The indemnity principle in cargo insurance in multimodal transport : a comparative study of English and Chinese law

Abstract

China has become one of the major exporting and importing countries in the world. With the growth of multimodal transport, there is a pressing need for insurance to fully cover the risks of loss of and damage to goods in transit against perils from the sea, air, rail and road, as well as during cargo operation and temporary storage whilst switching transport modes. At present, stakeholders utilise various ways of insuring their goods in both domestic and foreign insurance markets. However, in China the laws applicable to marine and non-marine insurance are different, which thus poses a real dilemma in the application of law, since the insurance of goods in multimodal transport may or may not fall within the bounds of marine insurance. Under both Chinese and English insurance law, the fundamental principle is that of indemnity, which provides that the assured who suffers a loss caused by the insured contingencies shall be indemnified by the insurer for his loss, such indemnity being limited to his loss. This principle is closely allied with those of insurable interest, measure of indemnity, and subrogation regarding its three propositions - the object, content and aftermath of indemnity, respectively. Given the above, this thesis investigates the application of the above three propositions of the indemnity principle in the insurance of goods in multimodal transport in China, mainly by conducting a comparative analysis alongside English insurance law. Its key findings are as follows: (i) The classification of the insurance of goods in multimodal transport and its applicable law depend on the employment of a sea leg in China, whilst the English Marine Insurance Act (MIA) 1906 would arguably apply to the insurance of goods in multimodal transport. (ii) The seller, buyer, carrier and freight forwarder all have insurable interests in the goods in multimodal transport, subject to satisfying the proposed pecuniary interest approach in Chinese law or the wide definition of insurable interest in English law. (iii) There are inconsistencies between the general insurance law and marine insurance law in China relating to total loss and its valuation, since the two regimes are influenced by different sources of law, one being based on previous domestic ordinances, and the other also taking into consideration the English MIA 1906. Ambiguities also exist regarding the extent of loss and deductibles. (iv) Whether the carrier or actual carrier are regarded as the "third party" under subrogation depends on individual insurance and carriage arrangements. Where recovery from the third party is insufficient to compensate the paid indemnity, the pro rata approach best reflects the legal basis for subrogation under Chinese law, whereas English law adopts a mixture of approaches. The contributions of this thesis are twofold. Firstly, it provides a complete picture of how goods are insured under multimodal transport in both the English and Chinese insurance markets and analyses the classification and applicable laws governing contemporary insurance contracts for goods in multimodal transport. Secondly, through a comparative analysis with English law, it comprehensively examines the principle of indemnity under Chinese law with regard to the insurance of goods in multimodal transport, and identifies the ambiguities and inconsistencies in current Chinese laws and regulations. This thesis is the first piece of dedicated scholarly work on the insurance of goods in multimodal transport from the perspective of the most fundamental principle of insurance law - the principle of indemnity. It pinpoints specific suggestions for drafting insurance contracts for goods in multimodal transport, as well as for better coordinating the laws relating to marine and non-marine insurance contracts in China.