Taihe Research | Should Employer’s Liability Insurance Cover Traffic Accidents Sustained by Overage Workers While Commuting to or from Work?

I. Case Summary

A labor service company insured its employees, including Zhang and Wang Jia, under an employer’s liability insurance policy and listed Zhang as one of the insured employees. At the time of his employment, Zhang had already reached the statutory retirement age and thus did not possess the legal status of a worker. On the morning of October 6, 2019, Zhang and his colleague, Wang Jia, were involved in a traffic accident on their way to work; both died after resuscitation efforts proved unsuccessful. According to the accident report issued by the traffic management authority, Zhang engaged in several violations—driving without a license, operating a vehicle that had not undergone the required inspection, and failing to yield to vehicles with right-of-way—which were identified as contributing factors to the accident.

Following the accident, Wang Moujia was recognized as having sustained a work-related injury and received corresponding compensation. As Zhang Mou was an overage worker, he was not eligible for the relevant provisions of the work‑injury insurance scheme. Accordingly, his family sought compensation from the labor service company; after negotiation, the company paid a total of RMB 900,000.

The employment contract at issue expressly provides that, during the employee’s period of employment and while commuting to or from work, if the employee suffers injury or death in a traffic accident for which the employee is not primarily or substantially at fault, the labor service company shall bear liability for compensation, even if the employee has exceeded the statutory retirement age. This clause represents an indemnity obligation voluntarily imposed by the employer. After fulfilling its compensation obligations, the labor service company sought reimbursement from the insurer; however, the insurer refused to pay, contending that the labor service company had no statutory duty to compensate and that the accident was caused by Zhang’s unlawful conduct. Consequently, the labor service company brought suit before the court.

II. The Core Issues of the Case

The central issue in this case is:
First, does the labor service company bear statutory liability for compensation in the event of the death of its overage employee, Zhang? Under a labor service arrangement, how is the employer’s statutory liability for injuries or fatalities sustained by an employee during the commute to or from work determined?
Second, does the indemnity paid by the labor service company pursuant to the terms of the employment contract fall within the scope of coverage under employers’ liability insurance, and how is the amount of such indemnity determined?
Third, is the exclusion clause in the insurance contract—providing that no benefits shall be payable for injury or death resulting from unlawful acts—enforceable, and may the insurer rely on it to deny coverage?

III. The Court’s Adjudicative Process and the Key Points of the Judgment

(1) Judgment of the Court of First Instance

The People’s Court of Huangpu District, Shanghai, held that, pursuant to the Implementing Regulations of the Labor Contract Law, a labor contract terminates when the employee reaches the statutory retirement age. Zhang is an overage worker, and his relationship with the labor service company constitutes… Labor relationship , This case is not subject to the Regulations on Work-Related Injury Insurance.

Mr. Zhang was employed as a cleaner. The accident occurred during his commute to and from work, rather than while performing his employment duties. His means of commuting were provided by himself, and there is no evidence that his travel was directed or arranged by the company. Consequently, Mr. Zhang’s death does not have a direct causal link to the performance of his labor, and the labor service company is not liable for statutory tort damages.

Employer’s liability insurance is indemnified on the basis of the employer’s statutory liability for damages; since the labor service company has no legal obligation to pay such damages, the insurer is not required to assume any indemnity obligations. The first-instance court ultimately ruled to dismiss all claims brought by the labor service company.

(II) Judgment of the Second-Instance Court

The labor service company, dissatisfied with the first-instance judgment, filed an appeal, and the Shanghai Financial Court rendered a revised judgment in accordance with the law. The key points of the ruling are as follows:
First, it is necessary to distinguish between statutory liability and contractual liability. The appellate court recognized that the parties were in a labor‑service relationship and that the labor service company bears no statutory liability for compensation; however, it clarified that the scope of coverage under employer’s liability insurance is not limited to statutory compensation obligations. Lawfully valid contractual obligations likewise fall within the scope of insurance liability. The compensation clause at issue reflects the true intentions of both parties and is lawful; accordingly, the labor service company’s obligation to make payment under the contract entitles the insurance company to honor the claim.

Secondly, the standard for calculating compensation was determined. The parties to the employment relationship agreed to base the compensation amount on the workers’ compensation standards, which constitute the customary basis for indemnity under employer liability insurance and do not exceed the scope of risks reasonably foreseeable at the time the insurance contract was concluded; accordingly, the court upheld this determination.

Finally, the exemption clause is deemed invalid. The exemption clause at issue merely provides a blanket exemption for unlawful acts without distinguishing the degree to which such acts contributed to the occurrence of the accident; thus, it constitutes an ambiguously worded standard-form clause. In accordance with the principle of unfavorable interpretation under insurance law, the provision must be construed in favor of the insured. As this accident was not caused solely by Zhang’s unilateral unlawful conduct, it does not fall within the scope of the exemption, and the insurer has no right to deny coverage.

The second-instance judgment overturned the first-instance judgment and ordered the insurance company to pay the labor service company the insurance indemnity.

IV. Legal Analysis

(1) Determination of the Legal Relationship in Cases of Employment of Over-Aged Workers

In judicial practice, except in special circumstances such as having already worked continuously at the same organization prior to retirement, Overage workers and their employers are generally deemed to have an employment relationship. On the one hand, the law stipulates that when a worker reaches the statutory retirement age, the labor contract is automatically terminated; on the other hand, social security institutions are unable to open social security accounts or make social security contributions for individuals who have exceeded the retirement age. If the employment relationship were forcibly recognized in such cases, it would impose an undue burden on enterprises.

The compensation rules governing the two types of legal relationships differ markedly: under an employment relationship, a traffic accident occurring during an employee’s commute that is not primarily the employee’s fault may be recognized as a work-related injury; by contrast, labor‑service relationships are not subject to workers’ compensation regulations, and injuries or fatalities sustained during commuting are generally not deemed “injured in the course of employment,” with employers typically bearing no liability for compensation. The two levels of courts have consistently upheld this distinction.

(II) Scope of Liability under Employer’s Liability Insurance

Traditionally, employers’ liability insurance has been understood to cover only the employer’s statutory liability for damages. In this case, the second-instance court departed from that established approach and explicitly clarified… A contractual obligation to provide compensation voluntarily and lawfully established by the employer. …is also covered under the insurance policy. By adding indemnity clauses to mitigate commuting risks and safeguard employees’ rights, the employer has not violated any mandatory legal provisions; moreover, this practice is a common employment arrangement in the industry, and the associated risks were foreseeable at the time of the insurance contract’s conclusion. In adjudicating such cases, it is necessary to assess insurance liability comprehensively, taking into account both statutory provisions and the terms of the employment contract.

(3) Criteria for Determining Statutory Liability for Compensation in Labor Relations

In labor relations, determining whether an employer bears statutory liability for damages hinges on assessing whether a direct causal link exists between the harm suffered and the labor‑related conduct. The key considerations are threefold: (1) whether the accident occurred during working hours and at the workplace; (2) whether the means of commuting and travel arrangements were provided or designated by the employer; and (3) whether the accident was caused by the performance of work duties. In this case, Zhang commuted independently and was not performing any work tasks; therefore, the labor service company bears no statutory liability for compensation.

(4) Rules for Interpreting Standard Insurance Clauses

Insurance contracts are standard-form contracts. Under the Insurance Law, in the event of a dispute over standard terms, such terms shall be interpreted in favor of the insured and the policyholder. The exclusion clause at issue is ambiguously worded and fails to allocate liability for unlawful acts, constituting an unclear contractual provision; therefore, the insurer may not invoke an exclusion solely on the basis of an employee’s unlawful conduct.

(5) Rules for Applying Compensation Standards

The compensation standards shall follow Party autonomy takes precedence. Principle: Where the parties have expressly agreed to compensation in accordance with workers’ compensation standards, and such standards do not exceed the scope of insurable risks, the court shall uphold that agreement. In the absence of an agreement or where the agreement is unclear, the ordinary standards for personal injury compensation shall apply.

V. Practical Risk Alerts

(1) To the policyholder (the employing enterprise)

Standardize the management of overage employment. When hiring workers who have exceeded the statutory retirement age, enter into a written service agreement that clearly sets out the rights and obligations of both parties and delineates liability. Retain supporting documentation, such as retirement certificates and identity documents, to clarify the legal relationship and mitigate the risk of work‑related injury disputes.

Align employment agreements with insurance coverage. If the contract includes additional provisions regarding compensation for injuries or fatalities sustained during commuting, be sure to disclose this information truthfully to your insurer, verify the scope of coverage, and ensure that the agreed-upon obligations are eligible for standard claims settlement.

Fully preserve the evidence. Following the accident, carefully retain the traffic accident liability determination, compensation agreement, bank transfer records, communication evidence, and other relevant documents to provide a basis for subsequent claims processing and litigation.

(2) With respect to the insurer (insurance company)

Refine the content of insurance policy provisions. Refine the terms of employer’s liability insurance to clarify whether coverage extends to obligations stipulated in the contract; further specify exclusion clauses by distinguishing between the causative force of unlawful conduct and the apportionment of liability, thereby preventing ambiguity in the policy language from giving rise to disputes.

Fully fulfill statutory obligations. At the time of underwriting, proactively verify the enterprise’s employment structure and any special indemnity provisions; and, in accordance with the law, fulfill the obligations to conspicuously alert and clearly explain exclusion clauses to the insured, thereby ensuring the validity of the policy terms.

Conduct claims reviews with due diligence. During claims processing, distinguish between statutory liability and contractual liability; conduct a thorough investigation into the causes of the accident and review employment contracts; refrain from applying exclusion clauses in a one-sided manner; and determine insurance liability in accordance with the law.

Lawyer Shi Qiao

Partner

Attorney Ge Weiyan

Attorney Ge Weiyan’s practice encompasses major insurance dispute arbitration and litigation, insurance compliance review and advisory services, legal counsel for state-owned enterprises, the recovery of non‑performing financial assets in banking and other financial sectors, accounts receivable management, corporate governance, and significant civil and commercial dispute resolution—both non‑litigation and litigation—related to construction projects.

Attorney Xie Yuting

Attorney Xie Yuting specializes in dispute resolution and legal advisory services in the insurance sector, ongoing legal representation for state-owned enterprises, labor disputes, civil and commercial litigation, and the recovery of non-performing assets, including those held by banks.

This article is published by Jiangsu Taihe Law Firm. The author is Jiangsu Taihe Law Firm, and the copyright belongs to the author. Please cite the original source when reprinting; violations will be prosecuted.

Follow us