Insurance Law

• Publication year: 2016
• Date: 01 December 2016
• Author: Winston KWEK Choon Lin LLB (Hons) (National University of Singapore); Advocate and Solicitor (Singapore); Adjunct Associate Professor, Faculty of Law, National University of Singapore.
• Published date: 01 December 2016

18.1 The year 2016 saw the UK Insurance Act 2015 (“Act”) taking effect in August 2016. The UK insurance market is adjusting to the legislative changes introduced by this Act that have not been tested in the UK courts. The Singapore Academy of Law has formed a law reform subcommittee (insurance) to study these changes and evaluate if our laws ought to adopt or follow suit. In the meantime, the following cases were reported, with each applying well-established principles, with no extension or development of legal principles.

Policy permitting recovery of sums paid which the insurer would not have been liable to pay but for the Work Injury Compensation Act

18.2 In Huationg (Asia) Pte Ltd v Lonpac Insurance Bhd,1 a crane and hoist operator (“Deceased Employee”) obtained permission from his employer, Huationg (Asia) Pte Ltd (“Huationg”), to leave the worksite on his motorcycle to buy food for his lunch, as there was no canteen or food available at the worksite. Unfortunately, he met with a fatal road traffic accident on 27 June 2011. Under s 23 of the Work Injury Compensation Act2 (“WICA”), Huationg had from 22 August 2010 to 21 August 2011 maintained a work injury compensation insurance policy (“Policy”) with Lonpac Insurance Bhd (“Lonpac”) where Lonpac agreed to indemnify the former against all liabilities that Huationg might incur under the WICA for any injury suffered by, inter alia, Huationg's employees as a result of any accident arising out of and in the course of the Deceased Employee's employment.

18.3 On or about 27 October 2011, the commissioner of labour, exercising his powers under s 24 of the WICA, assessed the compensation payable to the dependents of the Deceased Employee to be S$140,000 and served the requisite Notice of compensation on Huationg and Lonpac. Citing a Motorcycling Exception in the Policy, Lonpac objected to the Notice on the contention that the exception excluded its liability under the Policy from any injury arising out of or in

connection with motorcycling, but agreed to pay the Assessed Compensation when informed that it was compelled under the WICA to pay, but without any admission as to liability and without prejudice to any recourse it might have against Huationg under the Policy.

18.4 On 3 August 2012, Lonpac commenced proceedings in the State Courts to recover from Huationg the sum of S$140,000 that it had paid to the dependants of the Deceased Employee, on the footing that it was not contractually obliged under the Policy to pay because of the Motorcycling Exception but had done so by virtue of the WICA; and on the Avoidance and Recovery Clause. Lonpac succeeded and Huationg appealed to the High Court. George Wei J dismissed Huationg's appeal and dealt with Huationg's arguments as set out below.

18.5 Huationg argued that because the Motorcycling Exception was set out in a Travelling Extension to the Policy, its effect was limited to that Extension. Had Lonpac intended the Exception to apply “across the board”, the Exception ought to have been set out in the General Exclusions section of the Policy. Wei J ruled that properly construed, the Travelling Extension should not be read as an “extension” in its literal sense (which extended the scope of coverage) and found that it, instead, served to expressly clarify that the Policy covered journeys to and from work as well as meal breaks, especially given the Insuring Clause in the Policy which stated and defined Lonpac's obligation to an indemnification of Huationg against all sums for which Huationg should be liable to pay compensation under the WICA or common law, and no more. The Policy was one single contract that could not be divided into a “main policy” and an “extension”. As such, the Motorcycling Exception applied to the entire Policy, not just to the Travelling Extension, such that Huationg was not entitled to an indemnity from Lonpac under the Policy. Wei J added that as the language was clear, there was no scope for the application of the “contra proferentum rule” as argued by Huationg.

18.6 Huationg also argued that it would be contrary to public interest and the WICA Regime if the Motorcycling Exception was applied to the entire policy as the employee was deprived of access to an insurance fund. This was rejected by Wei J who, after reviewing the relevant legislation and parliamentary debates, held that a distinction is drawn between, on one hand, the relationship (and rights) of the injured employee against the employer (and the insurer) and, on the other, the relationship and rights as between the employer and the insurer under the contract of insurance. In the latter, the insurer is entitled to limit or exclude liability. To avoid the problem of an injured employee being left without compensation should the insurer disclaim liability and the employer lack financial resources, the legislation is intended to shift to the insurer the risk of the employer's insolvency or lack of financial ability to pay.

18.7 Huationg also invited the court to apply the red-hand rule and strike down the Motorcyling Exception as being “onerous” in nature and, thus, ought to have been highlighted by Lonpac at the time of contract. This was rejected because the red-hand rule has no application in cases where there is a signed contract – it being trite that contracting parties will be expected to ascertain their own legal positions before signing a contract, and be bound if they do except to the extent that relief is offered by the Unfair Contract Terms Act.3 Huationg did not contend that the Motorcyling Exception fell afoul of this Act.

18.8 The relevant portion of the Avoidance and Recovery Clause stated that Huationg should repay to Lonpac all sums Lonpac had paid, and which Lonpac “would not have been liable to pay but for the Legislation”4 and the Policy defined “Legislation” to mean “the Work Injury Compensation Act (Cap. 354), amendments and re-enactment thereof and [any] legislation made thereunder”.5 Huationg argued that as payment had been voluntary, Lonpac was not entitled to rely on this clause. Wei J accepted, on the evidence, that Lonpac had in fact paid under protest when the assistant commissioner had intimated that she was prepared to exercise her statutory powers under the WICA to compel payment; Lonpac did not concede liability and had expressly reserved recourse against Huationg under the Policy.

Multiple writs from a single cause of action in the eyes of s 35 of the Insurance Act

18.9 In Ng Koon Choon v Tang Wee Goh,6 a chain of suits followed a chain collision between four cars in a road traffic accident on 28 May 2009. Although four motor cars were involved in the collision, the saga in the courts were confined to the first two vehicles – SJC 693R, driven by Ng...