The Legal Value of Insurance Loss Assessment

Case Summary:

Company Q (Plaintiff – the Insured) and Company B (Defendant – the Insurer) entered into an insurance contract. After an insured event occurred, the parties could not agree on the value of the loss and therefore conducted an assessment. The unilateral assessment conducted by the Insurer was not accepted, while the independent assessment was only partially recognized.

Lessons Learned:

Insurance contract disputes are quite common in arbitration. In practice, it is not unusual for parties to disagree on the insured loss and require an assessment. The key question is: Does the assessment result have binding legal value?

In this case, the parties signed a motor vehicle insurance contract under which the Plaintiff insured a vehicle with a coverage value of VND 1,245,000,000, valid from May 2, 2012 to May 1, 2013. On July 18, 2012, the insured truck was involved in an accident that caused damage to both the vehicle and the cargo. On August 10, 2012, the Insurer conducted a motor vehicle damage assessment with the vehicle owner’s representative present. Meanwhile, the Insured requested Company HA to check the vehicle’s condition. Later, both parties agreed to appoint the third independent assessment body – the H Vehicle Registration Center – which concluded that no engine damage was found, and other systems were evaluated based on the Insurer’s prior damage assessment.

When resolving the dispute, the Arbitral Tribunal determined that “there are grounds to confirm that both parties agreed to appoint H Vehicle Registration Center as an independent assessor whose conclusion would be binding on both parties. The assessment was conducted twice in the presence of the Plaintiff.” Regarding the conclusion that “no engine damage was found at the time of inspection,” the Tribunal “recognized the assessment result of this authority.” However, for other parts, the Tribunal noted that “H Vehicle Registration Center relied on the Defendant’s previous assessment result, which was not objective and not consistent with the agreement between the Plaintiff and Defendant. H Center should have conducted a re-assessment as agreed by both parties. Therefore, the Tribunal does not recognize this conclusion.”

The above demonstrates that the Arbitral Tribunal did not accept a loss assessment conducted unilaterally by one party in case of dispute. This approach is reasonable and should be understood by businesses, as an assessment conducted by one side cannot ensure objectivity.

As for the independent assessment jointly agreed upon by both parties, the Tribunal accepted its results when it was carried out as agreed. In such a case, the assessment is binding on both parties. However, the part of the conclusion that merely repeated the prior unilateral assessment was not recognized, as it failed to comply with the agreed independent reassessment procedure. This reasoning is also convincing since, for an assessment to have legal validity, it must be conducted independently and objectively.

From this case, both insurance companies and insured businesses should note that a unilateral assessment (conducted by one party only) has no legal value in the event of a dispute and that an independent assessment is required. Furthermore, an independent assessment must also be carried out in an independent and objective manner; otherwise, its conclusion will not have binding legal effect, as demonstrated in the case above.

Disclaimer:
This article is published for informational purposes only, intended as a reference for arbitrators, disputing parties, participants in arbitration proceedings, and those studying commercial arbitration. It does not represent or express any opinion or viewpoint of the Vietnam International Arbitration Center (VIAC). Any reference or citation by third parties to part or all of this article has no validity and is not acknowledged by VIAC.

Source: https://www.viac.vn/