Policy Forms and Policy Schedules 保單及保單承保表
A policy provides written evidence of the insurance contract. Hong Kong does not prescribe a uniform general insurance wording: insurers can design their own products, although market wordings are often similar. Scheduled forms predominate. Personal lines commonly use plain English, addressing the parties as ‘we’ and ‘you’, sometimes in illustrated booklets.
The schedule records details specific to the contract, including the policy number, insured's details, sums insured or liability limits, effective and expiry dates, subject matter and premium. It also identifies special terms, extra cover and endorsements, and may identify the intermediary. Endorsements amend or supplement the policy and must be read with the schedule and standard wording.
The recital clause, or preamble, introduces the contractual relationship, usually incorporates the proposal form and declaration, and may refer to premium payment. The operative clause states when cover applies, identifying insured perils or an all risks basis. It may contain several sections with their own exceptions; an excess may appear in the relevant section or schedule.
General exceptions apply across all sections of the policy, while policy conditions govern its operation and the parties' rights and duties. The signature clause confirms the insurer's undertakings through its representative's signature and often appears in the schedule. The insured does not sign the policy document.
Common Policy Exceptions and Conditions 常用保單除外責任及條件
Exceptions define circumstances outside the cover; policy conditions govern how the parties perform the contract. General exceptions apply across all sections, while sectional exceptions limit the relevant section only. For example, motor own-damage cover typically excludes damage confined to tyres unless another part of the vehicle is also damaged. That restriction does not itself apply across every policy section.
Claims conditions set out procedures, rights and duties when claiming. An arbitration condition explains how arbitrators resolve disputes. Cancellation conditions allocate cancellation rights: general insurance usually gives the insurer a right to cancel, and most policies also give the insured that right, subject to the wording.
An average condition addresses under-insurance at the time of loss and can leave the insured bearing part of the loss. Indemnity policies also commonly address subrogation and contribution, sometimes modifying how those principles operate. The actual rights therefore depend on the wording as well as the underlying principles.
Adjustable premiums are used where the premium depends on changing factors such as payroll or turnover. An initial provisional premium is charged, and the condition requires adequate records so that the actual premium can be calculated and adjusted at expiry.
Use of Excesses, Deductibles and Franchises 自負額、免賠額及起賠額的運用
Excess and deductible have the same meaning here: the first specified amount, or a specified proportion subject to a minimum amount, of a loss is not recoverable. An excess can also be expressed in time. Its main purpose is to remove small claims that are uneconomical to handle, while also making the insured bear part of the loss.
A standard excess applies to policies in a class, such as a young driver excess in motor insurance. An imposed excess is added by the underwriter because of adverse features of an individual risk, without a premium reduction. A voluntary excess is chosen by the insured in return for a lower premium.
A franchise is a threshold: an individual loss that fails to satisfy it is unpaid, but a qualifying loss is payable in full, subject to the other terms, without deducting the threshold amount. Whether a loss exactly equal to the threshold qualifies depends on whether the wording requires it to reach or exceed that threshold. Monetary franchises are now uncommon in Hong Kong, where excesses or deductibles are preferred.
Time franchises still occur in some covers. For example, personal accident weekly benefits may require disablement lasting at least 2 weeks, after which benefits can cover the whole disablement period. Business interruption cover may use a threshold of at least 48 hours. A time excess instead removes the initial specified period. The actual period and calculation depend on the wording, which may not use the term ‘franchise’.
Warranties, Conditions and Representations 保證、條件及陳述
An insurance warranty requires exact compliance. It may require an act or an omission, or affirm that a fact exists or does not exist. Warranties are usually express, either standard or specially imposed, but may be implied, such as a marine warranty of seaworthiness. Under the strict legal rule, breach automatically discharges policy liability from the date of breach, without an insurer's election to rescind and without any need for a causal link to the loss.
Breach itself gives no right to a full or partial premium refund, except a full refund where it occurs before the risk attaches. Within its scope, the HKFI Code of Conduct for Insurers requires member insurers to rely on a warranty breach to refuse a claim only where the breach is causally connected to the loss or is fraudulent. Distinguish this industry standard from the strict legal consequence. [IA Study Notes, section 2.3.4(a)](https://www.ia.org.hk/en/supervision/reg_ins_intermediaries/files/P2_2022_Study_Notes_Eng_final.pdf)
Policy conditions govern rights and duties; not every one is a fundamental contract condition whose breach permits the other party to treat the contract as repudiated and seek remedies. By timing, distinguish a condition precedent to the contract, required before it starts; a condition subsequent, such as obtaining agreement to an occupation change under personal accident cover; and a condition precedent to liability, whose breach defeats the particular claim without destroying the contract. A notification term expressly forfeiting claim rights illustrates the last category. The parties' intention determines a term's nature; its label is not conclusive.
A representation states a fact or belief concerning a proposed risk. It can be oral or written and need not become a policy term to have legal effect. Unless warranties or other terms override these rules, an immaterial inaccuracy has no legal consequence. A material factual representation need only be substantially correct, meaning that a prudent insurer would not regard the difference as material. A representation of belief must be made in good faith. An untrue representation is a misrepresentation.
General, Specific and Market Exclusions 通用、特定及業界除外責任
In this classification, general exclusions are usual exclusions for a class of insurance. Examples include wear and tear, depreciation and gradually operating causes under all risks cover; racing, speed-testing and motor trade use under private car cover; contractual liability under liability cover; and suicide or extra-hazardous activities under personal accident cover. Distinguish this classification from ‘general exceptions’ describing an exclusion's application across all policy sections.
Specific exclusions are imposed by the underwriter because of extra hazards presented by an individual risk. Examples include excluding an insured's slipped-disc-related back problem, prohibiting a particular family member with a poor accident record from driving, or excluding vehicle impact after repeated damage to a boundary wall. Valuable jewellery may also be covered only in a specified secure location unless the insurer agrees to its use elsewhere.
Market exclusions are adopted by virtually all insurers in a market and are a more widely shared form of general exclusion, often involving fundamental risks. Examples include nuclear and radioactive risks, terrorism, sonic boom damage and war risks under non-marine insurance. This classification describes market practice; it does not mean that legislation requires every exclusion in every policy.
Fraud can provide legal grounds for denying liability even without an express policy exclusion. Courts may also refuse to enforce a contract or provision on public policy grounds. Special circumstances, such as social unrest or an epidemic, may lead insurers to agree on temporary or permanent market exclusions.
Practice
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