Perspective | Determination and Defense of Liability Disputes over Property Preservation Damages from the Perspective of Insurance Companies
Published:
2026-01-04
In the current context of frequent commercial disputes, property preservation—a crucial judicial measure for ensuring the enforcement of court judgments—is widely employed throughout litigation proceedings. Meanwhile, property preservation liability insurance, a commonly used tool for applicants to transfer risk, often finds itself embroiled in controversy alongside these disputes. Drawing on cases I have handled as counsel, this article explores the identification and defense of property preservation damage liability disputes from the perspective of insurance companies.
In the current context of frequent commercial disputes, property preservation—a crucial judicial measure for ensuring the enforcement of court judgments—is widely employed throughout litigation proceedings. Meanwhile, property preservation liability insurance, a commonly used tool for applicants to transfer risk, often finds itself embroiled in controversy alongside these disputes. Drawing on cases I have handled as counsel, this article explores the identification and defense of property preservation damage liability disputes from the perspective of insurance companies.
I. Case Review
In March 2022, the applicant B filed a lawsuit against the respondent A and other non-party entities in court due to a dispute over a partnership contract. At the same time, the applicant also submitted a pre-litigation application for property preservation to the court, requesting that the bank account deposit under the name of the respondent A, amounting to 3 million yuan, be frozen. The applicant secured this request by obtaining a property preservation liability insurance policy issued by insurance company C. After reviewing the application, the court issued a freezing order in accordance with the law, and the account has been frozen from March 2022 until January 2024.
The subsequent partnership dispute case went through first-instance proceedings, second-instance proceedings, remand for retrial, and a further appeal. Ultimately, the second-instance court dismissed all of Applicant B’s claims on the ground that the evidence was insufficient. Respondent A then filed a lawsuit against Applicant B and Insurance Company C, alleging wrongful preservation measures and seeking joint compensation from the two defendants for economic losses exceeding 800,000 yuan as well as attorney’s fees of 20,000 yuan. A argued that the freezing of his account had prevented him from accessing working capital, resulting in loan interest and loan-related expenses.
Ultimately, after hearing the case, the court held that the applicant B had fulfilled its duty of reasonable care when applying for provisional measures and there was no error in the preservation order. Consequently, the court dismissed all claims brought by the respondent A.
II. Determination of Errors in Preservation
The core of disputes over liability for damages arising from property preservation lies in the determination of whether the preservation was erroneous. According to relevant provisions of the Civil Code and the Civil Procedure Law, an erroneous preservation constitutes a general tort, and it must simultaneously meet four essential elements: fault, illegality, damage consequences, and causal relationship—all of which are indispensable. It is not sufficient to simply rely on whether the claim in the lawsuit was upheld as the sole criterion. In judicial practice, losing a lawsuit does not automatically mean that the preservation was erroneous.
1. Fault Determination
The application for property preservation is a procedural right granted by law to parties involved in litigation. In determining whether an application for litigation property preservation was made erroneously, full consideration should be given to whether the applicant for preservation bore subjective or objective fault. The progress of the litigation process alone should not be the sole factor considered. In the underlying litigation, as long as the applicant can initially establish a reasonable belief that the facts and grounds he or she asserts are well-founded, he or she should not be deemed to have committed any fault.
The court’s determination of whether the applicant was at fault hinges on whether, at the time of filing the application for provisional measures, the applicant relied on genuine facts and preliminary evidence and exercised the reasonable care expected of an ordinary person. As long as the applicant did not intentionally fabricate facts or falsify evidence, nor committed any gross negligence, even if the applicant ultimately loses the case due to insufficient evidence or other reasons, the provisional measures should not be deemed erroneous.
2. Determination of Illegality
The measures for property preservation must meet the following requirements: the object of preservation must be lawful, the amount involved must be reasonable, and the procedural steps must comply with applicable regulations. The illegality of property preservation measures primarily manifests itself in three aspects: first, the object of preservation is unrelated to the case—for example, freezing the property of a party not involved in the litigation; second, the amount of preservation exceeds the scope of the claims made in the lawsuit; and third, the preservation procedure is unlawful—for example, filing an application for preservation by falsifying evidence.
3. Harmful Consequences and Causal Relationship
According to legal provisions, losses caused by erroneous preservation measures must be direct property losses. Indirect losses—such as lost expected operating profits—and losses for which there is insufficient evidence are unlikely to be supported by the court. Moreover, there must be a direct causal relationship between the loss and the preservation action itself. If the loss is attributable to other factors unrelated to the preservation action, it will not constitute a tort.
III. Core Defense Grounds of Insurance Companies
In property preservation damage liability disputes, an insurance company’s defense does not invariably involve outright refusal to pay compensation; rather, it is based on statutory provisions, the terms of the insurance contract, and the factual circumstances of the case, focusing on whether the preservation was improper and whether the insurer’s liability has been triggered. The insurance company’s primary grounds for defense typically include the following aspects:
1. In cases of non-common torts, the plaintiff does not have a direct right of action.
According to Article 65, Paragraph 2 of the Insurance Law and the provisions of the insurance contract, the subject matter of property preservation liability insurance is the civil compensation liability that the applicant shall bear toward the respondent due to an error in preservation. The relationship between the insurance company and the applicant is one of an insurance contract; there is no direct legal relationship between the insurance company and the respondent. Therefore, the two parties are not joint tortfeasors.
The respondent’s right to claim compensation from the insurance company is a conditional, indirect right of claim. The respondent is entitled to demand compensation from the insurance company only after a final and enforceable court judgment has confirmed that the applicant bears liability for compensation. Before obtaining such a final and enforceable judgment confirming the applicant’s liability, the respondent’s direct request for joint compensation from the insurance company lacks a legal basis and should therefore be dismissed in accordance with the law.
2. Defense of No Error in Preservation Measures
(1) The applicant has exercised reasonable diligence.
If the applicant, based on preliminary evidence, has reasonable grounds to believe that the party subject to conservatory measures bears responsibility and actively presents evidence and cooperates with the proceedings, even if the applicant ultimately loses the case due to insufficient evidence, it cannot be concluded that the applicant acted with intent or gross negligence. Given the varying levels of legal knowledge, capacity to present evidence regarding the facts of the case, and ability to analyze and assess legal relationships among the parties involved, it is common for these parties not to meet the professional standards required by judicial authorities. Therefore, the parties’ judgments about the disputed facts and their rights and obligations may not necessarily align with the court’s final ruling. Even if the claims made by the parties—based on their existing evidence and understanding of the law—do not correspond to the ultimate judgment outcome, this does not constitute a failure to exercise ordinary care, nor can the outcome of the current lawsuit alone serve as the sole criterion for determining whether the conservatory measure was erroneous.
In practice, the applicant may submit a chain of evidence to demonstrate that its judgment at the time of applying for provisional measures was consistent with the level of understanding generally held by ordinary people and that there was no malicious intent or gross negligence involved.
(2) The preservation action is lawful.
As a guarantor, an insurance company will not be deemed at fault—and thus will not be liable for damages—if it has fulfilled its duty of prudent care when providing the guarantee and if the application for conservatory measures complies with applicable legal provisions. Provided that the object, amount, and procedures of the conservatory measures are all in compliance with the law, the respondent should not be held liable unless they can prove the existence of unlawful conduct. In such cases, particular attention should be paid to the various provisions governing conservatory measures—for instance, ensuring that there is no over-coverage, duplicate preservation, preservation beyond the statutory time limit, falsification of evidence, or fabrication of claims. Should the plaintiff withdraw the lawsuit or lose the case, the insurance company should promptly apply for the lifting of the conservatory measures.
3. Defense Based on Damage Consequences and Causation
(1) The party subject to preservation has failed to perform its obligations. Duty to Mitigate Loss According to Article 20 of the “Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Property Preservation Cases by People’s Courts,” the party subject to preservation may reduce its losses by providing security or applying to independently dispose of the preserved property. If the party subject to preservation fails to take any remedial measures, such failure shall be deemed a waiver of its own rights, amounting to a deliberate abandonment of efforts to prevent the expansion of losses; hence, there is no legal causal relationship between its losses and the preservation action.
(2) The applicant for preservation has itself violated the terms of the insurance contract. Litigation property preservation liability insurance is a property insurance contract and shall be governed by Article 52 of the Insurance Law of the People’s Republic of China. During the validity period of the contract, if the degree of risk associated with the insured object significantly increases, the insured shall promptly notify the insurer as stipulated in the contract... If the insured fails to fulfill the notification obligation prescribed in the preceding paragraph, the insurer shall not be liable for paying insurance benefits in respect of any insurance claim arising from the significant increase in the degree of risk associated with the insured object.
If the conservator engages in conduct that violates the terms of the insurance contract—such as submitting forged evidence, making false statements, withdrawing the lawsuit without authorization, or failing to promptly lift the conservatory measures—such actions increase the risk to the insured object, and the degree of this increased risk is significant and unforeseeable. Under these circumstances, the insurer should not be held liable, and therefore there is no causal link between the insurer and the resulting damage.
(3) The respondent has suffered no loss of interest. According to Announcement No. 7 [2023] issued by the People's Bank of China, the Supreme People's Court, the Supreme People's Procuratorate, the Ministry of Public Security of the People's Republic of China, and the China Banking and Insurance Regulatory Commission, funds that have been frozen but are not identified as proceeds of crime shall accrue interest during the freeze period, and such accrued interest shall be paid to the creditor unit upon deduction. If the funds are identified as proceeds of crime, no interest shall accrue during the freeze period. In the event of an erroneous freeze, any interest that should have accrued during the freeze period shall be retroactively paid upon lifting the freeze. Therefore, if the preservation measure has not caused any loss of interest to the party whose assets were preserved, and such funds can continue to generate normal interest income, then since the party has no evidence to prove losses resulting from the preservation measure, the court should not support their claim for compensation, including claims for loss of interest.
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