insured fully understands the true meaning and legal effects of the exclusion clauses. In this case, the evidence submitted by the appellant is insufficient to prove that it has fulfilled its obligations to provide notice and explicit explanation.
(3) Second-Instance Civil Judgment in the Dispute over Liability for Motor Vehicle Traffic Accidents Involving the Branch Office of **Insurance Co., Ltd.** and Shandong **Company**, etc.—Jinan Intermediate People’s Court
This court holds that Article 17 of the Insurance Law of the People’s Republic of China stipulates that, with respect to clauses in an insurance contract that exempt the insurer from liability, the insurer shall, at the time of concluding the contract, provide conspicuous warnings on the application form, policy, or other insurance documents to draw the insured’s attention to such clauses, and shall also clearly explain the contents of these clauses to the insured in writing or orally. If no such warning or explicit explanation is provided, such clauses shall be deemed ineffective. In this case, Taishan Insurance Company argues that Clause 26 of the insurance policy explicitly states that no compensation shall be paid for loss of business interruption; therefore, according to its view, it has merely fulfilled its obligation to provide a warning. Since the disputed clause has been highlighted in bold and underlined, the company contends that it is not liable for compensation. However, since loss of business interruption caused by the traffic accident is not prohibited by any laws or administrative regulations, Taishan Insurance Company was required to fulfill its obligations to warn and clearly explain the exclusion clause to the insured. Yet, the company has failed to provide any evidence to substantiate this claim. Consequently, the exclusion clause in question lacks legal effect.
II. Legal Analysis
Whether an insurance company should bear the loss caused by the停运 of a motor vehicle depends on whether it has fulfilled its dual obligations—namely, providing adequate notice and making clear explanations—regarding the exclusion clause that excludes coverage for indirect losses. The Civil Code of the People’s Republic of China, the Insurance Law of the People’s Republic of China, and the Supreme People’s Court’s Interpretation (II) on Several Issues Concerning the Application of the Insurance Law of the People’s Republic of China all stipulate that insurance companies must fulfill their obligations to provide notice and make clear explanations with respect to clauses that exempt them from liability. Typically, exclusion clauses in contract texts provided by insurance companies are highlighted in bold or set in special fonts and symbols; however, such mere formatting alone does not suffice to prove that the insurance company has indeed fulfilled its obligations to provide notice and make clear explanations. Rather, the insurance company must also provide the other party—in written or oral form—with comprehensible explanations about the concept, content, and legal consequences of any unusual clauses that significantly affect the other party’s interests. If an insurance company fails to meet the above-mentioned standards of notice and explanation regarding exclusion clauses, such exclusion clauses shall be deemed invalid, and the insurance company shall be liable for compensating the loss caused by the停运.
Today, a large number of insurance contracts are signed via online apps. Insurance companies typically set up check boxes or pop-up windows to indicate that they have fulfilled their duty to provide warnings or explanations. However, Article 10, Paragraph 3 of the “Interpretation by the Supreme People’s Court on Several Issues Concerning the Application of the General Provisions of the Contract Section of the Civil Code of the People’s Republic of China” stipulates: “With regard to electronic contracts concluded through information networks such as the internet, if the party providing standardized terms merely relies on having adopted measures such as check boxes or pop-up windows to claim that it has fulfilled its obligation to provide warnings or explanations, the people’s court shall not uphold such a claim…” Therefore, even if an insurance company raises this defense, the court will not support it.
III. Summary
Commercial auto insurance contracts are typically provided by insurance companies. The contract texts are often complex and contain numerous clauses, and when signing such contracts, vehicle owners generally do not review each clause carefully. To minimize their own liability for claims, insurance companies often include provisions that either mitigate or even exempt them from responsibility. However, not all of these provisions are legally valid. Therefore, when faced with an insurance company’s denial of compensation for vehicle downtime losses, you should actively negotiate with the insurer and, if necessary, resort to legal action to protect your legitimate rights and interests.
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