Lim Kitt Ping Lynnette v People s Insurance Co Ltd and another

Transcription

1 914 SINGAPORE LAW REPORTS (REISSUE) [1997] 1 SLR(R) Lim Kitt Ping Lynnette v People s Insurance Co Ltd and another [1997] SGHC 122 High Court Suit No 2235 of 1992 Kan Ting Chiu J 11, 12 February; 12 May 1997 Arbitration Agreement Scope Agreement to submit disputes arising out of insurance policy to arbitration Whether dispute in question arising out of insurance policy Contract Waiver Motor vehicle insurance policy Insured not making premium payment on time as required by insurer Insured meeting with accident Insurer nevertheless issuing debit note out of time after taking legal advice Whether insurer waiving requirement of premium payment on time Insurance General principles Risk Whether insurer on risk before subsisting policy came into force Insured party s right to be indemnified to be considered in light of all facts Insurance Motor vehicle insurance Termination Policy carrying premium warranty clause addendum Premium warranty clause providing that policy terminated if full payment of premium not made on time Insurer failing to issue debit note in time Compliance by insured impossible Whether policy terminated Facts The plaintiff s car was insured with the first defendant insurer through the second defendant insurance broker. Condition 8 of the policy provided that [a]ll differences arising out of this policy shall be referred to the decision of an arbitrator.... A premium warranty clause was appended to the policy. Clause 1 thereof provided that full payment of premium on time in full was a condition precedent to liability under this policy. Clause 2 provided that if the premium was not paid in full, the cover shall be deemed to have terminated from the expiry premium warranty period without prejudice to any liability incurred before that date. When the insurance broker forwarded the required documentation to the insurer in April 1991, the latter did not issue a policy or collect the premium immediately. The policy was issued on 25 June 1991 together with a debit note for the premium. The plaintiff met with a serious accident on 30 July 1991 and the car was badly damaged. The insurance broker paid the premium to the insurer by a cheque dated 30 October The insurer issued its receipt only three months later, because it took legal advice before presenting the cheque for payment. However, when the plaintiff tried to claim under the insurance policy, the insurer disclaimed liability on the ground that the cover under the policy was terminated at the

2 [1997] 1 SLR(R) Lim Kitt Ping Lynnette v People s Insurance Co Ltd 915 expiry of the premium warranty period, pursuant to the premium warranty clause. When doing so, the insurer sent a cheque for the refunded premium (net of the premium for the period that it was on risk), but there was no evidence that this cheque was presented for payment by the plaintiff. Non-presentation was not disputed. The plaintiff commenced this action against the defendants. The insurer s defences were that: (a) the premium warranty clause operated by reason of nonpayment of premium within the premium warranty period so as to relieve the insurer from any liability under the policy; (b) by accepting the refund of premiums, the plaintiff was estopped from saying that there was coverage for more than 60 days; and (c) condition 8 of the policy required the plaintiff first to obtain a decision of an arbitrator before commencing the action. Held, allowing the plaintiff s claim in part: (1) By its delay in issuing the debit note the insurer had rendered compliance with the premium warranty clause impossible. When it issued the debit note out of time, it must be inferred that it waived compliance of the premium warranty clause, a fortiori when it accepted the premium after taking legal advice: at [12] and [14]. (2) Estoppel had not been pleaded, and even if it was, there was no evidence to support it. When the insurer disclaimed liability on the policy, it sent a cheque for the refunded premium, but there was no evidence that this cheque was presented for payment: at [16]. (3) For the third line of defence to succeed, the dispute between the parties had to be a difference arising out of the policy. Where the dispute was as to whether a contract, which contained an arbitration clause arising out of the contract, was entered into at all that issue could not go to arbitration under the clause. The dispute between the insured and the insurer was not a dispute arising out of the policy. The insurer could not complain that there was no arbitration: at [19], [23] and [24]. [Observations: Clause 2 of the premium warranty clause implied that the policy was in force before the termination, and that the insurer might have incurred liability under it. It was arguable that cl 1 notwithstanding, prompt payment of premium was not a condition precedent to liability: at [15]. A subsisting policy was not the only precondition to an insurer s duty to indemnify. An insured party s right to be indemnified under a policy must be considered on the facts of each claim: at [25].] Case(s) referred to New India Assurance Co Ltd v Lewis [ ] SLR(R) 433; [ ] SLR 149 (folld) Roberts v Security Co Ltd [1897] 1 QB 111; (1897) 75 LT 531 (folld) Toh Peng Ann (Toh & Co) for the plaintiff; Benedict Chan (Goh Poh & Partners) for the first defendant.

3 916 SINGAPORE LAW REPORTS (REISSUE) [1997] 1 SLR(R) 12 May 1997 Kan Ting Chiu J: 1 The plaintiff received a BMW car from her father as a birthday gift. He also arranged for the car to be insured with The People s Insurance Co Ltd (hereinafter referred to as the insurers ). He insured it with them because he was a director of Kwang Hua Insurance Agencies Pte Ltd (hereinafter referred to as Kwang Hua ), their brokering agent. 2 The parties went through several steps insuring the car. On 5 April 1991 Kwang Hua issued the insurers cover note which was pre-signed by them. Kwang Hua then forwarded a copy of the cover note and the plaintiff s proposal form to the insurers. The insurers did not issue a policy or collect the premium straightaway on receiving the documents. The insurance policy was issued on 25 June together with a debit note for the premium. Kwang Hua issued its own debit note to the plaintiff on 31 July and paid the insurers the premium by their cheque dated 30 October The insurers issued their receipt on 11 February The receipt was issued after three months because the insurers took legal advice before they presented the cheque for payment. The insurers pleaded in their defence that they accepted the payment without prejudice to their right to rely on the premium warranty clause, but that was not stated on the receipt nor in any contemporaneous correspondence and was not raised in evidence during the trial. 3 The cover note stated that the plaintiff was insured in the terms of the company s usual form of Comprehensive/Third Party Policy. The insurers debit note and the policy bore the notation Subject to 60 days premium warranty clause attached. 4 The premium warranty clause provided that: 1 Notwithstanding anything herein contained to the contrary and subject only and without prejudice to Clause 2 hereinafter set out, it is hereby declared and agreed that it is a condition precedent to liability under this Policy, Renewal Certificate, Endorsement or Cover Note that any premium due must be paid and actually received in full by the company, the registered broker or registered agent through whom this policy was effected: (a) when the period of insurance is 60 days or more, within sixty (60) days from the: (i) Inception date of the coverage under the Policy, Renewal Certificate or Cover note; or (ii) Effective date of the coverage stated on each Endorsement, if any, issued under the Policy, Renewal Certificate or Cover Note when the effective date of coverage stated on the Endorsement is on or after the Insurance date of the Endorsement; or

4 [1997] 1 SLR(R) Lim Kitt Ping Lynnette v People s Insurance Co Ltd 917 or or (iii) Issuance date of each Endorsement, if any, issued under the Policy, Renewal Certificate or Cover Note where the effective date of coverage under the Endorsement is before the issuance date; (b) where the total premium under any single Policy exceeds S$50,000 and the company has allowed payment of that premium by instalments, within sixty (60) days from the: (i) Inception date of the cover under the Policy, Renewal Certificate or Cover Note for the first instalment and thereafter from the agreed dates on which the subsequent instalments become payable and (ii) Effective date of coverage of any Endorsement issued under such Policy, for the first instalment and thereafter from the agreed dates on which the subsequent instalments become payable (c) when the period of insurance is less than sixty (60) days within the period of insurance specified in the Policy, Endorsement, Renewal Certificate or Cover Note. 2 In the event any of the abovementioned premium is not paid in full to the company, registered broker or registered agent as described above in the manner and within the time stipulated above (the premium warranty period ), the cover under this Policy, Renewal Certificate, Endorsement or Cover Note shall be deemed to have terminated from the expiry of the premium warranty period and the company shall be discharged from all liability therefrom but without prejudice to any liability incurred before that date and the company will be entitled to a pro-rata time on risk premium subject to a minimum of S$25. 5 The insurers solicitors wrote to Kwang Hua on 11 December 1991 for proof that the plaintiff had made payment within the premium warranty period, recognising that under cl 2 of the premium warranty clause, payment can be made either to the insurers or their registered broker or registered agent. There was no response from Kwang Hua, and no queries were made directly to the plaintiff. On the available evidence it can be inferred that payment was made out of time as the debit note was issued late. 6 On 26 February 1992 they wrote to the plaintiff to inform her the insurers were disclaiming any liability under the policy. Specifically they said that: As the cover under the said motor policy had terminated from the expiry of the premium warranty period, there was no insurance policy

5 918 SINGAPORE LAW REPORTS (REISSUE) [1997] 1 SLR(R) purporting to cover the use of motor vehicle SBN 6448E in force at the time of the accident. [emphasis added] 7 They also enclosed a cheque for $1, made payable to Kwang Hua being the refund of the premium after deducting premium for the period that they were on risk and their credit note for the same amount. There was no evidence that the refunded premium was accepted. 8 When the insurers sought to disclaim liability under the policy, they knew that the plaintiff had a serious accident on 30 July 1991 resulting in personal injury to her and her three passengers, and the car was so damaged that it had to be scrapped. 9 The plaintiff disputed the disclaimer and commenced proceedings against the insurers and Kwang Hua for, inter alia: (1) a declaration that there was a valid cover note or policy covering the said vehicle SBN 6448E at the time of the accident; (2) the first defendants purported notice denying/disclaiming liability to any claim in the aforesaid accident was wrongful; (3) an indemnity from the first defendants against all claims actions and proceedings arising from the aforesaid accidents by the third parties or persons and all costs and expenses incurred thereby. 10 Kwang Hua was wound up in November 1996 and took no further part in the proceedings. 11 The insurers defence was summarised in their closing submissions as: (a) that the premium warranty clause operates by reason of nonpayment of premium within the premium warranty period so as to relieve insurers from any liability under the policy; (b) that by accepting the refund of premiums, the plaintiff is estopped from saying that there is coverage for more than 60 days; and (c) that condition 8 of the policy requires the plaintiff first to obtain a decision of an arbitrator before commencing this action. 12 The first line of defence that the plaintiff had breached the premium warranty clause in not paying the premium within 60 days from the inception of the cover note failed. The clause required that the premium due must be paid within the stipulated period. Any premium payment can only be due when it has been quantified and is made known to the payor. When the debit note dated 29 June was issued with the premium fixed, more than 60 days have elapsed from the commencement of the insurance period. By their delay in issuing the debit note the insurers had rendered compliance with the premium warranty clause impossible. When they issued the debit note out of time, it must be inferred that they waived compliance of the premium warranty clause. The inference was reinforced

6 [1997] 1 SLR(R) Lim Kitt Ping Lynnette v People s Insurance Co Ltd 919 when they presented Kwang Hua s cheque for the premium for payment after taking legal advice. 13 In Roberts v Security Co Ltd [1897] 1 QB 111; (1897) 75 LT 531, the plaintiff submitted an insurance proposal on 14 December for insurance cover against burglary and housebreaking. A clause in the proposal form stipulated that no insurance was to be considered in force until premium was paid was sent to the insurance company. On 27 December the insurance company executed a policy bearing a recital stating that the premium was paid. The clause that no insurance was in force until the premium was paid also appeared in the policy. The policy was kept by the insurance company and the plaintiff did not pay the premium. A burglary took place on the night of 26 December or early morning of 27 December which the insurance company was unaware of when the policy was executed. The insurance company refused to indemnify the plaintiff on the ground that no contract was formed because the premium was paid. Lord Esher MR rejected the contention, saying [1897] 1 QB 111 at 115; (1897) 75 LT 531 at 533: They cannot rely upon the fact of the premium not having been paid if they treated it as paid, and they have waived payment. The best way of dealing with this case is to say that if the company is not estopped from saying that the premium has not been paid, they have waived its prepayment. The company could ask for it at any time and then it must be paid. 14 A fortiori when the insurers accepted the premium they waived the condition that premium must be paid in compliance with the premium warranty clause. By their conduct they were estopped from relying on the premium warranty clause. 15 Before moving to the next line of defence, I have an observation to make on the effect of the premium warranty clause. Clause 1 thereof says that full payment of premium on time in full is a condition precedent to liability under this policy. Clause 2 says that if the premium is not paid in full, the cover shall be deemed to have terminated from the expiry premium warranty period without prejudice to any liability incurred before that date. The latter clause implies that the policy is in force before the termination, and that the insurers may have incurred liability under it. It is arguable that cl 1 notwithstanding, prompt payment of premium is not a condition precedent to liability. I will take this no further because this was not in issue in this action and was not addressed by counsel. 16 The defence of estoppel failed for two reasons. First, estoppel was not pleaded. Second, even if it was, there was no evidence to support it. When the insurers disclaimed liability on the policy they sent a cheque for the refunded premium, but there was no evidence that this cheque was presented for payment. When the insurers representative was shown the cheque he did not dispute that it was not presented for payment.

7 920 SINGAPORE LAW REPORTS (REISSUE) [1997] 1 SLR(R) 17 The third line of defence was grounded on conditions 8 and 9 of the policy that: 8 All differences arising out of this policy shall be referred to the decision of an arbitrator to be appointed in writing by the parties in difference or if they cannot agree upon a single arbitrator to the decision of two arbitrators one to be appointed in writing by each of the parties within one calendar month after having been required in writing so to do by either of the parties or in case the arbitrators do not agree of an umpire appointed in writing by the arbitrators before entering upon the reference. The umpire shall sit with the arbitrators and preside at their meetings and the making of an award shall be a condition precedent to any right of action against the company. If the company shall disclaim liability to the insured for any claim hereunder and such claim shall not within 12 calendar months from the date of such disclaimer have been referred to arbitration under the provisions herein contained then the claim shall for all purposed be deemed to have been abandoned and shall not thereafter be recoverable hereunder. 9 The due observance and fulfillment of the terms of this policy insofar as they relate to anything to be done or not to be done by the insured and the truth of the statements and answers in the proposal shall be conditions precedent to any liability of the company to make any payment under this policy. 18 In para 14 of their defence, the insurers pleaded that: (a) condition 8 of the policy of insurance required all differences under the said policy to be referred to the decision of a arbitrator. By condition 9, the decision of an arbitrator was a condition precedent to any liability on the part of the first defendants under the policy. No such decision having been first obtained prior to the commencement of this action, the first defendants are not liable to the plaintiffs as alleged or at all. (b) by condition 8 of the policy if the first defendants shall disclaim liability under the policy, and any such claim shall not within 12 calendar months be referred to the decision of an arbitrator, such claim shall be deemed to have been abandoned and shall not thereafter be recoverable. The first defendants disclaimed liability on 26 December To date, the plaintiff s claim has not been referred to are the decision of an arbitrator [sic]. In the premises, the first defendant is not liable as alleged or at all. 19 For this defence to succeed the dispute between the parties has to be a difference arising out of the policy. 20 In New India Assurance Co Ltd v Lewis [ ] SLR(R) 433 the parties were in dispute whether there was an insurance policy on a horse. The respondent paid premium to the appellant insurance company. The appellants accepted the premium, issued a temporary receipt for it, and

8 [1997] 1 SLR(R) Lim Kitt Ping Lynnette v People s Insurance Co Ltd 921 requested the respondent to forward to them a veterinary certificate to enable them to renew the policy. Before the certificate was forwarded, the horse died. The respondent made a claim under the policy, but the appellants took the position that the policy was not renewed. 21 To resolve the dispute the respondent applied to court to appoint an arbitrator under cl 10 of the policy that: All differences arising out of this policy shall be referred to the decision of an arbitrator to be appointed in writing by the parties in difference or if they cannot agree upon a single arbitrator to the decision of two arbitrators one to be appointed in writing by each of the parties within one calendar month after having been required so to do by either of the parties or in case the arbitrators do not agree of an umpire appointed in writing by the arbitrators before entering upon the reference. The umpire shall sit with the arbitrators and preside at their meetings and the making of an award shall be a condition precedent to any right of action against the company. 22 The appellants resisted the application on the ground that until the issue whether or not there was a policy of insurance in force at all had been determined there can be no basis for the appointment of an arbitrator. They failed at the first instance, and appealed to the Federal Court. 23 Wee Chong Jin CJ delivering the judgment with which I respectfully agree and by which I am bound held ([20] supra) at [9], that: It is settled law that where the dispute is as to whether a contract, which contains an arbitration clause in the widest and most usual form such as arising out of or under or with regard to the contract, was entered into at all that issue cannot go to arbitration under the clause. The reason why such an issue cannot go to arbitration is because in the words of Viscount Simon LC in Heyman v Darwins Ltd [1942] 1 All ER 337 at 343 the party who denies that he has ever entered into the contract is thereby denying that he has ever joined in the submission. In the words of Lord Macmillan, ibid, at 345, If there has never been a contract at all, there has never been as part of it an agreement to arbitrate; the greater includes the less. 24 The dispute between the plaintiff and the insurers was not a dispute arising out of a policy. The insurers cannot complain that there was no arbitration. 25 With the failure of the insurers defences, I granted prayers 1 and 2 of the plaintiff s claim, but not prayer 3. The relief sought in the third prayer does not necessarily flow from the two declarations granted because a subsisting policy is a precondition, but not the only precondition to an insurer s duty to indemnify. There are the circumstances which may relieve an insurer from the duty to indemnify an insured against a claim such as whether the claim is promptly notified to the insurer and whether the

9 922 SINGAPORE LAW REPORTS (REISSUE) [1997] 1 SLR(R) insured has dealt with the claim properly. An insured party s right to be indemnified under a policy must be considered on the facts of each claim. Headnoted by Arvin Lee.