Liberty Citystate Insurance Pte Ltd v AXA Insurance Singapore Pte Ltd

• Jurisdiction: Singapore
• Judge: S Rajendran J
• Judgment Date: 08 March 2001
• Neutral Citation: [2001] SGHC 43
• Docket Number: District Court Appeal No 24 of
• Date: 08 March 2001
• Year: 2001
• Published date: 19 September 2003
• Plaintiff Counsel: M Ramasamy and K Anparasan (William Chai & Rama)
• Citation: [2001] SGHC 43
• Defendant Counsel: B Rao and Shabnam Arashan (B Rao & KS Rajah)
• Court: High Court (Singapore)
• Subject Matter: Employer’s,Liability insurance,Validity of non-contribution clause,Whether such clause prohibited under Workmen's Compensation Insurance Regulations (Cap 354, Reg 3, 1990 Ed) reg 2(1),Insurance

: The third respondent, Tekken Corporation, was the main contractor (`Main Contractor`) of a construction project at Paya Ubi Industrial site. The first respondent, De Kong Construction (S) Pte Ltd (`De Kong`), now in liquidation, was a sub-contractor of the Main Contractor in the said construction project. One of the terms of the contract under which De Kong undertook the sub-contract was that:

The Main Contractor has taken out insurance coverage for the entire project and these insurance policies may be examined by the Sub-contractor at the Head Office of the Main Contractor. The Sub-contractor shall purchase additional insurance coverage at his own cost if he is of the opinion that the insurance coverage provided by the Main Contractor is insufficient for his purpose.

The Main Contractor had taken out an insurance policy with the fourth respondent, AXA Insurance Singapore Pte Ltd (`AXA`). The AXA policy covered claims under common law and claims under the Workmen`s Compensation Act (Cap 354, 1998 Ed) (`the Act`) (limited to $10m per event). As envisaged in the sub-contract entered into with De Kong, the AXA policy covered not only the Main Contractor but also sub-contractors working in the Paya Ubi project.

De Kong, on its part, also took out additional insurance cover for the said construction project from Liberty Citystate Insurance Pte Ltd (`Citystate`), the second respondent. The Citystate policy also covered claims at common law as well as claims under the Act (limited to $10m per event) but was subject to a `non-contribution` clause endorsed thereon which reads:

NON CONTRIBUTION

This insurance does not cover loss, destruction, damage or liability which is insured or would, but for the existence of this, be insured by any other policy or policies, except in respect of any excess beyond the amount which would have been payable under such other policy or policies had this insurance not been effected.

In the course of the sub-contract work at Paya Ubi, 15 of the employees of De Kong suffered injuries at various accidents at the worksite. The Commissioner for Labour (`the Commissioner`), Mrs Lee Poh Choo, acting under s 24(2) of the Act, assessed the total amount of compensation payable to the 15 workmen at $237,258.69 and, acting under s 32(1) of the Act, wrote to Citystate requiring Citystate to pay that sum. Citystate, however, took the view that, because of the `non-contribution` clause, its policy was a contingent policy under which liability would arise only in respect of any excess beyond the amount covered by the AXA policy. Citystate therefore took the position that AXA and not Citystate should be called upon to pay the compensation.

AXA rejected that view. AXA argued that the `non-contribution` clause in the Citystate policy did not exempt Citystate from its liability because that `non- contribution` clause was in breach of reg 2 of the Workmen`s Compensation Insurance Regulations (Cap 354, Rg 3, 1990 Ed) (`the Regulations`) and therefore invalid.

To understand AXA`s argument relating to reg 2(1), it would be useful to set out that regulation in full. It is headed: `Prohibition of certain conditions and exceptions in policies of insurance` and reads as follows:

Any condition or exception in a policy of insurance issued or renewed for the purpose of section 23 of the Act which provides, in whatever terms, that no liability shall arise under the policy, or that any liability so arising shall cease -

(a) in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy;

(b) unless the policy holder takes reasonable care to protect his workmen against the risk of bodily injury or disease in the course of their employment;

(c) unless the policy holder complies with the requirements of any written law for the protection of his workmen against the risk of bodily injury or disease in the course of their employment; and

(d) unless the policy holder keeps specified records or provides the insurer with or makes available to him information therefrom,

is hereby prohibited. [Emphasis is added.]

Regulation 2(1) can be broken down into two limbs. The first limb addresses itself to conditions and exceptions in insurance policies that provide that `no liability shall arise under the policy` whilst the second limb addresses itself to conditions and exceptions in insurance policies that provide that `any liability so arising shall cease`.

AXA submitted that the conditions and exceptions described in sub-cll (a) to (d) of reg 2(1) applied only to the second limb of that regulation and not to the first limb. In support of that, AXA relied on the judgment of a previous Commissioner for Labour in the case of Cosmic Insurance Corp v People`s Insurance Co (Unreported) where the Commissioner, Mr Sarjit Singh, had ruled that the first limb stood by itself and that sub-cll (a) to (d) of reg 2(1) did not apply to the first limb but applied to the second limb. On that construction, the first limb would, in effect, be as follows:

Any condition or exception in a policy of insurance issued or renewed for the purpose of section 23 of the Act which provides, in whatever terms that no liability shall arise under the policy is hereby prohibited.

AXA`s position was...