Chapter III. Non-life Insurance
Section 1. Fire Insurance
(Liability of a Fire Insurer)
A fire insurer is liable, unless otherwise stipulated in the contract, to indemnify for damage or loss of the subject matter insured as a result of fire.
Loss to the subject matter insured that occurs in the course of attempting to save or protect it is deemed to have arisen out of the insured risk.
(Liability of an Insurance Contract Covering a Group of Things Collectively)
When insurance is effected to cover a group of things collectively, the belongings of family members, employees, or cohabitants of the insured may also be specified in the insurance contract as part of the subject matter insured, and indemnification for loss to such items shall be made upon occurrence of the insured risk.
An insurance contract referred to in the preceding paragraph shall be deemed as having also been entered into for the benefit of the third parties.
(Effect of the Insured Amount)
The insured amount is the maximum liability to be borne by the insurer during the term of insurance. Before underwriting an insurance policy, the insurer shall appraise the market value of the subject matter to be insured, and may not over-insure the subject matter.
(Subject Matter Insured / Valued and Unvalued)
A proposer may apply for either valued or unvalued insurance coverage of any given subject matter, at a premium rate and under provisions approved by the competent authority.
When the stipulated value of the subject matter insured is the insured amount, if total loss or partial loss is sustained, indemnification shall be calculated on the basis of the stipulated value.
When the value of the subject matter insured is not stipulated, if loss is sustained, indemnification shall be calculated on the basis of the actual value at the time of occurrence of the insured peril. Indemnification may not exceed the insured amount.
(Definition of Total Loss)
The term "total loss" as used in Article 73 means total destruction or loss of the subject matter insured, to such an extent that it cannot be restored, or the cost of restoration exceeds the value of the subject matter insured after restoration to its original condition.
(Stipulating the Value of the Subject Matter Insured)
If the value of the subject matter insured cannot be appraised on the basis of market value, the contracting parties may stipulate its value. Any indemnification shall be based on the stipulated value.
Where the insured amount exceeds the value of the subject matter insured, if the contract is entered into through the fraud of one of the contracting parties, the other party may rescind the contract. If loss is sustained, the other party may also claim indemnification. If no fraud is involved, the contract shall, except in the case of valued insurance, be valid only within the limits of the value of the subject matter insured.
For contracts where fraud is not at issue, after one of the contracting parties has notified the other party of the fact that the subject matter is over-insured, the insured amount and the premium shall both be reduced pro rata according to the value of the subject matter insured.
If the insured amount is below the value of the subject matter insured, the burden of the insurer, unless otherwise stipulated in the contract, is to be determined by the ratio of the insured amount to the value of the subject matter insured.
(Liability for Delayed Appraisal of Loss)
If appraisal of loss is delayed due to causes attributable to the insurer, additional interest shall accrue beginning one month from the day on which the insured presents a statement of loss. If appraisal of loss remains unfinalized two months after presentation of the statement of loss, the insured may claim pre-payment of the minimum amount of indemnification to which it is entitled.
(Assumption of the Expenses of Appraising a Loss)
Any necessary expenses incurred by an insurer or an insured to prove and appraise a loss are to be borne by the insurer unless otherwise stipulated in the contract.
If the insured amount is less than the value of the subject matter insured, the expenses mentioned in the preceding paragraph are to be borne pro rata by the insurer in accordance with the ratio set forth in Article 77.
(Prohibition of Alteration to the Insured Subject Matter)
Before appraisal of loss has been finalized, the proposer or the insured may not, except in order to ensure the public interest or avoid aggravation of loss, make any alteration to the subject matter insured without the insurer's consent.
(Termination of Contract for Complete Destruction or Loss of the Insured Subject Matter)
When something other than an insured peril specified in the insurance contract causes complete destruction or loss of the subject matter insured, the insurance contract shall be forthwith terminated.
(Termination of Contract for Partial Loss of the Insured Subject Matter)
If the subject matter insured sustains partial loss, both the insurer and the proposer have the right to terminate the contract. After termination, premium already paid for the portion not affected by the loss shall be refunded.
The right to terminate the contract as stated in the preceding paragraph shall be extinguished if not exercised within one month after indemnification is paid.
The insurer shall notify the proposer fifteen days prior to terminating the contract.
If neither the proposer nor the insurer terminates the contract, the liability of the insurer for any future loss resulting from insured perils shall, unless otherwise stipulated in the contract, be limited to the balance of the insured amount after indemnification.
(Provisions Applied Mutatis Mutandis)
The provisions of Article 73 to 81 apply mutatis mutandis to marine insurance, land and air insurance, liability insurance, bonding insurance, and other types of non-life insurance.
The provisions of Article 123 and 124 apply mutatis mutandis to non-life insurance of term length exceeding one year.
Section 2. Marine Insurance
(Liability of a Marine Insurer)
Unless otherwise stipulated in the contract, a marine insurer is liable, with respect to the subject matter insured, to indemnify for damage, loss, and expenses arising out of all accidents and calamities at sea.
(Application of the Maritime Act)
Marine insurance is governed by the provisions of the Marine Insurance Chapter of the Maritime Act.
Section 3. Land and Air Insurance
(Liability of Land and Air Insurers)
Unless otherwise stipulated in the contract, land, inland waterway, and aviation insurers are liable, with respect to the subject matter insured, to indemnify for damage, loss, and expenses arising out of all accidents and calamities on land, inland waterways, or in the air.
(Period of Cargo Insurance)
With regard to cargo insurance, unless otherwise stipulated in the contract, the term of insurance begins from the time of delivery for transport and continues to the time the cargo is received at the place of destination.
(Specification of an Insurance Contract)
An insurance contract, in addition to specifying the particulars provided in Article 55, shall also specify the following particulars:
1. Route and method of transportation.
2. Personal name and business name of transporter.
3. Place of delivery for transport and place of cargo collection.
4. Deadline for transportation, if any.
(Effect of Temporary Suspension or Alteration of the Route or Method of Transportation)
If, due to transportation needs, transportation is temporarily suspended or the route or method of transportation is altered, the insurance contract remains valid unless otherwise stipulated therein.
(Mutatis Mutandis Application of Marine Insurance)
Unless otherwise provided for in this Section, the relevant provisions for marine insurance apply mutatis mutandis to hull, freight, and cargo insurance for vessels navigating inland waterways.
Section 4. Liability Insurance
(Liability of a Liability Insurer)
When the insured is legally obligated to indemnify a third party and receives a claim in connection therewith, the liability insurer is liable to provide indemnification.
(Assumption of the Necessary Expenses)
All necessary litigation or non-litigation expenses incurred by the insured to raise a defense against a third party's claim shall, unless otherwise stipulated in the contract, be borne by the insurer.
The insured may request that the insurer advance the expenses referred to in the preceding paragraph.
(Contract for the Benefit of Third Parties)
Where an insurance contract has been entered into to cover the liability of an enterprise run by the insured for loss indemnification, liability for loss indemnification borne by any agent, manager, or supervisor of the insured shall also be entitled to the benefit of the insurance, and the contract shall be deemed to have been entered into concurrently for the benefit of third parties.
(Insurer’s Right of Participation)
An insurer may stipulate in a contract that any acknowledgment, settlement, or indemnification made by the insured in connection with its liability toward a third party without the participation of the insurer is not binding on the insurer, provided that this rule does not apply where the insurer, having been requested by the proposer or insured to participate, has refused to do so without legitimate reason or has delayed its participation on pretext.
(Restrictions on Payment of the Insured Amount to an Insured)
Prior to indemnification of a third party for loss caused by an event attributable to the insured, an insurer may not pay all or any part of the insured amount to an insured.
Where the insured has been determined liable to indemnify a third party for loss, the third party may claim for payment of indemnification, within the scope of the insured amount and based on the ratio to which the third party is entitled, directly from the insurer.
(Indemnification to the Third Party)
The insurer may, upon being notified by the insured, indemnify the third party directly.
Section 4-1. Bonding Insurance
(Liability of a Bond Insurer)
A bonding insurer is liable to indemnify the insured for loss incurred through dishonest acts by the insured's employees or through non-performance of obligations by its obligors.
(Specification of Insurance Contracts Covering Dishonest Acts by the Insured's Employees)
Bonding insurance contracts for which dishonest acts by the insured's employees constitute the insured peril shall, in addition to the particulars provided in Article 55, also contain the following particulars:
1. Insured's name and domicile.
2. Employee's name and title or other means of identifying the employee.
(Specification of Insurance Contracts Covering Non-performance of Obligations by the Insured's Obligors)
Bonding insurance contracts for which non-performance of obligations by the insured's obligors constitute the insured peril shall, in addition to the particulars provided for in Article 55, also contain the following particulars:
1. Insured's name and domicile.
2. Obligor's name or other means of identifying the obligor.
Section 5. Other Non-life Insurance
(Definition of Other Non-life Insurance)
The term "other non-life insurance" refers to insurance of various kinds not within the scope of fire insurance, marine insurance, land and air insurance, liability insurance, and bonding insurance, and in which property or intangible interests constitute the subject matter insured.
(Right to Inspect the Insured Subject Matter)
An insurer has the right to inspect the subject matter insured at any time. If the insurer discovers that all or part of it is in abnormal condition, the insurer has the right to suggest that the proposer or the insured should repair it before further use. If the proposer or the insured refuses the suggestion, the insurer may terminate the insurance contract or relevant parts of it by written notice.
(Liability for Failing to Protect the Insured Subject Matter)
An insurer is not liable to indemnify for any loss resulting from failure of the proposer or the insured to fulfill its contractual duty to protect the subject matter insured.
If, after occurrence of the risk insured, assessment shows that loss was increased due to failure of the proposer or the insured to take reasonable measures to protect the subject matter insured, the insurer is not liable to indemnify for such increased loss.
(Variations of the Insurance Contract)
If the subject matter insured sustains partial loss, the insurance contract shall remain valid after indemnification has been made or the subject matter has been restored to its original condition. However, the premium may be increased or decreased if the condition of the subject matter differs from that originally insured.