The insurer is not liable for indemnification when the insured enters a judgment or settlement without the insurer's consent.

(Datuk Mohd. Saari Bin Yusoff H)

1. In a Third Party Notice (End. 19) , the defendant claims against the second third party the following:

"The defendant claims against you, the 2nd named Third Party an indemnity against the plaintiffs claim and the costs of this action on the rounds that you have wrongfully denied liability under the Marine Goods-In-Transit/Carrier's Liability Insurance Policy No: 05 Q201582 MOC taken out by the defendant from you."

Brief facts

The plaintiff had engaged the defendant, a carrier company, to convey machineries from its factory at Sg. Petani, Kedah to a project site at Bukit

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Kemuning Kelang, Selangor. On 10 February 1993 whilst the motor lorry WCM 5813 loaded with the plaintiff's machineries was travelling at 14 1/2 m.s. KL/Kajang Rd, the lorry overturned, resulting in the damage to the machineries.

3. The upshot of the motor accident is that the plaintiff filed this suit against the defendant for damages under the contract of bailment. The defendant in turn filed a third party claim against the driver and the insurer/Commercial Union Assurance (M) Sdn. Bhd . Then on 23 April 1998, the plaintiff and the defendant agreed to settle the plaintiffs claim by entering into a consent judgment whereby the defendant agreed to pay the plaintiff RM 100,000/- as damages and RM 10,000/- as cost.

4. The defendant had withdrawn its claim against the driver. The present dispute is regarding the third party claim against Commercial Union/insurer.

Issue

5. Issue for determination is whether Commercial Union is liable to indemnify the defendant.

Finding

6. It is not in dispute that the defendant and Commercial Union are the insured and the insurer respectively under Marine Policy No. 05 Q201582 MOC (p. 9 to 14 of Ex. ABD "3") (hereinafter referred to as "the said policy"), It is a liability policy as opposed to non-liability policy where default need not be proved. Under the terms and conditions of the said policy, the following is relevant:

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"The Underwriters agree to indemnify the Assured for any sum or sums paid by the Assured to owners of the goods carried by reason of the Assured becoming legally Iiable, as common carrier/freight forwarder, for any claims or damages to the goods carried, where such liability is in consequence of matters arising from an accident during the period of this issurance, subject to the conditions and exclusions stated herein." (underline added)

7. The words "legally liable" were equivalent to "responsible in law" and in the context of liability insurance, ordinarily means liability to pay a definite sum imposed by a final judgment against an insured or by an award or a settlement by way of an agreement (see Malaysian National Insurance Sdn Bhd v Lim Tiok .

8. In Post Office v Norwich Union Fire Insurance Society Ltd (1976) 2 Q.B. 363, Lord Denning at page 373 said:

"The Policy says that "the company will indemnify the insured against all sums which the insured shall become legally liable to pay as compensation in respect of loss of or damage to property. It seems to me that the insured only acquires a right to sue for the money when his liability to the injured person has been established so as to give rise to a right of indemnity. His liability to the injured person must be ascertained and determined to exist, either by judgment of the court or by an award in arbitration or by agreement. Until that is done, the right to an indemnity

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does not arise. I agree with the statement by Devlin J in West Wake Price & Co. v. Ching. The assured cannot recover anything under the main indemnity clause