Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2024 MarsdenLR 2642

HIGH COURT MALAYA PENANG
DATO ABDUL SUBAHAN MYDIN PITCHAY & ANOR – Appellant
Versus
KHOO KHAY OON & ANOR – Respondent
[Civil Suit No: PA-22NCVC-87-05-2023]

Petitioner Advocates:Rajivan Nambiar,Nur Aiman Sharizal ,Respondent Advocate: Elson Beh Hong Shien,Joel Ng Chung Ern

A life insurance policy cannot be revived after the death of the insured, and an insurance agent does not owe a fiduciary duty to prevent policy lapsation.

Headnote:(A) Financial Services Act 2013 - Sections 133 and 164 - Life Insurance Policy - Death benefit claim rejected due to policy lapse - Policy lapsed on 1 January 2022, deceased passed on 4 February 2022 - Claimants argued policy revived by payment of RM270.00 post-lapse - Court found no valid revival post-death, emphasizing impossibility of insuring a deceased life. (Paras 11, 13, 55, 66, 71)

(B) Duty of Care - Insurance Agent's obligations - Court ruled no fiduciary duty owed by agent to ensure policy maintenance - Agent's communications sufficient under policy terms, no breach established. (Paras 28, 29, 30, 35, 39)

Facts of the case:
Plaintiffs claimed death benefits under a lapsed policy, asserting the policy was revived by a late premium payment. The deceased had been informed of the policy's status and implications of lapsation.

Findings of Court:
The court found the policy lapsed prior to the deceased's death and that the late payment could not revive it.

Issues: Whether the policy was in force at the time of death and if the agent owed a duty to prevent lapsation.

Ratio Decidendi: The court determined that an insurance policy cannot be revived post-death and that the agent had fulfilled communication duties.

Result: Claim dismissed; costs awarded to defendants.

Judgement Key Points

Key Points: - The policy could not be revived after the life assured's death; revival requires alive life to insure (!) (!) (!) - A life insurance policy cannot be revived post-death and payments after death do not revive the policy (!) (!) (!) - The insurance agent does not owe fiduciary or duty of care to prevent lapsation of the policyholders; duties align with principal insurer and confidentiality; no direct duty to the deceased or nominees (!) (!) (!) (!) (!) (!) - The payment of RM270.00 by the deceased after lapsation did not revive the policy; waiver/estoppel not established; revival requires revival formalities and healthy life at time of revival (!) (!) (!) (!) (!) (!) - The policy terms require in-force status at death for death benefit payable; lapse defeats eligibility (!) (!) (!) - Notices and communications via email/SMS acceptable under policy terms; not required to ensure reading by policyholder, but communications sufficed to inform (!) (!) (!) (!) - Court dismissed plaintiffs’ claims and found costs against plaintiffs and in favor of defendants (!)

What is the effect of policy lapse on death benefit claims under Malaysia's life insurance contracts?

What is the extent of an insurance agent's fiduciary or duty of care to prevent lapsation?

What are the limitations on reviving a lapsed life insurance policy after the death of the life assured?

JUDGMENT

Quay Chew Soon J:

Introduction

[1] This action arose from a rejection of a death benefit claim of a life insurance policy ("policy") of an individual named Nazrul Affendi bin Abdul Subahan ("deceased"). During his lifetime, the deceased had purchased the policy from the 2nd Defendant ("D2"). The 1st Defendant ("D1") is an insurance agent for D2.

[2] The Plaintiffs are the nominees of the deceased under the policy. The 1st Plaintiff is the father of the deceased. The 2nd Plaintiff is the wife of the deceased.

[3] After a full trial, I dismissed the Plaintiffs' claim. Here are the grounds of my judgment.

Background Facts

[4] The Plaintiffs' claim is based on the policy issued by D2 to the deceased. The policy was issued upon the deceased's application vide a Life Insurance Regular Premium Proposal Form dated 1 November 2013 ("proposal form").

[5] It was stated by the deceased in the proposal form that: (a) the deceased's mobile telephone number is '019-4444440'; (b) the deceased's email address is 'dgresources@yahoo.com'; and (c) the deceased's preferred mode of contact is 'Mobile Tel.' and 'Email'.

[6] In April 2019, the deceased redeemed units from the Investment Linked Funds vide his application for withdrawal dated 17 April 2019 ("withdrawal application"). A sum of RM141,900.00 was withdrawn and paid to the deceased's CIMB Bank account.

[7] By signing the withdrawal application, the deceased declared that:

(a) he fully understands the implication to the policy if he chooses to leave the minimum fund value of RM1,000.00 in the Basic Unit Account (BUA) and Protection Unit Account (PUA) after a withdrawal request, which includes the risk that the policy will lapse;
(b) he understands and has considered all the implications of making withdrawal(s) from the policy. This may include insufficient balance fund value to pay for future insurance charges, resulting in policy lapse and loss of insurance coverage. He is aware that such risk is higher if he chooses to keep the balance fund value at the minimum;
(c) he is aware that if there is insufficient balance fund value, he may need to make additional payment when paying his premium to fund the increasing insurance charges, so that he can continue to enjoy the same insurance coverage; and
(d) he has read, understood and agreed to the terms and conditions for making the withdrawal application.

[8] Consequent upon the deceased's redemption of the units and realisation of the cash amount from the Investment Linked Funds, the No-Lapse Guarantee under the policy was revoked in April 2019 pursuant to cl 11.3(c) of the policy provision. The aforesaid redemption and withdrawal by the deceased, described as 'Withdrawal on/Pengeluaran pada 19 April 2019', was reflected in the 2019 Annual Statement for the policy. It was further stated in the 2019 Annual Statement that to restore the sustainability of the policy to its policy term, the deceased need to pay a single premium top-up of RM60,673.00.

[9] On 1 January 2022, the policy lapsed due to the deceased's failure to pay the one-time top-up premium of RM270.00 by 31 December 2021. In this regard:

(a) On 4 December 2021, D2 had informed the deceased, vide its letter sent by email dated 4 December 2021 ("pre-lapse letter") to the deceased's email address, that the policy does not have sufficient cash value to cover the upcoming insurance charges and service charges. And that if there is no top-up amount received by 31 December 2021, the policy will lapse on 1 January 2022.
(b) As per D2's instructions, D2's service provider, Moblife.tv Sdn Bhd ("Moblife"), had also notified the deceased of the pre-lapse letter by SMS (short message service) to the deceased's mobile telephone number on 6 December 2021.
(c) Thereafter on 17 December 2021, Moblife had informed the deceased via SMS that the policy will lapse soon due to insufficient cash value. And that a one-time top-up of RM270.00 will be required for there to be continued coverage.

[10] D2 did not receive t

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