Overview

Litigation is the public system for insurance dispute resolution. If parties to an insurance policy have concluded an arbitration agreement, the courts will heed the agreement and the dispute will be resolved not by litigation but by arbitration (see 3.3 The Use of Arbitration for Insurance Dispute Resolution). A dispute over an insurance contract may also be resolved by ADR, including court-assisted mediation and mediation by ADR institutions designated by the Insurance Business Act (see 1.3 Alternative Dispute Resolution (ADR)). The purpose of ADR is to facilitate resolution by the agreement of both parties, and, accordingly, if no agreement is reached, the procedure ends and the dispute is resolved by litigation or arbitration.

Provisional Remedy and Compulsory Execution

Before, or in the course of, litigation or arbitration, a provisional remedy procedure is available. The claimant must submit prima facie evidence that demonstrates that their claim exists and that it is necessary to preserve it, and deposit counter-security with a Japanese court. After a judgment or an arbitral award becomes final and conclusive, a claimant may file a petition with the court to commence compulsory execution proceedings to collect its claim from a debtor’s assets.

Litigation

The most important dispute resolution system is litigation. An insurance policy governed by Japanese law usually contains a jurisdiction clause whereby a specific District Court is agreed as the first-instance court. In such case, the District Court is the first-instance court, the Court of Appeal that has jurisdiction over the place of the District Court is the second-instance court and the Supreme Court is the final-instance court. The number of judges is one or three in the District Court, three in the Court of Appeal and three to five in the Supreme Court (nine to fifteen when the Supreme Court decides to hear the case en banc).

Time Until Judgment

Japanese courts have a non-mandatory target to finish the first-instance procedure as quickly as possible within a period of two years. About 75% of all cases appealed to the Court of Appeal (not limited to insurance disputes) are finished within six months by judgment, settlement, withdrawal, etc. About 90% of all cases in the Supreme Court (again not limited to insurance disputes) are finished within six months.

Litigation Process

Up to the first hearing date

The plaintiff files a complaint with the first-instance court specifying the parties, their legal representatives (in the case of a company, a person who has legal authority to represent the company), the gist of the claim and cause of action. After the judge finds the complaint to be in order, the court effects service of the complaint and issues a summons for the first hearing date to the defendant. After the service, the defendant must submit their answer to the court. Both the complaint and the answer are treated as stated in the first hearing date for oral argument.

Up to witness examination

After the first hearing date, the plaintiff and defendant alternately submit legal briefs (a document describing its case), an evidence explanation and documentary evidence. The court may also designate the case for preparatory proceedings, where hearings are held in a meeting room without a public audience. The exchange of briefs and evidence usually continues until the issues are clarified and both parties’ arguments are exhausted. If witness examinations are planned, the court confirms with the parties the facts that will be proven by witness testimony.

Evidence

When submitting documentary evidence written in a foreign language, the party must submit a Japanese translation of the relevant parts and the opponent party is entitled to object to the accuracy of the translation. If a party presents an expert’s opinion to the court, their expert report should be submitted firstly and then they may be examined in witness examination. An expert retained by a party is different from an expert designated by the court. The Japanese judicial system does not adopt a discovery system such as those in place in England or the US and a party seeking disclosure of evidence in the hands of an opponent or a third party must file with the court a petition for a court order to produce documents.

Up to the first-instance judgment

If a party applies for examination of a witness and the judge considers such examination necessary, the witness submits their statement to the court a few weeks before the witness examination. The witness is then examined and cross-examined in a courtroom, with an interpreter in the case of a non-Japanese-speaking witness. Both parties submit the final brief taking account of the results of the examination. Prior to or after the examination, the court often asks both parties about the possibility of settling the case by amicable settlement. If no settlement is reached, the court renders judgment.

The second instance

A losing party in the first instance may file a petition for appeal within two weeks from the date of service of the original judgment and then must submit detailed grounds for appeal within 50 days from the appeal. The opponent may file a written counterargument by the deadline designated by the second-instance court (a Court of Appeal if the first-instance court was a District Court). In practice, these submissions are of high importance as the judges examine them carefully in forming their initial impression of whether there are merits to the appeal. Ordinarily, the second-instance judges are not willing to have additional hearing dates for further arguments. After the conclusion of oral arguments (which may take place on the first hearing date), the court may ask both parties about the possibility of settlement before deciding to render judgment.

The third instance

Judgments of the second-instance courts may be appealed to the second appellate court, which is the Supreme Court if the second instance was presided over by a Court of Appeal. However, the grounds of appeal to the Supreme Court are very narrow and are limited to errors in the construction of the Constitution, among other barriers.

Rules on Limitation

General

Under Japanese conflict of law rules, limitation is considered not as a matter of procedural law but of substantive law. Accordingly, if an insurance policy is governed by Japanese law:

• the right to claim an insurance payment, the right to claim a refund of insurance premiums and the right to claim a refund of a premium reserve is subject to a three-year limitation period from the time the right becomes exercisable;
• the right to claim insurance premiums is subject to a one-year limitation period from the time the right becomes exercisable; and
• limitation is effected when a party invokes the limitation after the expiry of the limitation period.

If an insurance policy is governed by a foreign law, the rights expire according to the limitation provisions set out in the foreign law.

Expiry of limitation period

It is possible to postpone the expiry of, or renew, the limitation period through certain events. For example:

• if a party commences litigation, the limitation period does not expire until the litigation is completed;
• if an agreement to hold negotiations on a claim is made in writing, the limitation period does not expire until one year (or an agreed time period of less than one year) has passed from the time of the agreement (or six months from the time of the notice of refusal of the negotiation); and
• if a demand is made, the limitation period does not expire for six months from the time of the demand.

Limitation is one of the most complicated areas of law and a Japanese lawyer’s advice should be sought for specific cases.

ADR is widely used in the insurance field. Japan has three ADR institutions designated by the Prime Minister based upon the Insurance Business Act, namely:

• the Sompo ADR Centre (for a dispute against a Japanese non-life insurance company);
• the Insurance Ombudsman (for a dispute against a foreign non-life insurance company); and
• the Life Insurance Counselling Office (for a dispute against a life insurance company).

All three institutions have complaint resolution procedures and dispute resolution procedures. Their systems are basically the same, as follows.

Complaint Resolution Procedure

An insured or a policyholder files a complaint with the ADR institution. The ADR institution provides necessary advice, notifies the relevant insurer of the complaint and requests them to respond swiftly. The insurer makes contact with the insured or the policyholder and holds negotiations for resolution of the dispute. If the dispute is not settled within a certain period, the institution may refer the insured or the policyholder to a dispute resolution procedure and the complaint resolution procedure ends.

Dispute Resolution Procedure

An insured or a policyholder files a petition for dispute resolution with the ADR institution. The ADR institution appoints one or more committee members for handling the dispute resolution process. In the case of the Life Insurance Counselling Office, its internal permanent committee handles the dispute resolution process. The committee hears both parties’ arguments and, if they consider it appropriate, proposes settlement terms. In principle, the insurers owe an obligation to accept certain settlement terms (special mediation terms in the case of the Sompo ADR Centre and the Insurance Ombudsman, and settlement terms in the case of the Life Insurance Counselling Office), while the insured or the policyholders do not.

Number of Cases

For the period from 1 April 2022 to 31 March 2023, the Sompo ADR Centre newly accepted about 3,490 complaint resolution cases and about 500 dispute resolution cases, the Insurance Ombudsman about 130 complaint resolution cases (the number of dispute resolution cases is not disclosed) and the Life Insurance Counselling Office about 5,000 complaint resolution cases and about 350 dispute resolution cases.

Jurisdiction

Agreement

Under the Japanese rules regarding international jurisdiction, parties to an insurance contract may agree on a country in which they are permitted to file an action with the courts. The agreement is not valid unless it is made regarding actions that are based on a specific legal relationship, and executed by means of a written document. An agreement that an action may be filed only with the courts of a foreign country may not be invoked if those courts are unable to exercise jurisdiction by law or in fact. A jurisdiction agreement in which the parties agree exclusive jurisdiction of the court that has the jurisdiction over the head office of the defendant is, in principle, valid, unless the agreement is extremely unreasonable and against public policy (the Supreme Court judgment of 28 November 1975 Minshu 29.10.1554).

Other grounds

The Code of Civil Procedure of Japan provides certain grounds for the jurisdiction of the Japanese courts where no jurisdiction agreement exists. Typical examples are as follows:

• an action that is brought against a corporation whose principal office or business office is located in Japan; and
• an action on a claim for performance of a contractual obligation, on a claim for damages due to non-performance of a contractual obligation or on any other claim involving a contractual obligation if the contractually specified place for performance of the obligation is within Japan.

However, even when the Japanese courts have jurisdiction over an action (except when an action is filed based on an exclusive jurisdiction agreement specifying the Japanese court), the court may dismiss the whole or part of an action without prejudice if it finds that there are special circumstances due to which, if the Japanese courts were to conduct a trial and reach a judicial decision in the action, it would be inequitable to either party or prevent a fair and speedy trial, in consideration of the nature of the case, the degree of burden that the defendant would have to bear in responding to the action, the location of evidence, and other circumstances.

Choice of Law

General

Under the conflict of law rules of Japan, the applicable law to an insurance policy is the law of the place chosen by the parties at the time of the conclusion of the insurance policy. In the absence of said choice of law, an insurance policy shall be governed by the law of the place with which the insurance policy is most closely connected at the time of the conclusion of the insurance policy. The law of the habitual residence of the insurer is presumed to be the law of the place with which the insurance policy is most closely connected. The parties may agree to change the governing law otherwise applicable to the insurance policy, but such change may not be asserted against a third party when it prejudices the rights of such third party.

Consumer protection

There are special provisions regarding the choice of law for consumer contracts. For example, even when the law applicable to the consumer contract as a result of a choice or a change of governing law is a law other than the law of the consumer’s habitual residence, if the consumer has manifested their intention to the business operator that a specific mandatory provision from within the law of the consumer’s habitual residence should be applied, such mandatory provision shall also apply to the matters stipulated by the mandatory provision with regard to the formation and effect of the consumer contract. Notwithstanding said general rule, in the absence of a choice of law with regard to the formation and effect of a consumer contract, the formation and effect of the consumer contract shall be governed by the law of the consumer’s habitual residence.

Validity of a Final and Conclusive Judgment Rendered by a Foreign Court

A final and conclusive judgement rendered by a foreign court must satisfy the following requirements in order to be enforceable in Japan:

• the jurisdiction of the foreign court is recognised pursuant to laws and regulations, conventions, or treaties;
• the defeated defendant has been served (excluding service by publication or any other similar service) with the requisite summons or order for the commencement of litigation, or it has appeared without being so served;
• the content of the judgment and the litigation proceedings are not contrary to public policy in Japan; and
• a guarantee of reciprocity is in place.

This general rule is applicable to enforcement by or against insurers in Japan.

General Procedure

A party who seeks enforcement in Japan of a final and conclusive judgment rendered by a foreign court should firstly file a lawsuit against an obligor for an execution judgment. After the execution judgment becomes final and conclusive, the party may apply with the Japanese courts for compulsory execution against real property, vessels, movables, claims and other property rights.

Litigation Costs

When filing a lawsuit, the plaintiff needs to purchase revenue stamps and attach them to the complaint. The amount of the revenue stamp is roughly proportional to the claim amount. The cost of revenue stamps is included in the litigation costs, which are borne entirely or partly by a losing party. However, in practice, it is not claimed.

Legal Costs

Legal costs (attorneys’ fees) shall be borne by each party and are not recoverable from the losing party. In the case of a claim in tort, the Japanese courts often add 10% of the awarded amount as attorneys’ fees. However, it is unrelated to the actual amount spent by the winning party.

If a party files a lawsuit with a Japanese court for a dispute (including insurance and reinsurance) that is subject to an arbitration agreement and the other party requests dismissal without prejudice, the Japanese court will, in principle, dismiss the lawsuit without prejudice. There are exceptions to this general rule where the arbitration agreement is null and void, where the arbitration procedure cannot be carried out based upon the terms of the arbitration agreement and where the other party requests dismissal pursuant to the arbitration agreement after it presented oral arguments on the merits. These rules are applied regardless of whether the place of arbitration is in Japan, outside Japan or has not been fixed.

New York Convention

Japan is a contracting state of the New York Convention.

Enforcement of Arbitral Awards Handed Down in Other Jurisdictions

When the place of arbitration is outside Japan and a party seeks to enforce an award from that arbitration in Japan, the party must:

• obtain an execution order of the arbitral award from the Japanese courts; and then
• apply to the Japanese courts for compulsory execution against the respondent’s assets. In the application, various documents must be submitted to the Japanese courts, including an arbitral award for which an execution order has become final and conclusive.

Execution Order

A party who intends to enforce an arbitral award may apply for an execution order with the Japanese courts. The court may not make a decision on the application without holding oral arguments or a hearing that both the applicant and the obligor-respondent can attend. The court dismisses the application if it finds that any of the grounds set forth in Article 45 paragraph 2 of the Arbitration Act (which are substantially the same as Article 5 of the New York Convention) exists. Otherwise, an execution order is issued.

Use of Arbitration

Arbitration is not a significant form of insurance dispute resolution in Japan.

Rules of Arbitration

If the place of arbitration is in Japan, general rules provided in the Arbitration Act are applied to arbitration. According to these rules, the parties must be treated equally in an arbitration procedure, the parties must be given full opportunity to argue their case in an arbitration procedure, and the rules of arbitration provided by the parties’ agreement must be observed by the arbitral tribunal, etc. If the parties agree to resolve their dispute at an arbitration institution such as the Japan Commercial Arbitration Association, arbitration rules provided by the institution are also applied.

Private Character

Arbitration is neither presided over by the national courts nor operated at the taxpayer’s expense. In this sense, arbitration is private. On the other hand, Japanese law provides for general rules regarding arbitration procedure; a claim by arbitration has the statutory effect of postponing the expiry of the limitation period, and an arbitral award is given the same effect as a final and conclusive court judgment. Considering these aspects, an authoritative academic has pointed out that arbitration has the character of a semi-public dispute resolution.

Appeal to Arbitral Award

If the place of arbitration is in Japan, a party may apply to the Japanese courts for a cancellation of the arbitral award. The court may not make a decision on the application without holding oral arguments or a hearing that both parties to the arbitration can attend. The court may cancel the arbitral award if certain grounds exist that are substantially the same as Article 5 paragraph 1(a)–(d) and paragraph 2 of the New York Convention.

Terms are not implied into a contract of insurance by operation of law. Japanese insurance contracts normally contain detailed terms and conditions. Disputes are resolved through the construction of specific terms in the contract.

Principle – Insured’s Obligation to Answer the Insurer’s Questions

In concluding a non-life insurance policy, a life insurance policy or a fixed-amount accident and health insurance policy, an insurer-to-be has the right to request the disclosure of facts with regard to material matters concerning the likelihood of occurrence of loss to be compensated for under the relevant insurance policy. The policyholder/insured-to-be owes an obligation to disclose the facts requested by an insurer-to-be. This is a mandatory rule under the Japanese Insurance Act that may not be contracted out of to the disadvantage of the policyholder or insured.

If the policyholder or insured fails to disclose such facts or discloses false facts intentionally or by gross negligence, an insurer, in principle, may cancel the insurance policy. This is also a mandatory rule that may not be contracted out of to the disadvantage of the policyholder or insured.

Exception – Insured’s Obligation to Voluntarily Disclose Material Matters

These mandatory rules are not applicable to certain non-life insurance policies that compensate damage arising from business activities including marine insurance policies, property insurance policies or liability insurance policies regarding aircraft or nuclear facilities. Freedom of contract is widely admitted. For example, standard hull and machinery insurance policies provide that a policyholder/insured-to-be must disclose facts with respect to important matters that may affect the acceptance of underwriting or the decision of the contents of an insurance policy by the insurer-to-be (ie, in these cases, the scope of disclosure is not limited to facts requested by an insurer-to-be). Such standard policies commonly provide for the insurer’s right of cancellation where the policyholder or insured failed to disclose facts or disclosed false facts.

Litigation Cases

There are many cases in which insurers allege that the insured caused the incidents intentionally or by gross negligence and rely upon exemption clauses in the insurance policies. The Japanese courts carefully consider the circumstances and background of the incident, occurrences after the incident and economic motivation, among other factors, in their fact-finding and judgment on the issues.

ADR Cases

Wide varieties of cases and issues are raised with regard to various types of insurance. It is difficult to see any trends. In 2022, accident insurance claim cases have increased and automobile insurance cases have decreased. Cases ending without resolution have increased. One noteworthy development is that there was an application for ADR regarding a D&O insurance claim.

Generally, insurance coverage disputes are resolved through negotiation. If it turns out to be difficult, they are resolved by litigation, arbitration or ADR.

The position is slightly different for reinsurance contracts. Most reinsurance coverage disputes are resolved by negotiation and it is rare for them to be settled though legal proceedings.

Principle

The position is almost the same where the law views the insured party as a consumer. The differences are as follows.

The Consumer Contract Act

The Consumer Contract Act provides a consumer’s right of rescission of a contract. A consumer may rescind a consumer contract, for example, in the case of a consumer’s mistake caused by a trader’s material misrepresentation or by a trader’s provision of a conclusive assessment of uncertain matters. If a consumer rescinds an insurance policy based upon these rights, they receive a refund of the insurance premium, which, however, would not be a sufficient remedy in many cases.

ADR

For a dispute between a consumer and a trader of national import, a consumer may utilise mediation or arbitration by the Dispute Resolution Committee of the National Consumer Affairs Centre of Japan. However, it is unclear how many insurance disputes are settled by these procedures.

Principle

A third party may neither enforce an insurance contract nor sue an insurer in connection with an insurance contract. If a third party’s claim against an insured is established by final and conclusive judgment, the third party may apply to the Japanese courts for a seizure order of the insured’s claim against an insurer for insurance payment. The third party is entitled to directly collect the claim for insurance payment from the insurer one week after service of the seizure order to the insured.

Execution of Statutory Lien in Liability Insurance

A third party who has a claim for compensation for damage against an insured under a liability insurance policy has a statutory lien over the insured’s claim against the insurer for insurance payment (Article 22 paragraph 1 of the Insurance Act). Even if the third party does not have a final and conclusive judgment that establishes their claim against the insured, the third party may apply to the Japanese courts for a seizure order of the claim for insurance payment, based upon the statutory lien.

Direct Claim Based Upon Insurance Policy

If an insurance policy contains a clause that allows a direct claim by a third party against the insurer, a third party may claim for payment against the insurer to the extent allowed by the clause. Such a clause is often contained in an automobile insurance policy.

Direct Claim Based Upon Japanese Law for Automobile Accidents

The Act on Securing Compensation for Automobile Accidents provides for compulsory automobile liability insurance. Under this insurance, a person who puts an automobile into operational use for their own benefit is included as an insured. When the person is liable to compensate for damage to a third party, the third party may directly claim against the insurer for payment of damage up to the amount of insurance coverage.

Japan does not have a concept of bad faith or bad faith breach of contract in the areas of insurance and reinsurance law.

Late Payment Interest

If an insurance policy is governed by Japanese law, an insurer owes the obligation to pay late payment interest if the insurer fails to pay the insurance claim by the due date. If the interest rate is agreed in the insurance policy, the agreed rate is applied. If there is no such agreement, the statutory rate is applied. The current statutory rate is 3% per annum but it may be changed by ministerial order in the future. If an insurer failed to make the payment by a due date that was on or prior to 31 March 2020, the old statutory interest rate of 6% per annum applies.

Due Date

Even if the due date of an insurance claim is provided in an insurance policy, if the due date falls after the expiry of a period of time reasonable to confirm matters that need to be confirmed under the insurance policy for the purpose of payment of an insurance claim, the day on which such period expires is treated as the due date for payment of the insurance claim.

If the due date of an insurance claim is not provided in an insurance policy, the insurer is not responsible for any delay until an insurance proceeds payment is claimed and the period necessary to confirm the insured event, etc, pertaining to said claim expires.

An insurer is not liable to pay late payment interest for the period of delay in investigation that is attributable to a policyholder or an insured.

Generally, an insured would not be bound by representations made by its broker. It is normally understood in Japan that when an insurance broker performs procedures such as application for insurance for its customers – ie, a person who is to be a policyholder or an insured – the insurance broker acts not as an agent but as a messenger of the customer. Under this interpretation, the insurance broker has no authority to represent the customer as agent and, accordingly, an insured is not bound by the broker’s representations.

However, in a specific case, the question should be examined carefully, taking factual backgrounds into consideration.

General

Delegated arrangements such as those adopted between a Lloyd’s syndicate and managing agents are not common in Japan. With regard to a Lloyd’s syndicate, there is a precedent in which the Japanese court allowed a leading underwriter who was one of the members of a Lloyd’s syndicate to pursue legal proceedings relating to an insurance policy on behalf of themselves and other members.

Co-insurance

Co-insurance is widely used in Japan. A leading underwriter and other underwriters usually conclude a business outsourcing contract. Based upon the contract, the leading underwriter would issue the co-insurance policy papers, but the leading underwriter is not usually authorised to conclude the insurance contract on behalf of the other underwriters. Also, the leading underwriter would deal with the administration of the insurance claim payment, but is usually not authorised to assess loss on behalf of other underwriters. Each insurer in a co-insurance owes separate liability to an insured in proportion to each underwriting ratio. In order to pursue 100% of the rights or obligations in a co-insurance policy, all co-insurers must be the plaintiffs or the defendants.

No statistics are published on the area of claims where insurers fund the defence of insureds or insurers make insurance payment for disputes costs.

Most liability insurance policies in Japan provide insurance cover for disputes costs. As long as the requirements for the cover are satisfied, insurers generally make insurance payments for the costs irrespective of the areas of claims. However, insurers of automobile insurance are specially allowed negotiation with the victims on behalf of the insureds. This allows insureds to save disputes costs, while insurers may negotiate for a smaller insurance payment.

This is unlikely to change in the next few years.

As Japanese society and the country’s economy have become highly complex, litigation cases have inevitably come to contain complex elements, which has created a general increase in litigation costs. Among recently published court precedents in the area of liability insurance, more than half of them are automobile collision cases, which have traditionally been the most common type of case. However, there are also some cases concerning complex and high-value claims such as those relating to a nuclear incident, asbestos damage, oil pollution, directors’ and officers’ liability and expert malpractice liability.

Claimants can buy rights protection insurance for insurance coverage of legal costs or litigation costs (see 2.3 Unique Features of Litigation Procedure). In many cases, rights protection insurance takes the form of an additional endorsement to the automobile insurance, fire insurance or other major insurance policy. A few insurance companies sell rights protection insurance for natural persons as well as legal persons in the form of independent insurance.

With respect to an insurance policy governed by Japanese law, the law gives an insurer a right of action to recover sums from third parties causing an insured loss to an insured.

Article 25 of the Insurance Act of Japan provides the following effects.

• When an insurer has paid an insurance claim, the insurer shall be subrogated with respect to any claim against a third party acquired by an insured due to the occurrence of damages arising from an insured event (the “Insured’s Claim”).
• The maximum amount of subrogation is the lesser of:
1. the amount of the insurance payment made by the insurer; or
2. the amount of the Insured’s Claim (if the amount of the insurance payment made by the insurer falls short of the amount of damages to be compensated, the amount that remains after deducting the amount of the shortfall from the amount of the Insured’s Claim).
• If the amount of the insurance payment falls short of the amount of damage to be compensated, the insured’s right to receive payment of the un-subrogated portion of the Insured’s Claim shall have priority over the subrogated claim.

Name

Under Article 25 of the Insurance Act, the Insured’s Claim is transferred to the insurer by operation of law when the insurer has paid the insurance claim. Accordingly, the claim is exercised in the name of the insurer.

Type of Litigation

There have not been drastic changes in the type of litigation in the year up leading up to August 2023.

The war in Ukraine has not affected the types of litigation in Japan. There have been no other developments that have affected the type of proceedings in Japanese courts.

Amount of Litigation

According to court statistics, the number of ordinary civil and administrative litigation cases in 2022 remained at the same level as in 2021, while there was a 1.7% increase in the number of civil execution cases and a 3.9% decrease in the number of bankruptcy cases compared to the previous year.

Changes in social and economic conditions can cause new types of disputes to be brought before the Japanese courts. For example, a Japanese individual investor filed a lawsuit against a Japanese securities company, seeking damages allegedly suffered in relation to the Swiss authorities’ announcement that Credit Suisse’s AT1 bonds would be made valueless in March 2023. There are signs of a further class-action lawsuit being filed within 12 months, but it is yet unclear how large it will be.

Generally speaking, however, Japanese individuals and companies prefer to resolve disputes through negotiation, so it may take some time before disputes are brought before the courts. In addition, it can take even longer for the court’s decision to be rendered in the form of a judgment, as Japanese court proceedings are time-consuming.

The authors are unaware of any specific coverage issues or test cases deriving from COVID-19, the war in Ukraine, or otherwise.

Insurance Cover

In a broad sense, the COVID-19 pandemic and the war in Ukraine have affected the scope of insurance coverage available.

On 10 April 2020, the Japanese Financial Service Agency (FSA) requested insurance trade associations to take active measures to protect policyholders exposed to the risk of COVID-19. In response, some insurers introduced a retrospective revision of their insurance products to cover COVID-19-related losses and expenses, while others decided to apply accidental death clauses to COVID-related deaths. In addition, insurers have developed various new products covering COVID-19-specific losses such as loss of earnings due to temporary closure or shortening of business hours and facility disinfection costs.

Meanwhile, the war in Ukraine has led to major Japanese insurers suspending war and strike coverage from cargoes carried near Ukraine in response to reinsurance trends.

Appetite for Risk

There is no evidence of published items that indicate that the pandemic or the war in Ukraine changed appetites for risk within Japan.

The Effect of Climate Change on Underwriting

The General Insurance Association of Japan, a trade association representing non-life insurance companies licensed in Japan, established its Climate Change Response Plan in July 2021. The Plan states that its members shall:

• contribute to relieving and responding to climate change risks and assist in a smooth transition into a sustainable society; and
• aim for a decarbonised society by curbing their emission of greenhouse gases.

Various insurers have issued or amended their own climate change response papers to further the association’s agenda. For example, in June 2022, a major insurer announced that by 2025 they would stop underwriting, investing in or lending to businesses relying mainly on coal that have no greenhouse gas reduction plans.

The Effect of Climate Change on Insurance Litigation

Particular court precedents showing a connection between climate change and insurance litigation cannot be found.

In Japan, the Act on the Protection of Personal Information has been in full force since 2005.

With regard to underwriting, the following apply.

• Following recommendations by the Basic Policy on the Protection of Personal Information (Cabinet Decision of 2 April 2004, promulgated under delegation by said Act), non-life and life insurance companies have established and published personal information protection policies, which include the purpose of use of personal information, types of personal information to be obtained, methods of obtaining personal information, provision of personal information, protection and management of personal information and requests for disclosure, correction and deletion of personal data. Each insurance company carries out underwriting work in accordance with their respective personal information protection policy.
• Article 20(2) of the said Act prohibits the acquisition of sensitive personal data (race, creed, social status, medical history, criminal and victim records, etc), except with the prior consent of the subject individual or as provided by the Act. Thus, insurers must obtain prior consent when acquiring such information.
• Article 28(1) of the said Act prohibits the provision of personal data to third parties in foreign countries, except with the prior consent of the individual or as provided by the Act. In obtaining such consent, certain information such as the data protection laws in that foreign country must be provided to the individual. Thus, insurers must provide such information and obtain prior consent when it will conclude reinsurance contracts with foreign reinsurers.

With regard to litigation, the following apply.

• Insurance companies must maintain a high level of information management because they handle highly sensitive information such as an individual’s physical characteristics. No court precedents regarding disputes over information management could be found.
• No court precedents regarding insurance claims over leaks of personal information could be found.
• A traffic accident victim is entitled to directly claim against the perpetrator’s insurer under the Act on Securing Compensation for Automobile Accidents (see 4.6 Third-Party Enforcement of Insurance Contracts). In such cases, the victim may dispute whether they gave consent to the insurance company’s obtaining a medical certificate from the victim’s hospital. This is considered to be mainly a question of fact-finding, and occasionally it has been found that the victim gave consent with regard to one hospital but not another. The courts pay due respect to the subject individual’s right to privacy when considering such issues.

The Code of Civil Procedure of Japan was amended in May 2022, introducing:

• the digitalisation of court procedures; and
• “fast track” proceedings allowing for a quicker resolution to court disputes.

As of August 2023, the date of enforcement of the revised Code has not been fixed.

Under the current regime, the parties must, in principle, file court submissions by paper, and formal hearings must be attended in person. The amendment will make it possible to commence suit, file submissions, and inspect court files electronically without resorting to paper. It will also allow court hearings and witness examinations to take place electronically.

Also, under the current regime, there are no mandatory limits on the time by which litigation must be concluded. Although there is a law requiring the first-instance courts to aim for the conclusion of proceedings within two years, it is a best-effort provision which cannot be enforced. Further, ordinary litigations are subject to two appeals. The amendment will make it possible for the parties to agree to apply for “fast track” proceedings, whereby the proceedings must conclude within six months from the date of the first hearing, and a judgment issued within one month from the conclusion of the proceedings. A “fast track” judgment cannot be appealed unless the claim was dismissed without prejudice to the merits. The draftsmen anticipated “fast track” proceedings to be utilised in cases where the points of dispute are limited to the interpretation of contractual clauses or the application of law. As such, they may prove helpful in insurance coverage disputes.

However, the “fast track” has certain limitations. First, the proceedings are subject to a court determination that it would not prejudice fairness or proper procedure. The proceedings may not be utilised for consumer and individual labour disputes. Further, any one of the parties has the right to demand a switch to ordinary procedure. In addition, a losing party may file an objection against a “fast track” judgment within two weeks from service, upon which the proceedings will revert to the position before hearings were concluded and transition into ordinary litigation.