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A fire caused by an electrical short circuit destroyed the home and all belongings of a low-income household eligible for government assistance. Despite an insurance coverage of 122,000 yuan, the family received only 2,000 yuan in compensation. The insurance company refused to pay the full amount, citing a clause that “all losses caused by short circuits are excluded from coverage,” while the family argued that the exclusion applies only to the electrical appliances themselves. Behind this dispute over the interpretation of the policy terms, it is worth examining whether the insurance company’s logic for denying the claim complies with the provisions of the Insurance Law.

In response, Attorney Zhang Li of JAVY Law Firm was interviewed by China National Radio and provided an in-depth analysis of the incident.

In Xiping County, Zhumadian City, Henan Province, an elderly person receiving government-provided basic living allowances suffered a fire caused by an electrical short circuit, which completely destroyed three single-story houses along with all the household appliances, farm tools, and grain stored inside. The comprehensive household property insurance policy he held with China United Property Insurance (with coverage of 80,000 yuan for the structure and 42,000 yuan for contents) paid out only 2,000 yuan and refused to issue a damage assessment report.

The core of the dispute lies in the fact that while the insurance policy lists “fires caused by electrical appliances” as covered under the policy, the exclusion clause only specifies that “damage to the electrical appliance itself caused by a short circuit” is excluded from coverage.

Ms. Song, a family member, believes the fire damage caused by the short circuit should be fully compensated, while the insurance company maintains that all losses resulting from a short circuit are excluded from coverage.

Additionally, since the elderly man has passed away and his wife is in a common-law marriage without a marriage certificate, the insurance company is demanding proof of inheritance, such as a marriage certificate, before proceeding with the claim.

Insiders at the insurance company claim they originally had no intention of paying out, citing a lack of basis for damage assessment, and that the 2,000 yuan was paid only because the village demanded “compensation.”

Legal Analysis: Fire Damage Falls Within the Scope of Insurance Claims; the Insurance Company Should Compensate in Accordance with the Contract

Regarding the insurance claim dispute involving Ms. Song’s uncle, Attorney Zhang Li believes that, based on an analysis of the insurance policy terms, the essence of this dispute does not lie in any ambiguity within the policy itself. Rather, it stems from the insurance company’s improper interpretation of the standard form clauses during the claims process—an interpretation that goes beyond the plain meaning of the text—and its subsequent refusal to fulfill its contractual obligations on that basis. This approach is in clear conflict with the rules governing the interpretation of standard form clauses, the principle of utmost good faith under the Insurance Law of the People’s Republic of China, and the regulatory authorities’ mandatory requirements for claims settlement procedures.

Attorney Zhang Li notes that regarding the scope of application of the exclusion clause, the policy in question explicitly lists “fires caused by electrical appliances, electrical circuits, and other internal or external sources of ignition” as covered under the policy, while the exclusion clause only stipulates that “damage to household appliances caused by short circuits” is not covered. The logic between the two is clear: the former addresses whether the cause of the fire falls within the scope of insurance coverage, while the latter addresses whether a specific damaged item is excluded. Attorney Zhang Li stated that the insurance company in question interpreted “exclusion of liability for short circuits in electrical appliances themselves” as “exclusion of liability for all fire losses caused by short circuits.” Logically, this constitutes a fallacy of equivocation; in legal hermeneutics, it is an expansive interpretation that goes beyond the literal meaning of the text, severely exceeding the scope of the clause’s wording. In this regard, even without invoking the rule of unfavorable interpretation of standard terms under the Insurance Law of the People’s Republic of China—which stipulates that where there are two or more possible interpretations, the one most favorable to the insured and the beneficiary must be adopted—a negative conclusion can still be reached based solely on the plain meaning and logic of the text: the property destroyed in the fire, including the single-story house, home appliances, and farm tools, constitutes direct loss and falls within the scope of insurance coverage.

Regarding the question of who has the right to claim compensation. Attorney Zhang Li believes that since Mr. Song has passed away, his right to claim insurance benefits is legally exercised by his statutory heirs. As a first-order statutory heir, his wife is fully entitled to file a claim. Even without a marriage certificate, according to the interpretation of the Marriage and Family section of the Civil Code of the People’s Republic of China, if a man and a woman met the substantive requirements for marriage prior to the promulgation and implementation of the Ministry of Civil Affairs’ “Regulations on the Administration of Marriage Registration” on February 1, 1994, their relationship is treated as a de facto marriage. Based on the information in the household registration booklet and other certificates from the village committee, it is not difficult to establish the de facto marriage between Ms. Song’s maternal uncle and his wife. According to relevant regulations of the China Banking and Insurance Regulatory Commission, an insurance company may not require customers to provide additional proof for matters it can independently obtain or verify from existing materials. The insurance company’s delay in processing the claim lacks legal basis and violates its statutory obligations.

Attorney Zhang Li noted that the fire occurred in July 2025, and by April 2026, more than nine months had elapsed—far exceeding the 30-day review period for complex cases stipulated in Article 23 of the Insurance Law of the People’s Republic of China, as well as the 60-day advance payment period specified in Article 25. The insurance company’s failure to issue a damage assessment report and to provide a comprehensive list of required documents in a single written notice violates the duty of full disclosure under Article 22 of the Insurance Law of the People’s Republic of China, constituting a serious breach of statutory procedures. As an insurance contract is a contract of utmost good faith, the insurance company, as a professional institution, bears a higher duty of disclosure, explanation, and assistance toward ordinary consumers, particularly vulnerable groups such as those receiving government-provided basic living allowances.

“Since both the house and the contents were completely destroyed by fire, the insurance company should pay compensation in accordance with the policy’s stipulated coverage limits of 80,000 yuan per household for the house and 42,000 yuan for the contents, and the supplementary coverage should also be paid based on the actual losses.” Attorney Zhang Li stated that upon receiving a claim request, insurance institutions must promptly process eligible claims in accordance with laws, regulations, and contractual terms. In cases of delayed claims settlement, complainants may file a complaint with financial regulatory authorities and simultaneously initiate legal proceedings in court. He advised the family to immediately call 12378 to file a complaint or file a lawsuit with the People’s Court, and under no circumstances should they abandon their rights due to procedural obstacles.

Just before the May Day holiday, Ms. Song reached a settlement agreement with the insurance company.