Hanwha Non-Life Insurance Company Ltd v Alba Pte Ltd

• Jurisdiction: Singapore
• Judge: Tan Lee Meng J
• Judgment Date: 30 December 2011
• Neutral Citation: [2011] SGHC 271
• Citation: [2011] SGHC 271
• Docket Number: Suit No 927 of 2008/N
• Date: 2011
• Hearing Date: 09 March 2011,01 November 2010,24 August 2010,23 August 2010,27 October 2010,25 August 2010,10 March 2011,12 May 2011,25 October 2010,27 August 2010,28 October 2010,07 March 2011,02 November 2010,26 August 2010,08 March 2011,29 October 2010,26 October 2010
• Plaintiff Counsel: Toh Kian Sing SC, Elaine Tay Ling Yan and Tang Bik Kwan Hazel (Rajah & Tann LLP)
• Published date: 05 January 2012
• Defendant Counsel: Thio Shen Yi SC and Kong Shu Hui Charmaine (TSMP Law Corporation)
• Court: High Court (Singapore)
• Year: 2011

Tan Lee Meng J: Introduction

The plaintiff, Hanwha Non-Life Insurance Co Ltd, a Korean insurance company, merged with the original plaintiff in this action, First Fire & Marine Insurance Co Ltd (“FFM”), in December 2009. The defendant, Alba Pte Ltd (“Alba”), a Singapore company that is presently in run off, was an underwriter and reinsurer. The plaintiff sought from Alba an indemnity under a reinsurance contract between FFM and Alba for a fire loss in December 2007 at a model house in Korea that was insured with FFM. Alba contended that the fire loss was not within the ambit of its reinsurance contract with FFM for a variety of reasons.

Background

On 27 March 2007, FFM’s client, Dae Hye Construction Co Ltd (“Dae Hye”), which is in the business of constructing model houses and apartments in Korea, successfully bid for a project to renovate an existing model house, the Daewoo Kangnam Model House at #832-21, Yeoksam I-Dong, Kangnam-gu, Seoul (“DMH”), which belonged to Daewoo Engineering and Construction Co Ltd (“Daewoo”). No formal written agreement between Dae Hye and Daewoo was signed at that time.

Sometime in May 2007, Dae Hye approached FFM to insure its liability in relation to the construction of model houses and apartments in Korea. In turn, FFM requested its insurance broker, BRM Korea (“BRM”), to reinsure part of the risks under its proposed insurance contract with Dae Hye.

On 25 May 2007, BRM’s director, Mr Bongjoo Moon (“Mr Moon”), approached Alba for the requisite reinsurance cover. He conducted negotiations on the terms of the proposed reinsurance cover with Alba’s then regional manager, Ms Margaret Sze To (“Ms Sze To”). On 11 June 2007, Alba agreed to provide reinsurance cover to FFM. Mr Moon then informed FFM that 45% of its risk under the underlying insurance contract with Dae Hye was reinsured by Alba and 25% by another reinsurer. FFM then issued Dae Hye a Master Contractors All Risks policy (“the Master CAR policy”) for a period of one year with effect from 11 June 2007.

On the next day, Ms Sze To forwarded a signed document that specified the terms of the reinsurance contract to Mr Moon.

Events between the reinsurance contract and the fire

The system adopted by the parties to the reinsurance contract was that declarations of Dae Hye’s model house projects covered under the Master CAR policy in a particular month would be made in the following month by BRM to Alba. The main details furnished by BRM to Alba in each monthly declaration form included the following: (a) The name of the model house project; (b) The location of the project; (c) The period of insurance; (d) The insured sum; and (e) The reinsurance premium due to Alba.

On 10 July 2007, the first monthly declaration was forwarded by BRM to Alba in respect of projects insured by FFM in the previous month. This retrospective declaration was as follows:

Facultative Closing Slip for June, 2007

With reference to the captioned, please find declaration of below risk in particulars which read as follows;

...

2. Details a. Instruction: New Addition of 3 projects during one month from June 11th to June 30th, 2007 (Refer to the attached) ... e. Period: Individual insurance period as attached (less than 9 months) ... g. Other Terms & Conditions: Same as the original Master Policy

3. Reinsurance a. Your Share: 45% of Original Line b. Net Reins. Premium due to you (45%): KRW 3,117,465.-

We are looking forward to your debit note for premium remittance.

BRM’s subsequent declarations to Alba were also made retrospectively. Alba accepted the premiums with respect to all the projects declared without asking for further details or documents.

In regard to the renovation of the DMH, the preliminary construction work, which commenced on 25 July 2007, was not insured under the Master CAR policy because the existing model house was insured under a property insurance package provided by another insurer. When that other insurance lapsed after stripping work commenced on the existing model house, Daewoo asked Dae Hye to arrange for fresh insurance cover. On 22 August 2007, FFM insured the DMH under the Master CAR policy from 22 August to 31 October 2007 (“the original cover”). The insured sum was KRW2.34bn. On 5 September 2007, the original cover for the DMH was included in the third monthly declaration sent by BRM to Alba.

It was common ground that the original cover was reinsured by Alba. The dispute between the parties relates to the extension of cover under the Master CAR policy beyond 31 October 2007. The circumstances of the extension of cover on the DMH are as follows. On 7 September 2007, a written construction contract was finally signed between Dae Hye and Daewoo for the DMH. The contract value was KRW3.3bn (excluding VAT), and the contract period was eight months, from 1 April to 30 November 2007. However, by October 2007, construction costs on the DMH had exceeded KRW3.3bn and it became clear that the works were unlikely to be completed by 30 November 2007.

On 31 October 2007, the original cover for the DMH expired. On 12 November 2007, the construction contract for the DMH was amended when the contract price was increased to KRW5.63bn and the contract period was extended to 31 January 2008. On 15 November 2007, Dae Hye forwarded a copy of the amended construction contract for the DMH to FFM and sought a retrospective extension of the insurance period and an increase in the insured sum. FFM acceded to this request and issued an endorsement to Dae Hye on 19 November 2007 (“the 19 November Endorsement”), effecting the following changes to the insurance cover: (a) the period of insurance was extended to 31 January 2008; and (b) the sum insured was increased from KRW2.34bn to KRW5.63 bn.

On the same day that the 19 November Endorsement was issued, FFM informed BRM about the amendments to the original cover in relation to the DMH.

BRM took a longer time to collate the project list for November 2007 for reasons which need not be discussed. As such, the retrospective monthly declaration of projects covered by the Master CAR policy in November 2007 was only forwarded to Alba on 14 December 2007 at 2.33 pm Korean time. Included in this declaration was the 19 November Endorsement for the DMH.

Mr Moon said that when he forwarded the monthly declarations for November 2007 to Alba on 14 December 2007, he did not know that the DMH had been extensively damaged by a fire some 9 hours earlier at around 5.24 am Korean time.

Events after the fire

Apparently, FFM’s deputy general manager of the claims department, Mr Young Mock Park (“Mr Park”), was informed of the fire at the DMH at around 2.00 pm to 3.00 pm Korean time on 14 December 2007. On 17 December 2007, Mr Moon was informed about the fire at the DMH. On the following day, Mr Moon notified Alba about the fire at the DMH.

When informed of the fire at the DMH, Alba did not reject liability under its reinsurance contract with FFM. Instead, it took a keen interest in the matter and asserted that it was entitled to information on investigations more speedily.

FFM’s loss adjusters, International Adjusters & Surveyors Co Ltd (“IASCO”), submitted a preliminary report dated 18 December 2007 on the fire at the DMH. On 15 January 2008, Mr Moon emailed a copy of the report to Alba. On 16 January 2008, Ms Sze To wrote to FFM, stating that “bearing in mind that we [are] actually insuring 45% of the risk, we’d like to know more and receive the information much quicker.” An interim report by IASCO dated 23 January 2008 was subsequently forwarded to Alba.

Significantly, on 28 January 2008, Alba engaged its own loss adjusters, McLarens Young International (“McLarens”), at a cost of around US$57,500 to investigate the fire loss at the DMH.

More than two months after the fire, on 21 February 2008, FFM paid the reinsurance premium for the 19 November Endorsement. It is crucial to note that Alba accepted the premium with full knowledge of the fire.

On 20 March 2008, FFM demanded an indemnity from Alba for the cost of repairing the fire damage. Despite having taken such a keen interest in the matter, some four months after the fire, Alba repudiated liability for the damage at the DMH on 23 April 2008 and asserted that its reinsurance cover for the DMH had ended on 30 October 2007. In short, Alba’s position was that it did not reinsure the extension of cover to the DMH which was effected by the 19 November Endorsement.

On 31 March 2008, FFM paid KRW2.5bn to Dae Hye. It paid a further sum of around KRW1.7bn to Dae Hye on 2 December 2008.

As Alba refused to indemnify FFM under the reinsurance contract, the latter commenced the present proceedings. Among the defences relied on by Alba to avoid liability were the following: (a) It had offered facultative reinsurance to FFM, which meant that it had to specifically agree to accept any reinsurance risk ceded to it and it did not agree to reinsure FFM’s extension of the risk to the DMH under the 19 November Endorsement; (b) the terms of the 19 November Endorsement took the insurance on the DMH outside the scope of the reinsurance policy; (c) the 19 November Endorsement was issued by FFM without its written consent; (d) the 19 November Endorsement was issued after the fire had occurred; and (e) FFM was itself not at risk when the fire occurred at the DMH because the building project had already been completed by then. Alba also asserted that it was entitled to avoid liability on account of alleged misrepresentations by FFM.

Whether Alba offered facultative reinsurance to FFM

The first defence relied on by Alba concerned the nature of its reinsurance contract with FFM. It claimed that it had offered FFM facultative reinsurance cover with respect to risks assumed by the latter under the Master CAR policy issued to Dae Hye. Under such a policy, the...