1. Employer's claim for insurance payouts following employee's death in motorcycle accident — Dispute over non-disclosure of policies and riding without a valid license under Financial Services Act 2013. (Para 3 , 4 , 11 , 12 , 13 , 14 )
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2024 MarsdenLR 566
HIGH COURT (TAIPING)
NOOR RUWENA MD NURDIN, JC
Kunasegaran al Vadevello – Plaintiff
Versus
The Pacific Insurance Bhd and another – Defendant
RAYUAN SIVIL NO AB-12BNCVC-2-03/2021, AB-12BNCVC-3-03/2021, AB-12BNCVC-4-03/2021 AND AB-12BNCVC-5-03/2021
Important Points
Deliberate or reckless misrepresentation by a consumer regarding material facts, such as the lack of a valid driving license, entitles an insurer to avoid a consumer insurance contract and refuse claims under the Financial Services Act 2013.
Subject
Insurance Law - Consumer Insurance / Misrepresentation
Act Referred
Financial Services Act 2013: S.129(1), S.5, S.6, S.7(1)(b), S.15, S.10, S.14
Evidence Act 1950: S.114(g)
Road Transport Act 1987: S.26(1), S.96(3), S.15(1), S.90(1)
Evidence Act 1950: S.114(g)
Road Transport Act 1987: S.26(1), S.96(3), S.15(1), S.90(1)
Headnote
(A) Financial Services Act 2013 - Schedule 9 - Consumer insurance contract - Pre-contractual duty of disclosure - Duty to take reasonable care not to make a misrepresentation - Remedies for deliberate or reckless misrepresentation - Insurer's right to avoid contract and refuse claims (Paras 29, 40, 58, 59)
(B) Road Transport Act 1987 - Section 26(1) - Requirement of valid driving license - Exclusion clauses in insurance policies - Riding without a valid license as an unlawful act triggering repudiation of liability (Paras 51, 54)
(C) Evidence Act 1950 - Section 114(g) - Adverse inference - Failure to call material witnesses - Not applicable where the party relying on the inference failed to put the witnesses in the stand (Paras 68, 70)
(D) Legal Maxims - Ex turpi causa non oritur actio - Application to claims founded on dishonest misrepresentation by the claimant (Para 75)
Facts of the case:
An employer took out several group personal accident policies for an employee. Following the employee's death in a motorcycle accident, the insurers refused to pay the claims. The repudiation was based on the employee's lack of a valid driving license and the employer's failure to disclose other insurance policies obtained for the same employee.
Findings of Court:
The court held that the policies were consumer insurance contracts. The employer had made dishonest misrepresentations regarding the employee's license status and the existence of other policies. The deceased was riding without a valid license, which constituted a breach of law and triggered the exclusion clauses of the policies.
Issues: Whether the insurance policies were consumer or non-consumer contracts; whether the employer breached the duty of disclosure under the Financial Services Act 2013; whether the exclusion clause for riding without a valid license was applicable; and whether the principle of ex turpi causa barred the claim.
Ratio Decidendi: The court reasoned that while the Financial Services Act 2013 modifies the duty of disclosure for consumers, it does not abolish the principle of uberrimae fidei. A deliberate or reckless misrepresentation of material facts entitles an insurer to avoid the contract. Furthermore, the requirement of a valid license under the Road Transport Act 1987 is a matter of public safety, and failure to possess one triggers exclusion clauses. The claim was further barred as it was founded on the employer's own dishonest misrepresentation.
Result: Appeals dismissed with costs.
(B) Road Transport Act 1987 - Section 26(1) - Requirement of valid driving license - Exclusion clauses in insurance policies - Riding without a valid license as an unlawful act triggering repudiation of liability (Paras 51, 54)
(C) Evidence Act 1950 - Section 114(g) - Adverse inference - Failure to call material witnesses - Not applicable where the party relying on the inference failed to put the witnesses in the stand (Paras 68, 70)
(D) Legal Maxims - Ex turpi causa non oritur actio - Application to claims founded on dishonest misrepresentation by the claimant (Para 75)
Facts of the case:
An employer took out several group personal accident policies for an employee. Following the employee's death in a motorcycle accident, the insurers refused to pay the claims. The repudiation was based on the employee's lack of a valid driving license and the employer's failure to disclose other insurance policies obtained for the same employee.
Findings of Court:
The court held that the policies were consumer insurance contracts. The employer had made dishonest misrepresentations regarding the employee's license status and the existence of other policies. The deceased was riding without a valid license, which constituted a breach of law and triggered the exclusion clauses of the policies.
Issues: Whether the insurance policies were consumer or non-consumer contracts; whether the employer breached the duty of disclosure under the Financial Services Act 2013; whether the exclusion clause for riding without a valid license was applicable; and whether the principle of ex turpi causa barred the claim.
Ratio Decidendi: The court reasoned that while the Financial Services Act 2013 modifies the duty of disclosure for consumers, it does not abolish the principle of uberrimae fidei. A deliberate or reckless misrepresentation of material facts entitles an insurer to avoid the contract. Furthermore, the requirement of a valid license under the Road Transport Act 1987 is a matter of public safety, and failure to possess one triggers exclusion clauses. The claim was further barred as it was founded on the employer's own dishonest misrepresentation.
Result: Appeals dismissed with costs.
Legal Category Hierarchy
- insurance law
- tort
- practice and procedure
Advocates:
Shuroma Guha Thakurta (Manjit & Co) for the appellant.
Ananth Shanmugam (Azim, Tunku Farik & Wong) for the Pacific Insurance Bhd.
Vinoshini Saminathan (Isharidah, Ho, Chong & Menon) for Berjaya Sompo Insurance Bhd.
Razlan Hadri Zulkifli (with Aina Shobri) (Gan Ho & Razlan Hadri) for Syarikat Takaful Malaysia Am Bhd.
S Suresh (Kanaga, Suresh & Co) for Allianz General Insurance Company (Malaysia) Bhd.
Shuroma Guha Thakurta (Manjit & Co) for the appellant.
Ananth Shanmugam (Azim, Tunku Farik & Wong) for the Pacific Insurance Bhd.
Vinoshini Saminathan (Isharidah, Ho, Chong & Menon) for Berjaya Sompo Insurance Bhd.
Razlan Hadri Zulkifli (with Aina Shobri) (Gan Ho & Razlan Hadri) for Syarikat Takaful Malaysia Am Bhd.
S Suresh (Kanaga, Suresh & Co) for Allianz General Insurance Company (Malaysia) Bhd.
Table of Contents
2. Plaintiff alleged waiver of disclosure duty and triviality of license absence — Insurers contended breach of uberrimae fidei and applicability of exclusion clauses for unlicensed riding. (Para 4 , 14 , 19 , 40 , 51 )
3. Plaintiff made dishonest misrepresentations regarding the deceased's license and other policies — Riding without a license constitutes an unlawful act triggering policy exclusion clauses. (Para 20 , 21 , 43 , 44 , 50 , 51 , 53 , 54 , 59 , 62 )
4. Dishonest misrepresentation by a consumer allows insurers to avoid consumer insurance contracts and refuse all claims under Paragraph 15, Schedule 9, Financial Services Act 2013. (Para 58 , 59 , 65 )
5. Appeals dismissed with costs. (Para 77 )
6. How is a consumer insurance contract distinguished from a non-consumer insurance contract under the Financial Services Act 2013?
A consumer insurance contract is one entered into, varied, or renewed by an individual wholly for purposes unrelated to that individual's trade, business, or profession. (Para 29 )
7. Does a basis clause remain effective in a consumer insurance contract?
No, Paragraph 10 of Schedule 9 of the Financial Services Act 2013 renders any basis clause in a consumer insurance contract of no effect, preventing representations from being converted into warranties. (Para 33 )
8. What is the remedy for a licensed insurer in the event of a deliberate or reckless misrepresentation by a consumer?
Under Paragraph 15, Division 2 of Schedule 9, if a misrepresentation is found to be deliberate or reckless, the licensed insurer may avoid the consumer insurance contract and refuse all claims. (Para 58 , 65 )
9. Can an insurer rely on an exclusion clause if the insured was riding without a valid license?
Yes, riding without a valid license is a breach of the law and constitutes an unlawful act, which justifies the insurer's reliance on specific exclusion clauses to repudiate liability. (Para 51 , 54 )
Noor Ruwena Md Nurdin JC:
GROUNDS OF JUDGMENT
INTRODUCTION
[1]Originally there were 4 appeals which were heard together by this Court. On 22.9.2023 this Court affirmed the decision of the Sessions Court in Taiping delivered on 26.2.2021 that had dismissed the Appellant’s claim against the Respondents with costs. Dissatisfied with this Court’s decision, the Appellant then filed 2 Notices of Appeals on 13.10.2023 in respect of Appeal Nos. AB-12BNCVC-2-03/2021 and AB-12BNCVC-3-03/2021 against THE PACIFIC INSURANCE BERHAD and BERJAYA SOMPO INSURANCE BERHAD, respectively. It has now come to my attention that the Plaintiff has been granted leave by the Court of Appeal on 10.1.2024 to file Notices of Appeal in respect of the other two cases against the other 2 insurers, namely AB-12BNCVC-4-03/2021 and AB-12BNCVC-5-03/2021 against SYARIKAT TAKAFUL AM (MALAYSIA) BERHAD and ALLIANZ GENERAL INSURANCE COMPANY (MALAYSIA) BERHAD, respectively.
[2]For convenience, I have prepared this Grounds of Judgment to encompass Appeals No. 2 and 3 then as they involved the same Plaintiff (Kunasegaran A/L Vadevello) but different insurance companies, in respect of the same subject-matter, which was one Raja A/L Krishnan (deceased) who was the Plaintiff’s employee. I will refer to the parties as the “Plaintiff” and “Defendant 1” (Pacific Insurance Berhad) and “Defendant 2” (Berjaya Sompo Insurance Berhad) since the trials were heard together by the Sessions Court. The Plaintiff took 4 separate actions against the four Defendants abovementioned. I will refer to SYARIKAT TAKAFUL AM (MALAYSIA) BERHAD and ALLIANZ GENERAL INSURANCE COMPANY (MALAYSIA) BERHAD as “Defendant 3” and “Defendant 4”, respectively. The Court has now updated the first page of the Grounds of Judgment dated 24.1.2024 only in respect of the status of the 4 appeals now that leave to appeal has been granted for Appeals No. 4 and 5 and also the date of this Grounds of Judgment and renumbering of paragraph 23. Other than that, the contents of the Grounds of Judgment dated 24.1.2024 and this one are the same.
[3]The crux of the Plaintiff’s claim was the failure of the 4 insurers to pay him the agreed policy amounts due to the death of the deceased.
THE APPEAL
[4]Before delving into the issues at hand, it is noted that these suits were registered under commercial disputes by the Plaintiff and not as road accident claim. The evidence adduced in respect of the accident which occurred on 14.12.2018 were the precursor to the claim for compensation totalling RM990,000.00 which the Plaintiff claimed he was entitled, pursuant to the death of his employee. The Defendants refused to make payment under the respective policies, namely on 2 grounds i.e. that the deceased was riding a motorcycle without a valid licence at the time of the accident, and failure of the Plaintiff to declare that he had obtained policies with other insurers during the same period.
[5]The Plaintiff had taken out 3 Group Personal Accident policies under the deceased’s name with Pacific Insurance, Berjaya Sompo and Allianz General. Then he took out 1 Group Personal Accident policy i.e. Syarikat Takaful insurance in respect of his 4 employees, including the deceased. Copies of the identity cards of the three (3) other employees were as per exhibit P19(A-C) and their names were as follows:
i.Babelan A/L Kunasegaran;
ii.Mathialegen A/L Nyanasgar; and
iii.Nyanasgar A/L Vadevello.
[6]Based on the names and address in the 3 identity cards above, it appeared that they were all related to the Plaintiff, unlike the deceased. It was the Plaintiff’s contention that Raja A/L Krishnan (the deceased) was offered employment via letter dated 9.5.2017 with a salary of RM4,500.00 as a General Worker (page 410 of the Record of Appeal, Part C).
[7]Details of the renewed insurance policies taken out by the Plaintiff were as follows:
| No. | Policy No. And Name | Issuer and premium paid | Date of Renewal | Validity Period | Amount Insured (RM) |
| 1. | CPN-PO174058-A4 (Pacific Super Protec | ||||
