Insurance Law
| Published date | 01 December 2004 |
| Citation | (2004) 5 SAL Ann Rev 366 |
| Author | LEE Kiat Seng LLB (Hons) (National University of Singapore); LLM (Maritime Law) (London); Advocate and Solicitor (Singapore); Adjunct Associate Professor, Faculty of Law, National University of Singapore. |
| Date | 01 December 2004 |
15.1 It is trite law that when a policy of insurance is taken out by a person and expressed to be for the benefit of another, the beneficiary of the policy has no direct interest in the policy. Of course, it is not clear if the operation of the Contracts (Rights of Third Parties) Act (Cap 53B, 2002 Rev Ed) has any impact on this. But we shall not dwell on this as it is not within the scope of this Review chapter. Similarly, when a policy of insurance is taken out by an employer and expressed to be for the benefit of his employees, the employees acquire no interest in the policy as there is no privity of contract between the employees and the insurers.
15.2 However, if a group insurance is taken out by an employer to provide a direct benefit to his employees and the employer declares himself a trustee of those benefits, the employees acquire an equitable interest in the policy as beneficiaries under the trust.
15.3 Hence, when a group insurance is taken out by an employer on the health and lives of his employees and the insured event occurs, an issue will arise as to whether the employees or his representatives are entitled to the proceeds paid out under the policy or whether these are moneys for the benefit of the employer.
15.4 The above-mentioned issue arose in Zhang Yiguang v Intergraph Systems South East Asia Pte Ltd[2004] 3 SLR 360. The plaintiff suffered permanent head injury whilst in the employment of the defendant company. Insurance payouts were received, inter alia, from the Group Term Life policy and the Group Personal Accident Benefits policy. Not surprisingly, it was asserted by the defendant that employees under the group insurance policies did not have any direct contractual interest in the policies and hence were not entitled, as of right, to the proceeds paid out thereunder. The plaintiff put forward the argument that cl 11 of the employment contract, read
together with cl 7.3 of the company handbook, meant that the employee would be entitled to the insurance money.
15.5 Clause 11 of the contract of employment, dated 4 October 1999, read as follows:
Admission for Employee to the Company”s non-contributory medical, dental and hospital scheme. Dental benefit to apply after 6 (six) months employment.
Clause 7.3 of the company handbook read as follows:
All employees are entitled to the benefits of insurance protection under the following schemes at the Company”s cost. Employees based in Singapore, Myanmar and Vietnam are covered by (the Insurance Corporation of Singapore) …
The schedule of benefits was annexed to the handbook.
15.6 Choo Han Teck J held that the company handbook was not part of the employment contract as there was no reference in the latter to the company handbook. He, however, held that this was not fatal as cl 11 of the employment contract was sufficient to allow an employee to claim such medical and hospitalisation benefits as was provided in the handbook. This would suffice to allow the plaintiff to succeed in his claim.
15.7 Further, the High Court held that when an employer took out insurance on the life and health of his employee, he must have done so with the benefit of the employee in mind. The company handbook was further evidence of such intention on the part of the defendant. As a result, the defendant would hold all benefits payable under the insurance policies as trustee for the employees.
15.8 Choo J dealt with the issue of the handbook first. The issue here was, simply put, whether the schedule of benefits (which included the life and accident policies) was incorporated as part of the...
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