Motor insurance case keenly watched, Outcome may affect how insurers write risks in future.

20 September 1997- The High Court has issued a judgment clarifying the role of individual motor vehicle insurers under the Motor Insurers’ Bureau of Singapore (“MIB”)’s scheme of compensation for third-party victims of road accidents. Under the scheme, insurers of the party at fault for the accident are compelled to compensate third-party victims in cases where an insurance policy is not in force or ineffective for any reason.

In this case, the first defendant, Mr Ong Kah Hoe, was the owner of a lorry which was involved in an accident which resulted in the death of a cyclist. The lorry was driven by the second defendant with the first defendant’s authorisation, even though the second defendant’s license had been suspended. The lorry was insured under a commercial vehicle insurance policy which covered third-party risks.

The deceased cyclist’s estate successfully brought a claim against the second defendant only. The plaintiff insurer, Cosmic Insurance Corp Ltd, who should have covered the judgment sum, avoided liability on the basis that the second defendant had driven while disqualified. However, Cosmic was later instructed by the MIB to pay the estate anyway.

Having paid out the judgment sum, Cosmic Insurance then demanded repayment from Ong, as well as from the second defendant. The issue in this case was whether, under the terms of a motor vehicle insurance policy, the insurer could recover from the policyholder, namely the owner of the motor vehicle, sums paid out by the insurer to the estate of a third-party road accident victim.

The High Court agreed in principle that an insurer could recover sums paid out to third-party victims, which discharged the liabilities incurred by the policyholder. However, there had to first be a judgment establishing the policyholder’s liability to this third party. In the present case, Cosmic Insurance had not satisfactorily established Mr Ong’s liability to the cyclist and so was not entitled to recover the judgment sum. Cosmic’s claim was thus dismissed.

Carolyn Tan and Tony Au Thye Chuen from Tan-Au Associates (now Tan & Au LLP) acted for the first defendant, Mr Ong Kah Hoe.