Insurance Law

• Citation: (2010) 11 SAL Ann Rev 433
• Published date: 01 December 2010
• Date: 01 December 2010
• 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.

Construction of extension cover in workmen“s compensation insurance policy

17.1 In Mohammed Shahid Late Mahabubur Rahman v Lim Keenly Builders Pte Ltd [2010] 3 SLR 1021, the defendant company was the main contractor at a worksite. It engaged a subcontractor to carry out works at the said worksite. In the course of such works, the plaintiff, who was an employee of the subcontractor, suffered injury. Proceedings were commenced by the plaintiff for breach of statutory duties and under occupier“s liability against the defendant, which in turn joined the insurer as third party to the proceedings. At trial, the defendant accepted 95% liability in favour of the plaintiff. The defendant continued to claim an indemnity from the third party insurer under the policy, which the latter denied on the construction of the said policy.

Decision of the court

17.2 The High Court agreed with the third party insurer that the policy, in so far as it only insured the defendant company (and its subcontractors) for its respective liabilities under the Workmen“s Compensation Act (Cap 354, 1998 Rev Ed), could only be expected to answer to the claim if the claim had in fact been made by the defendant“s workman. Although there was an extension of the cover by way of endorsement to cover claims brought by workmen of the defendant“s subcontractors under the Workmen“s Compensation Act if they suffered injury performing work for the defendant at the time of the accident, there was no similar extension in respect of common law claims brought by the same workmen. The court, therefore, took the view that since the accident did not occur while the workman was carrying out work for the defendant and the claim was settled on the basis of occupier“s liability, the endorsement did not cover the given claim and hence the third party insurer was not liable.

Observations of the High Court

17.3 The High Court made a few observations which are important:

(a) The contra proferentum principle should be used only where there is a genuine ambiguity. In any event, it should be used only to clarify ambiguous words and should not be used where the interpretation argued for would lead to inconsistency within the policy itself.

(b) The use of contra proferentum is not appropriate for the consideration of a clause which - taken in isolation - may appear to be ambiguous, but which becomes clear when read in the context of the overall policy.

(c) The mere fact that the defendant and its broker...