Answer: Some employers buy commercial accident insurance for their employees in addition to work injury insurance. It is a common question whether the employer can use the commercial insurance compensations to substitute or offset partial or full amount of the work injury compensations it bears, or, from the other perspective, whether the employees are entitled to both work-related injury compensations and commercial insurance compensations when they are injured at work.
It is a legal and mandatory obligation for employers to purchase work injury insurance for employees and provide them with work injury entitlements when they suffer from work-related injury. Therefore, in general, courts hold that compensation from commercial insurance belongs to another legal relationship than the work-related injury compensation relationship between the employers and the social insurance authority and the employees, or that it is an additional benefit besides work-related injury compensation.1Shanghai Zhenshu Furniture Co., Ltd. v. Zhu Jiafu Work injury insurance Treatment Dispute Shanghai Qingpu District People’s Court Civil Judgment (2014) Qing Min Si (Min) Chu Zi No.406. In 2017, the Guangdong Provincial People¡¯s High Court released the seventh of ten typical cases of labor disputes: the case of work injury insurance treatment disputes between Tong Mou and Yuhai Dongguan Branch-commercial insurance and work injury insurance treatment can be both available. Xinjiang Jinshantui Construction Machinery Co., Ltd. and Li Zongjun Labor Dispute Retrial Review and Trial Supervision Civil Ruling Civil Ruling of the High Court of Xinjiang Uygur Autonomous Region (2020) Xin Min Shen No.912.Prevailing practice is that employees are entitled to the both.
There are two exceptional circumstances where commercial insurances can offset the work-related injury compensations: the first is that the employee agrees the offset in the work-related injury settlement; the second is that both parties have an explicit agreement before hand that the insurance claim proceeds from the commercial insurer belong to the employer.2Beijing Jindingsheng Lifting Construction Machinery Equipment Co., Ltd. and Chen Guijun Labor Dispute Appeal Case Beijing No.2 Intermediate People’s Court Civil Judgment (2016) Jing 02 Min Zhong No.2150. In the case, the employee agreed to offset the work-related injury compensation with commercial insurance, which was recognized by the court. Xiamen Feiyue Express Logistics Co., Ltd. and Zhong Xiaoqing Labor Dispute Second Instance Civil Judgment Fujian Xiamen Intermediate People’s Court Civil Judgment (2019) Min 02 Min Zhong No.773. ¡°However, Feiyue Company did not provide evidence in this case to prove the source of funds for the payment of the commercial insurance premium and the agreement between the two parties on the ownership of the claim compensation.¡± Civil Ruling on Retrial Review and Trial Supervision of Contract Disputes between Tan Wenlian and He Moudeng, etc. Civil Ruling of Sichuan High Court (2021) Chuan Min Shen No.1125.These two situations essentially confirm that the employer possesses the ownership of the insurance claim proceeds, so that the insurer¡¯s compensating the work injured employee is tantamount to the employer¡¯s discharging its statutory obligations to its work injured employee.
For example, Ms. Li’s employer purchased an accident injury insurance for her, but did not purchase work injury insurance for her. After Ms. Li had a work-related accident, the employer should pay RMB 50,000 for work-related injury compensation. Commercial insurance paid Ms. Li RMB 30,000 as insurance compensation. Under the normal circumstance, Ms. Li has the right to receive RMB 50,000 from the employer and RMB 30,000 from commercial insurance compensation. However, if Ms. Li agrees that the commercial insurance compensation can offset work-related injury compensation, or the two parties have agreed in advance that the ownership of the commercial insurance compensation belongs to the employer or that commercial insurance can offset work-related injury compensation, the employer only needs to pay RMB 20,000 of the discrepancy.
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Mr. Dong Wang has been in practice for over 20 years, specializing in business law, including employment law, commercial law, company law, and intellectual property law. Mr. Wang has earned respect and trust from his clients due to his professionalism, fidielty, and kindness.
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- 1Shanghai Zhenshu Furniture Co., Ltd. v. Zhu Jiafu Work injury insurance Treatment Dispute Shanghai Qingpu District People’s Court Civil Judgment (2014) Qing Min Si (Min) Chu Zi No.406. In 2017, the Guangdong Provincial People¡¯s High Court released the seventh of ten typical cases of labor disputes: the case of work injury insurance treatment disputes between Tong Mou and Yuhai Dongguan Branch-commercial insurance and work injury insurance treatment can be both available. Xinjiang Jinshantui Construction Machinery Co., Ltd. and Li Zongjun Labor Dispute Retrial Review and Trial Supervision Civil Ruling Civil Ruling of the High Court of Xinjiang Uygur Autonomous Region (2020) Xin Min Shen No.912.
- 2Beijing Jindingsheng Lifting Construction Machinery Equipment Co., Ltd. and Chen Guijun Labor Dispute Appeal Case Beijing No.2 Intermediate People’s Court Civil Judgment (2016) Jing 02 Min Zhong No.2150. In the case, the employee agreed to offset the work-related injury compensation with commercial insurance, which was recognized by the court. Xiamen Feiyue Express Logistics Co., Ltd. and Zhong Xiaoqing Labor Dispute Second Instance Civil Judgment Fujian Xiamen Intermediate People’s Court Civil Judgment (2019) Min 02 Min Zhong No.773. ¡°However, Feiyue Company did not provide evidence in this case to prove the source of funds for the payment of the commercial insurance premium and the agreement between the two parties on the ownership of the claim compensation.¡± Civil Ruling on Retrial Review and Trial Supervision of Contract Disputes between Tan Wenlian and He Moudeng, etc. Civil Ruling of Sichuan High Court (2021) Chuan Min Shen No.1125.