The insurer must prove fraud or non-disclosure beyond reasonable doubt, as material ambiguity in health inquiries shields the insured from liability.

Headnote:(A) Insurance Act, 1996 - Duty of Disclosure - The plaintiffs, as administrators of the estate of the deceased, sued for damages under the MRTA Policy after the defendants disputed liability due to alleged non-disclosure of diabetes. The court found that the deceased was not adequately informed before signing the blank MRTA form, and the questions regarding health were ambiguous, failing to reach the standard necessary to prove fraud in the disclosure. (Paras 29-45)

(B) The insurer's obligation in a contract of insurance requires utmost good faith, where both parties must disclose all relevant material information. Non-disclosure, particularly under misrepresentation allegations, cannot be considered unless proven to a high degree of certainty. (Paras 20, 35)

Facts of the case:
The plaintiffs claimed for RM367,961 from the defendants post the death of the insured due to heart disease, which the defendants denied, citing the insured failed to disclose his diabetes in the application period. (Paras 1-5)

Findings of Court:
The deceased could not be held liable for fraud due to insufficient communication regarding the health declaration. Given the ambiguity, the court ruled in favor of the plaintiffs, allowing their claim against the second defendant while dismissing the claim against the first defendant. (Paras 46)

Issues: The court addressed whether there was a material non-disclosure by the deceased and whether fraud was established by the defendants. (Paras 17-18)

Ratio Decidendi: The burden of proof lies with the insurer, and vague questions regarding health cannot place fault on the insured for nondisclosure, particularly when the insured could not adequately understand the questions posed. (Paras 29, 42-45)

Result: The plaintiffs' claim against the second defendant is allowed; the claim against the first defendant is dismissed.

Table of Content
1. plaintiffs' claim based on insurance breach. (Para 1 , 2 , 3 , 4 , 5 , 6)
2. defendant's argument on non-negligence. (Para 7 , 8 , 9 , 10)
3. second defendant’s stance on non-disclosure. (Para 11 , 12 , 13 , 14 , 15 , 16)
4. issues to be determined by the court. (Para 17 , 18 , 19)
5. duty of disclosure in insurance contracts. (Para 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 , 28)
6. impact of policy duration on disclosure. (Para 29 , 30 , 31 , 32 , 33)
7. definition and proof of fraud in contracts. (Para 34 , 35 , 36 , 37 , 38 , 39 , 40)
8. court's findings on fraud not proven. (Para 41 , 42 , 43 , 44)

JUDGMENT

Hanipah Farikullah JC:

[1] The 1st plaintiff is the lawful wife of Heng Chong Teck, deceased and the 1st plaintiff and the 2nd plaintiff are the joint administrators of the estate of Heng Chong Teck, the deceased. The 1st defendant is a licensed financial institution. The second defendant is a licensed insurance company. The plaintiffs claim against the defendants for damages suffered as a result of breach of insurance policy No 11518 under Master Policy No EGS 10148 by the defendants. The defendants refused to pay on the grounds that there was a material non-disclosure and the plaintiffs had fraudulently failed to disclosure a material fact that he was suffering from diabetes.

Background Facts

[2] On 30 December 2006 the 1st plaintiff's husband (the deceased) died of ischemic heart disease. The plaintiffs furnished proof of the death of the deceased and requested the said sum of RM367,961, but the defendants repudiated liability on the ground of non-disclosure of a material fact by the deceased in the MRTA Policy form dated 28 July 2003. The plaintiffs sued the defendants for the said sum being the insured amount for the housing loan and interest thereon.

The Plaintiff's Case

[3] The first plaintiff, Tan Mooi Sim (PW1) testified that on 28 July 2003, the deceased and her attended to the office of the 1st defendant for the purpose of applying for a housing loan to finance the purchase of one unit of two storey terrace house. The deceased and PW1 were informed the Wong May Cy (DW1), a Personal Banking @ Officer of the 1st defendant that they were required to purchase a MRTA Policy to cover the life of the deceased so that in the event the deceased pass away during the period of the housing loan, the housing loan would be paid by the insurance company. Subsequently PW1 said that the deceased was given a blank MRTA Policy form by DW1 and the deceased signed the blank form as he could not read and write in English. PW1 informed the court that DW1 did not go through and explain in detail the contents of the MRTA form to the deceased before he signed the blank form.

[4] According to PW1, vide a letter dated 7 November 2003, the 2nd defendant informed the deceased that his application in respect of the MRTA Policy for the amount of RM367,961 had been approved and effective on 20 November 2003.

[5] It is an agreed fact that on 30 December 2006, almost three years after the MRTA Policy was taken, the deceased died of ischemic heart disease while playing volleyball. The plaintiffs furnished proof of the death of the deceased and requested the sum of RM367,961 from the 2nd defendant but vide a letter dated 11 December 2007, the 2nd defendant repudiated liability on the ground that the deceased failed to disclose material facts in the proposal form in respect of the deceased health condition that he was suffering from diabetes since 2002.

[6] Hence the plaintiffs commence this action against the 1st defendant as agent of the 2nd defendant for negligence in failing to explain to the deceased the contents of the MRTA Policy form before the deceased signed it on 28 July 2003 when DW1 knew that the deceased could not read, write or speak in English and against the 2nd defendant for failing to pay the insured sum of RM343,676 together with interest and costs.

1st Defendant's Case

[7] The 1st defendant denies being negligent as alleged by th

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2010 MarsdenLR 2765

HIGH COURT MALAYA KUALA LUMPURTAN MOOI SIM & ANOR – AppellantVersusUNITED OVERSEAS BANK (MALAYSIA) BHD & ANOR – Respondent[Suit No: D-22-2072-2008]

The insurer must prove fraud or non-disclosure beyond reasonable doubt, as material ambiguity in health inquiries shields the insured from liability.

Cases Referred (2)

HIGH COURT MALAYA KUALA LUMPUR
TAN MOOI SIM & ANOR – Appellant
Versus
UNITED OVERSEAS BANK (MALAYSIA) BHD & ANOR – Respondent
[Suit No: D-22-2072-2008]