Lloyd's Maritime and Commercial Law Quarterly

Professor Francis D Rose

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Compulsory insurance and its implications

Ling Zhu and Xiuhua Pan†*

“Compulsory insurance” is not a recent invention in insurance law; rather, from traditional motor vehicle insurance to newly developed international Conventions, there is continuing expansion in ways of applying the compulsory insurance obligation. However, there lacks a holistic study, and this paper aims to fill this research gap by studying compulsory insurance obligations in different insurance practices. The paper begins by considering the necessity of the compulsory insurance obligation, as well as its potential drawbacks; this is followed by discussing a number of key issues, including the subject matter insured, the principle of direct action, the choice of liability regime, and the certificate of insurance. It concludes that a uniform solution to the issues discussed in the paper may be achieved under international Conventions, whereas varying legislation on a domestic level may provide differing answers to these issues, mostly due to the impact of political, economic, environmental or other external influences.

Introduction

An insurance contract, in brief, is a contract whereby one party (“the insurer”) promises, in return for a monetary consideration (“a premium”), to pay the other party (“the assured”) a sum of money, or to provide him with a corresponding benefit, upon the occurrence of one or more specified events.1

* Associate Professor, Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University.

† Research Assistant, Department of Logistics and Maritime Studies, The Hong Kong Polytechnic University.

The project from which this article is drawn is financially supported by the research funding (Project Account Code: G-YBEH) granted by The Hong Kong Polytechnic University.

The following abbreviations are used:

AILA, Mandatory Insurance: Australian Insurance Law Association, Mandatory Insurance: Legal and Economic Myths and Realities (Submission from the Australian Insurance Law Association to AIDA World Congress (held in Paris, 2010), available at www.aida.org.uk/pastcong.asp;

Bergkamp: Lucas Bergkamp, Liability and Environment: Private and Public Law Aspects of Civil Liability for Environmental Harm in an International Context (Kluwer Law International, The Hague, 2001);

Colinvaux: Robert Merkin (ed.), Colinvaux’s Law of Insurance, 9th edn (Sweet & Maxwell, London, 2010);

Colinvaux & Merkin: Robert Merkin, Colinvaux & Merkin’s Insurance Contract Law (Sweet & Maxwell, London, 2002);

Faure, TLE: Michael Faure (ed.), Tort Law and Economics (Edward Elgar, Cheltenham, 2009);

Ivamy: ER Hardy Ivamy, General Principles of Insurance Law, 6th edn (Butterworths, London, 1993);

Merkin, Privity: Robert Merkin (ed.), Privity of Contract—The Impact of the Contracts (Rights of Third Parties 1999) (LLP, London, 2000);

Parsons: Chris Parsons, “Liability Rules, Compensation Systems and Safety at Work in Europe” (2002) 27 The Geneva Paper on Risk and Insurance 358;