Insurance in Case of Emergency

People buy insurance in case of emergency, including fire insurance. After the Great Earthquake, great fires occurred in every corner in Kobe. The delay and ineffectiveness of the earthquake prevention system and the fire service in Kobe city were regarded as main causes of the great fires. Many citizens thought they could at least rebuild their houses and shops with fire insurance and/or the fire mutual aid by which they were covered.

Most citizens, however, were not aware of the fact that every fire insurance and fire mutual aid contract had a so-called "earthquake exemption clause". This is a rule to exempt the insurance companies and the mutual aid associations from paying insurance money to reduce their burden in the case of a great disaster when a large number of insurable contingencies may arise simultaneously. The exemption clause is for the insurance companies and the mutual aid associations to be exempted in the case of great need.

Insurance Companies Claim the Exemption

At first, insurance companies and mutual aid associations claimed this earthquake exemption for most of the fires that occurred during the first ten days after the earthquake, and many citizens thought they could do nothing and endured in bitter silence, giving up rebuilding their houses and/or shops. However, some of the citizens, not being convinced of the impartial application of the exemption clause, decided to file a lawsuit. Some volunteer lawyers from the consumers' assistant center at the Hyogo Bar Association took on the cases as legal aid.

In the earthquake exemption clause, there were three types of cases to be exempted as follows;

1. Type of General Non-Life Insurance Company
   Damage caused by an earthquake (including damage caused by a spread or extension of fire provoked by the earthquake, and damage caused by fire, regardless of the cause, spread or extended by the earthquake)
2. Type of the National Federation of Workers and Consumers Insurance Cooperation (Zenrosai)
   Damage caused by a fire provoked and/or extended by an earthquake
3. Type of the Cooperative Association (Seikyoren) (or pre-amendment type of the National Federation of Workers and Consumers Insurance Cooperation)
   Damage caused by a fire provoked by an earthquake directly or indirectly

* Type of non-life insurance company before 1975 amendment
Damage caused by a fire provoked and/or spread, etc., by an earthquake directly or indirectly

The differences were hardly recognizable for general citizens. Even among lawyers, interpretation greatly varied. The differences were reflected in the application to three categories.

Category 1. Damage caused by a fire provoked by an earthquake

Category 2. Damage caused by spread or extension of a fire provoked by an earthquake

Category 3. Damage caused by a fire spread or extended by an earthquake, regardless of the cause of fire

The third category was introduced in 1975 by non-life insurance companies after a fire insurance suit in the Niigata Earthquake, 1964. The Zenrosai followed the case while the Cooperative Association (Seikyoren) did not.

Limitless Expansion of Exemption -- Judgment of the Supreme Court

The supreme court overbearingly interpreted that the types of non-life insurance and Zenrosai were the same in meaning, that all the three categories of fire damage are to be exempted, and that exemption for Cooperative Association's one did not include the category three. Also it gave an unlimitedly expanded interpretation of the range of exemption, stating that fires occurred before the earthquake, the earthquake itself as a natural phenomenon and also man-made disasters such as the decline of the fire fighting capacity and the delay and/or error in the fire fighting activity after the earthquake should be included in "earthquake". The argument of the insurance companies, thus, was approved.

As a result (1) When the fire was acknowledged as earthquake-caused, no insurance money was to be paid for any related fire. (2) Even in the case of a fire which cannot be said to be caused by the earthquake (origin unknown) or caused by some other reason, no insurance money nor mutual aid (except Cooperative Association's aid) were to be paid for damage by spread, except for the house where the fire started and damage by non-earthquake-related spread. There was even such a case in which a house was covered by an insurance of Cooperative Association' aid type, but the insurance money was not paid because the agreement had been revised without informing the policyholder and no remedy was taken.

Importance of the Judgment of the Court

There are hardly any consumers who choose an insurance while taking such difference in earthquake exemption clauses into consideration. What is more, the clauses can be one-sidedly revised and changed only by being authorized by the administrative bodies, leaving the policyholders unknowing. The fates of citizens were decided by which insurance or mutual aid they had happened to choose to buy. Rebuilding of the citizens' lives was dominated by the highly large-scale enterprise-oriented governments and the court of justice who me-tooed the attitude of the governments.

(YAMANOUCHI Yasuo)