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2011 MarsdenLR 2809
ZAINUN ALI, RAMLY ALI, BALIA YUSOF WAHI
OVERSEAS ASSURANCE CORPORATION (MALAYSIA) BHD – Appellant
Versus
MSIG INSURANCE (MALAYSIA) BHD – Respondent
In insurance, a right of contribution only arises from a legal obligation to pay. Voluntary payments made without legal liability do not trigger claims for contribution.
Headnote:(A) Contribution in Insurance Law - Right of Contribution - Principle of Equitable Contribution - Exclusion Clauses - The case involves two insurance policies covering the same development project. The respondent paid the insured a claim but sought contribution from the appellant. The court found that both policies contained rateable proportion clauses, limiting liability to 50% each. The respondent's claim was denied, as the payment made was voluntary and there was no legal obligation under the policy. (Para 53, 54)
(B) Liability and Exclusions in Insurance Contracts - The court noted that loss resulting from defective design does not trigger coverage under the respondent's Fire Policy's exclusion clause. Accordingly, the claim was not compensable. (Para 48, 51)
(C) Equitable Principles - The principle that equity will not assist a volunteer was applied, stating that the respondent, having paid more than its legal liability, could not claim contribution from the appellant. (Paras 28, 54)
| Table of Content |
|---|
| 1. introduction and factual context of the case. (Para 1 , 2 , 3 , 4 , 5 , 6) |
| 2. arguments from both parties regarding contribution. (Para 7 , 8 , 9) |
| 3. court's findings on the conditions for contribution. (Para 10 , 11 , 12 , 13 , 14 , 15) |
| 4. principles of equitable contribution between insurers. (Para 16 , 17 , 18) |
| 5. clarifying rateable proportion clauses in insurance policies. (Para 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26) |
| 6. distinction between subsidence and settlement in context of policy coverage. (Para 27 , 28 , 29 , 30 , 31 , 32 , 33) |
| 7. analysis on responsibility for damages between the insurers. (Para 34 , 35 , 36 , 37 , 38 , 39) |
| 8. impact of design flaws on insured perils. (Para 40 , 41 , 42 , 43 , 44 , 45 , 46 , 47) |
| 9. final observations on misdirection and policy exclusions. (Para 48 , 49 , 50 , 51 , 52) |
| 10. conclusion on liability and result of the appeal. (Para 53 , 54) |
| 11. final conclusion and judgment by the court. (Para 55) |
Ramly Ali JCA:
(1) The assured, Perdana Parkcity Sdn Bhd, was involved in the development of a residential township comprising of 165 units of two storey terrace houses known as Desa Parkcity, in Mukim Batu, Kuala Lumpur.
(2) The respondent and the appellant had issued their respective and separate insurance policies to the insured in relation to the said development project. The respondent had issued a Fire Policy and the appellant had issued a Contractors All Risk Policy (CAR Policy) to the same insured.
(3) After the completion of the construction of various units of buildings in the township, cracks appeared in the two storey terrace houses at Phase 1B known as Nadia Parkhomes (the said damage). The cracks were discovered on 11 January 2006.
(4) After having been notified of the said damage by the insured, the respondent proceeded to appoint a firm of loss adjuster to investigate and access the loss. The loss adjuster recommended settlement of the insureds claim. Accordingly the respondent proceeded to indemnify the insured for a sum of RM1,011,838.31 for its total loss. The loss adjuster also recommended that the respondent to recover from the appellant by way of contribution.
(5) The appellant was first notified by this loss on 20 February 2006, however the respondents solicitor sought such contribution through its letter dated 2 March 2009. The appellant having refused to contribute, the respondent proceeded to file the present claim to seek contribution from the appellant in respect of the amount of RM522,838.31.
(6) On 10 December 2010, the learned High Court Judge, after a full trial held that the appellant was liable for a contribution and allowed the respondents claim for the sum prayed and costs of RM35,000 in lieu of taxation. Hence the present appeal before this court.
Respondents Contentions
(7) The respondents contention is that since the loss suffered by the insured was a peril insured under two policies, the obligation to compensate the insured for the loss falls equally upon the two insurers ie, the respondent and the appellant. The respondent further contended that upon the respondent indemnifying the insured for its total loss, the respondent is entitled under the doctrine of contribution in insurance law to recover half of the payment made to the insured, from the appellant.
Appellants Contentions
(8) The appellant on the other hand contended that the respondents claim for contribution from the appellant is not payable for the following reasons:
(a) the respondents Fire Policy does not respond to the claim made by the insured, as the respondents own geotechnical expert has identified the cause of the failure as "defective/faulty design" and "settlement" (as apposed to "subsidence") which does not trigger liability under the Fire Policy;
(b) there is no double insurance to give rise to the right of contribution against the appellant; and
(c) in any event, as the respondent has volunteered to pay 100% of the insureds claim when there was no legal or contr
