Insurance Law
| Author | YEO Hwee Ying LLB (Singapore), LLM (London); Associate Professor, Faculty of Law, National University of Singapore. |
| Publication year | 2021 |
| Citation | (2021) 22 SAL Ann Rev 545 |
| Date | 01 December 2021 |
19.1 2021 was a significant year for local insurance jurisprudence in that there appeared two cases on appeal — one from the High Court and the other from the District Court — where hitherto uncontested but critical doctrines were addressed. The first case to be discussed in this review chapter is particularly important because for the very first time in Singapore the court clearly endorsed in ratio decideni a crucial common law principle regarding the precise ingredients of non-disclosure and misrepresentation in insurance contract formation. The second case selected for discussion is also noteworthy for resolving a challenge lodged by the issuer of a performance bond with regard to the salient principle of subrogation that is of great import to insurers in general.
19.2 The essential purpose of a life insurance policy is largely to offer crucial protection for family members in the event of the insured's death which, in stark contrast to the non-life risks commonly covered by insurance, is an eventuality waiting to happen. In certain instances, the insured may find it necessary over time to take out multiple life policies in order to expand the financial safety net for his or her beloved. Unfortunately, any failure by the insured to disclose other life policies (whether already issued or still pending) can in principle constitute grounds for avoidance by insurers whenever the applicants for coverage have breached their duty of utmost good faith. That insurers are able to do so after having discharged the two-pronged proof of both materiality and inducement has thus far not been conclusively ruled upon by any local court. The recent decision of the Appellate Division of the High Court (“High Court (Appellate Division)”) in Tan Yi Lin Cheryl v AIA Singapore Pte Ltd1 has henceforth affirmed the insurer's entitlement to avoid the policy when the insured is found to be at fault for not disclosing and/or misrepresenting material information (regarding the risks to be insured
19.3 The deceased insured (who was the husband of the appellant, Cheryl) took out a life policy for $1m with the respondent insurer, AIA Singapore Pte Ltd (“AIA”). Assisted by Aik (who was AIA's authorised financial services consultant), he declared in the application form on 7 May 2014 that he had neither existing life policies nor pending applications for life coverage. In actual fact, however, he submitted three previous applications (during the six-week period prior to 7 May 2014) and three subsequent applications (after Aik had forwarded the completed application form to AIA for risk evaluation). By the time AIA issued the $1m policy on 30 June 2014, he had successfully taken out a total of five other life policies with multiple insurers and one more was about to be approved by yet another insurer. All in all, his seven life policies (including that issued by AIA) eventually amounted to a total assured sum of $6,250,000.
19.4 Shortly after her husband died on 26 September 2016, Cheryl lodged claims under the life policies with the different insurers in her capacity as the sole executrix of the insured's estate pursuant to a Grant of Probate. On learning of the other undisclosed policies, AIA denied liability after drawing attention to the warning contained in the application form that the insured must continue to disclose any and all material facts that might arise or have since changed after his application, as well as the insured's declaration that the answers he had provided “shall form the basis of the contract between the parties hereto”2 with the understanding that “the policy issued hereunder may be void and [he] may receive nothing”3 by way of compensation for any claim if his answers were untrue.
19.5 During the proceedings before the High Court, Cheryl (who was present during the discussion at the time of her husband's application for the $1m policy) insisted that Aik was apprised of the existing policies and pending applications and he had even advised that there was no need to disclose these facts in AIA's form. In addition, she contended that Aik's completion of the application form on her husband's behalf implied that
19.6 The High Court4 ruled against Cheryl after finding that her husband had made fraudulent misrepresentation during the completion of the application form as well as fraudulently failed to disclose three policies at the time of application and another three policies before the issuance of the policy. These misrepresentations and non-disclosure would then have induced AIA into entering the contract. Moreover, AIA also relied on the basis clause which turned the insured's answers into warranties. Hence, the trial judge accepted the open-and-shut defences of AIA which was accordingly entitled to avoid the policy after the insured's breach of warranty was established.
19.7 During her appeal to the High Court (Appellate Division), Cheryl argued that the trial judge had erred in his findings and tendered the following counterclaims:
(a) that there was no fraudulent misrepresentation on the part of her husband; and
(b) that the misrepresentation, if any, had not induced AIA to enter the contract.
19.8 The following were Cheryl's key arguments in support of her appeal:
(a) Her husband's existing policies and pending applications had (in her presence) been disclosed to Aik in his capacity as AIA's authorised agent (who filled in the application form), and such knowledge ought to be imputed to his principal AIA.
(b) Her since-deceased husband had relied on Aik's advice that there was no need to disclose (after the submission of the application to AIA) any future life coverage applications submitted by him to other insurers.
(c) On 5 May 2017, Crawford International Pte Ltd (“Crawford”) (the loss adjusters appointed by various insurers to investigate the claims lodged after the insured's death) released an interim report stating that there was, so far, no evidence of Cheryl having deliberately concealed from insurance agents
and financial advisors the facts concerning the different policies issued by multiple insurers for coverage on her husband's life.(d) Written statements from other insurance agents (such as Shirley who was an agent with Aviva Ltd (“Aviva”)) were also presented by Cheryl to indicate that her husband had made the necessary disclosures.
19.9 In what was essentially a contest of the witnesses' credibility, the High Court (Appellate Division) agreed unreservedly with the trial judge's finding that Cheryl was not a truthful witness because of her flagrant deceit that was manifest on many other occasions (such as under-declaring on oath the size of her husband's estate in the application for the Grant of Probate in addition to lying in AIA's death claim form that her husband did not have any other insurance policies). Returning to the occasion of Aik completing the application form for covering his client's life, both first instance and appellate courts thus had difficulty in believing that there was no fraudulent misrepresentation here as well.
19.10 The High Court (Appellate Division) concluded that the objective evidence did not lend support to Cheryl's assertion that during the period from 7 May 2014 (when the application form was completed) to 30 June 2014 (when the life policy was issued) Aik had been informed about his client's other life policies. What could be confirmed during the crossexamination proceedings were that Cheryl did mention her husband's investment policies (but not his life policies) to Aik at the time of application and that much later (perhaps a year after AIA's life policy had been approved) Aik happened to hear from Cheryl about the existence of another $1m life policy taken out by his client with Prudential Assurance Company Singapore Pte Ltd (“Prudential”). Instead, the WhatsApp messages between Cheryl and Shirley on 26 October 2016 clearly showed that not only was Aik oblivious of the other six life policies, but Cheryl had also actively taken measures to prevent Aik from finding out about any of them. Equally telling was the point-blank question posed by Aik on 9 October 2016 asking Cheryl whether her husband had any Prudential policies; it could be inferred from Aik's enquiry then that he did not know about the existence of the two policies issued by Prudential on 31 March 2014 and 23 May 2014 to cover his client's life.
19.11 Citing the appellate decision in National Employers' Mutual General Insurance Association Ltd v Globe Trawlers Pte Ltd5 (“Globe Trawlers”), the High Court (Appellate Division) ruled that Aik's knowledge could not be imputed to AIA if he (as alleged by Cheryl) was indeed aware of the other life policies. Although Aik was officially engaged by AIA as a financial services consultant, he took on the role of a scribe for his client when entering all the particulars in the application form and should thus be deemed as acting as an agent of the insured (rather than the insurer) while temporarily performing this scribal function as part of his overall service. Furthermore, the insured could not simply push the blame to the agent for any scribal mistakes spotted much later during the processing of a claim: the insured would still be held responsible because he ought to have checked for inaccuracies or omissions before signing the application form that the agent had...
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