Underwriting Property Preservation Security Insurance for Cross Border Claims
Property preservation security insurance requires onshore Chinese guarantees backed by enforceable offshore bank collateral to mitigate cross-border subrogation risks.
Over-Preservation Tort Liability
Meaning
Legal responsibility for damages that arise when a claimant freezes assets far exceeding the value of their claim is a protection for defendants. This over-preservation tort liability ensures that the power to seize assets is used proportionately and fairly. If a plaintiff locks up more property than is necessary to satisfy a potential judgment, they may be sued for the resulting losses.
The court evaluates whether the applicant acted with reasonable care when requesting the seizure.
Excessive Freezing
A claimant must provide a specific value for the assets they wish to preserve based on the amount of their legal claim. Under over-preservation tort liability, freezing an entire factory’s operation for a minor debt would be considered a violation of the defendant’s rights. The court is supposed to limit the freeze to specific bank accounts or items of property.
If the court accidentally freezes too much, the plaintiff has a duty to request a partial release once the error is discovered.
Damage Assessment
The defendant must prove that the excessive seizure caused them a quantifiable financial loss. This over-preservation tort liability covers lost profits, interest on blocked funds, and the cost of missed business opportunities. Evidence such as cancelled contracts or bank statements showing the inability to pay suppliers is required.
The court will only award damages for the portion of the loss that was directly caused by the excess amount frozen.
Fault Proof
The mere fact that more was frozen than necessary does not always lead to a successful claim. For over-preservation tort liability to apply, the plaintiff must be shown to have acted with intent or negligence. If the plaintiff provided accurate information but the court made a mistake, the liability might not attach to the individual.
However, providing false information about the value of assets or the size of the claim will almost always lead to a judgment against the applicant.