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2010 MarsdenLR 4402
HIGH COURT KUALA LUMPUR
PEREMBUN CONSORTIUM & ANOR – Appellant
Versus
AXA AFFIN GENERAL INSURANCE BERHAD – Respondent
[Suit No: D-22-1652-2009]
The court ruled that damages from the flood were covered under the insurance policy as the works were not 'put into service' at the time of loss, emphasizing the contra proferentum principle in contract interpretation.
Headnote:(A) Contractor's All Risks Insurance Policy - Coverage terms and liability - Claim of RM16,704,400 for flood damage repudiated by insurer on grounds of works being 'taken over' or 'put into service' - Court found works not taken over as per issued completion certificates. (Paras 24-28, 36-49)
(B) Contra proferentum rule - Court reaffirmed interpretation principles where ambiguous contract terms are construed in favor of the insured - Coverage continued despite partial completion due to maintenance provisions in the policy. (Paras 48-54)
Facts of the case:
The second plaintiff suffered significant damages to ongoing construction works during a flood on December 19, 2006. The plaintiff's claim under the insurance policy was denied by the defendant, claiming work had been 'put into service.'
Findings of Court:
The court ruled that key works had not been completed and thus were covered under the insurance policy during the flood incident, confirming the defendant's liability for damages.
Issues: The critical issue was whether the construction works had been 'taken over' or 'put into service' at the time of the flood.
Ratio Decidendi: The court emphasized that since the policy included an extended maintenance cover, the loss was still actionable under the terms of the insurance despite being completed in parts.
Result: The defendant was held liable for damages claimed by the second plaintiff.
| Table of Content |
|---|
| 1. insurance claim specifics and background. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 2. defendant's denial of liability. (Para 11) |
| 3. plaintiff's evidence of damages and operations. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18) |
| 4. defendant's evidence regarding policy and coverage. (Para 19 , 20 , 21 , 22) |
| 5. court's determination of project status. (Para 24 , 25 , 26 , 27 , 28) |
| 6. analysis of service status of project works. (Para 29 , 30 , 31) |
| 7. precedent case interpretation. (Para 34 , 35 , 36 , 37 , 38 , 39 , 40) |
| 8. contra proferentum principle on policy interpretation. (Para 49 , 50 , 51) |
| 9. conclusion on policy coverage. (Para 52 , 53 , 54 , 55 , 56) |
| 10. conclusion and liability determination. (Para 58) |
GROUNDS OF DECISION
1. The second plaintiff, Perembun (M) Sdn. Bhd. ("the second plaintiff") claim against the defendant, Axa Affin General Insurance Berhad for a sum of RM16,704,400.00 from the defendant under the Contractor's All Risks Insurance Policy ("CAR Policy") for the loss or cost of repairing the damaged works suffered by the plaintiff as a result of a flood that occurred on 19.12.2006.
Background Facts
2. By a Consortium Agreement, the second plaintiff and Road Builder (M) Sdn Bhd agreed to form a consortium known as Perembun Consortium for the purposes of bidding and tendering for a project by the Government of Malaysia described as "Menaiktaraf laluan 1 dari Gemas ke Ayer Hitam, Johor Secara Deferred Payment Scheme" ("the Project").
3. By a letter of award dated 22.5.2002, the Project was awarded by the Government of Malaysia to Perembun Consortium subject to the terms and conditions stated in the letter. Clause 9 of the letter of award states inter alia :
"Untuk makluman tuan, perlaksanaan projek ini perlu dilaksanakan secara berperingkat bagi mengelakkan kesesakan lalulintas dan kerumitan kepada pengguna jalan raya ...."
4. By a further letter dated 24.5.2002, Jabatan Kerja Raya Malaysia (JKR) informed Perembun Consortium that their tender has been accepted subject to the terms and conditions stated therein. Clause 6 of the letter states:
"Sebelum tuan dibenarkan memulakan kerja-kerja diatas, tuan adalah diarahkan untuk mengambil dan mengemukakan ke pejabat ini dokumen-dokumen seperti berikut:
c) Polisi Insurans Untuk Kerja (Insurance Policy for the Works)
Polisi ini hendaklah dikeluarkan oleh Syarikat Insurans yang diakui dan diambil diatas nama Kerajaan Malaysia dan Kontraktor berharga RM214,950,000.00 bermula dari tarikh 20.6.2002 hingga 19.6.2005 (tempoh kontrak) untuk menanggung liability "against loss and damages by fire, lightning, explosion, storm, tempest, flood, ground subsidence, bursting or overflowing of water tanks, apparatus or pipes ....... all works executed and all unfixed materials and goods, delivered to or placed adjacent to the Works and intended therefore ...."
5. By a letter of award dated 27.9.2002, Perembun Consortium awarded part of the works in particular works from CH. 0.00 to CH. 65,000 to the plaintiff and works from CH.65,000 to CH. 120,000 to Road Builder.
6. Pursuant to the terms of the Letter of Award and the JKR letter, the plaintiff applied to the defendant for insurance coverage as required by the authorities. On 23.7.2002, the defendant issued a CAR Policy No. CCX/01001447/64/06 (Exhibit (P2) & (Exhibit P2A) (the Schedule attached to the Policy) in favour of the plaintiff and Road Builder to cover the construction period from 20.6.2002 to 19.6.2005 and maintenance period from 20.6.2005 to 19.6.2007 and subject to the terms and conditions stated therein.
7. By endorsements subsequently issued by the defendant evidenced in Exhibits P3, PSA, P3B and P3C , the period of insurance was eventually extended to cover construction period from 20.6.2002 to 18.6.2007 and maintenance period from 1.1.2007 to 15.4.2009.
8. The Insurance Policy also contained an "Extended Maintenance Cover" clause Exhibit (P2A) which state as follows:
"It is agreed and understood that otherwise subje
