Recently, the Beijing Financial Court reached a verdict in a dispute concerning a property insurance contract for a new energy vehicle, providing clarity on the criteria for determining a “constructive total loss” of the power battery. On August 10, 2024, Mr. Zhang was driving his new energy vehicle when it encountered an accident on a flooded road, leading to water damage. The vehicle was insured under a motor vehicle loss insurance policy with a coverage amount of slightly over 60,000 yuan. Following the accident, Mr. Zhang promptly reported the incident, and the insurance company sent personnel to inspect the damage. They agreed to have a repair facility disassemble the lithium-ion power battery for a loss assessment.

Upon disassembly, it was found that water had infiltrated the battery, causing damage to its core components. This necessitated the replacement of parts such as the power battery system assembly. The material costs alone surpassed 180,000 yuan, significantly exceeding the insured amount. Mr. Zhang also incurred a 3,000-yuan disassembly fee. Given that the repair costs far exceeded the vehicle's actual value, Mr. Zhang decided to scrap the vehicle for recycling and completed the deregistration process, receiving 2,500 yuan as the residual value of the scrapped vehicle.

Subsequently, Mr. Zhang applied to the insurance company for compensation based on a constructive total loss and requested reimbursement for the disassembly fee. However, the insurance company contended that, according to photos from the accident scene, only the vehicle's chassis was submerged. They argued that since the battery itself was waterproof, it should not have sustained damage. Furthermore, based on the insurance policy terms, when both parties fail to agree on a constructive total loss, they should jointly entrust a qualified third-party assessor for evaluation. The insurance company claimed that Mr. Zhang had unilaterally scrapped the vehicle, making it impossible to conduct an assessment, and therefore, the adverse consequences should be borne by him.

After failed negotiations, Mr. Zhang filed a lawsuit against the insurance company in the Pinggu District People's Court of Beijing, demanding compensation of over 60,000 yuan for vehicle loss and 3,000 yuan for the disassembly fee. The Pinggu District Court ruled that the insurance contract between Mr. Zhang and the insurance company was legally valid. Since the vehicle was involved in an insured accident during the policy period, and considering evidence such as the 'Accident Vehicle Quotation' and the 'Scrap Motor Vehicle Recycling Certificate,' it was sufficient to conclude that the vehicle's repair costs exceeded its market value, making repairs uneconomical and thus qualifying it as a constructive total loss.

According to Article 59 of the Insurance Law of the People's Republic of China, if the insurer pays the full insured amount and the insured amount equals the insured value, all rights to the damaged insured property shall transfer to the insurer. As Mr. Zhang received 2,500 yuan as compensation for the scrapped vehicle, the insurance company's request to deduct this residual value from the insured amount was legally justified. Therefore, the insurance company was ordered to pay a total of over 60,000 yuan in vehicle insurance compensation. The disassembly fee, being a necessary expense incurred for loss assessment, was to be borne by the insurance company.

In conclusion, the Pinggu District Court ordered the insurance company to pay Mr. Zhang over 60,000 yuan for vehicle loss and 3,000 yuan for the disassembly fee. Dissatisfied with the first-instance judgment, the insurance company appealed to the Beijing Financial Court.

The Beijing Financial Court held that the core dispute in this case centered on whether it was reasonable to compensate based on the constructive total loss amount. The doctrine of constructive total loss is a principle in property insurance, grounded in economic rationality. When the repair costs of an insured property reach or exceed its insured value, insisting on repairs would result in a waste of social resources and undermine the insurance contract's function of compensating for actual losses. In such cases, the insured may claim compensation for the total loss.

The power battery system of new energy vehicles is highly technologically integrated and concentrated in value, with a damage mechanism and repair cost structure significantly different from those of traditional fuel vehicles. Unlike traditional fuel vehicles, where the focus of loss assessment is on mechanical components such as the engine, transmission, and chassis, the core value of new energy vehicles lies in the 'three electric' systems—power battery, electric motor, and electronic control. The battery assembly typically accounts for about half of the vehicle's total value and is the primary focus during loss assessment.

In this case, the repair quote exceeded 180,000 yuan, far surpassing the insured amount of over 60,000 yuan. Objectively, the vehicle had lost its repair value and met the criteria for a constructive total loss. The insurance company emphasized that only the vehicle's chassis was submerged and that the battery itself was waterproof, suggesting it should not have been damaged. In response, the court stated that the high technological integration and concentrated value of core components in new energy vehicles render traditional visual loss assessment methods inadequate for reflecting true damage. While water damage in fuel vehicles primarily affects the engine, new energy vehicles cannot be judged solely based on appearance and chassis conditions. Even if there is no visible damage, professional disassembly is necessary to inspect the battery's sealing, high-voltage insulation, and other aspects, with hidden circuit faults also included in the loss assessment. The extent of vehicle damage should be determined based on the conclusions of professional disassembly inspections rather than simply inferred from appearance or waterproof ratings.

Regarding the insurer's action in agreeing to disassemble for loss assessment and then refusing compensation, the court held that Mr. Zhang promptly reported the incident after the vehicle was submerged, and the insurance company's personnel inspected the scene and agreed to have the repair facility disassemble the battery for loss assessment, with their own loss adjuster present. By exercising its right to inspect, participating in, and agreeing to the disassembly for loss assessment, the insurer had jointly completed a preliminary loss assessment with the insured, constituting recognition of the loss. The insurer's subsequent refusal to pay on procedural grounds, such as 'the insured unilaterally scrapped the vehicle' and 'failure to jointly entrust a third-party assessment,' contradicted its prior actions and violated the principle of utmost good faith in insurance contracts.

Given that the vehicle's repair costs far exceeded the insured amount and repair was impossible, the first-instance judgment recognizing a constructive total loss represented a balanced discretion between the interests of both parties. In conclusion, the Beijing Financial Court dismissed the appeal and upheld the original judgment.