Chapter II. Insurance Contracts
Section 1. General Provisions
An insurance contract shall be made in the form of a policy or a binder.
(Agreement of the Insurer)
An insurance contract is to be signed and executed by the insurer after it agrees to an application submitted by the proposer.
Any interested party may request a copy of the insurance contract from the insurer.
(Contract for the Benefit of a Third Party)
A proposer may, without having been mandated, enter into an insurance contract for the benefit of another person. Should there be any doubt as to the beneficiary, it will be presumed that the proposer entered into the contract for its own benefit.
(Enter into Contract by Agent)
If an insurance contract is entered into by an agent [on behalf of another], a statement to such effect shall be made in the insurance contract.
(The Effectiveness of Agent Contract)
If an insurance contract is entered into by one or several partners or co-owners for the benefit of all the partners or co-owners, a statement to such effect shall be made in the insurance contract.
(Co Insurance Clause)
An insurer may stipulate in the contract that loss to a portion of the subject matter insured arising from risk shall be borne by the proposer.
When the type of stipulation set forth in the preceding paragraph is made, the proposer may not enter into an insurance contract with another insurer for the portion that has not been insured.
(Method for Making Contract and Raise a Plea)
Except in the case of insurance of the person, an insurance contract may have either a specified or an unspecified beneficiary.
The insurer may raise against the assignee of an insurance contract the same defense that it may raise against the proposer.
(Valued and Unvalued Insurance Contracts)
Insurance contracts are classified into unvalued and valued insurance contracts.
An unvalued insurance contract is an insurance contract which expressly states that the value of the subject matter insured must be estimated after occurrence of the insured risk.
A valued insurance contract is an insurance contract that expressly states a definite value for the subject matter insured.
(Effectiveness of Occurred or Ceased to Exist Risk)
If the risk associated with the subject matter insured has already occurred or ceased to exist at the time an insurance contract is entered into, the contract shall be void, provided that this rule does not apply when neither of the contracting parties is aware of the occurrence or cessation of existence.
If, at the time an insurance contract is entered into, only the proposer knows that the risk has already occurred, the insurer is not bound by the contract.
If, at the time an insurance contract is entered into, only the insurer knows that the risk has ceased to exist, the proposer is not bound by the contract.
(Determination of Beneficiary)
When an insurance contract is entered into for the benefit of another person, if that person has not yet been determined at the time the contract is entered into, the proposer, or such beneficiary as may be determined in accordance with the content of the insurance contract, shall enjoy the benefit.
(Insurer’s Right of Subrogation)
If an insured has a right to claim indemnification from a third party due to occurrence of loss for which the insurer bears insurance liability, the insurer may, after paying indemnification, be subrogated to the insured's right of claim against the third party. However, the amount of the subrogated claim may not exceed the amount of the indemnification.
If the third party referred to in the preceding paragraph is a family member or employee of the insured, the insurer has no right of claim by subrogation. However, this rule is not applicable when the loss has resulted from the willful misconduct of such third party.
(Effectiveness of Compulsory Provisions and Interpretation of Insurance Contracts)
Compulsory provisions of this Act may not be modified by contract. However, this restriction does not apply to modifications favorable to the insured.
Interpretation of insurance contracts shall seek the true intent of the parties, and may not adhere blindly to the language employed. Where there is doubt, interpretations should in principle be favorable to the insured.
(Conditions for Voidance of the Contract)
If an insurance contract contains any term or condition as follows, and such term or condition would have been obviously unfair under the circumstances at the time of signing, such part of the contract shall be void:
1. A term or condition that exempts the insurer from or diminishes its obligations under this Act.
2. A term or condition that causes the proposer, beneficiary, or insured to waive or limit any right they enjoy under this Act.
3. A term or condition that increases the obligations of the proposer or the insured.
4. Any other term or condition that is materially disadvantageous to the proposer, beneficiary, or insured.