Insurance take home test
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Insurance take home test

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INSURANCE LAW

INSURANCE LAW

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Insurance take home test Insurance take home test Document Transcript

  • 1 The problematic question above concerns with the two life insurance policies that were undertaken by the insured, Sam Lee with ASIA Insurance Berhad as the Insurer. The statement of facts clearly states that both of the life insurance policies worth a total amount of RM30 000 each. Sam Lee named his father, Gary Lee, as the beneficiary of the first life policy and Sally Tan, his foster mother as the beneficiary of the second life insurance policy. Furthermore, the insured, Sam Lee took out another life insurance policy for RM500, 000 with EURO Insurance and assigned it to “his wife Jessie Koh and children”. On top of that, he bought a motor insurance policy on his BMW with the insurer, MINI Insurance Bhd. Having extracted all the material facts of the question, now, we proceed to the first issue. The issue of whether Jessie Koh, the second wife of Sam Lee can successfully claim an indemnity from MINI Insurance Bhd for her injuries and suffering need to be determined first. Based on the question, it can be safely assumed that the insured policyholder, Sam Lee had given permission to his nephew, Joe Lee to drive his car and Joe Lee’s position can be regarded as an authorized driver for the purpose of driving both Sam Lee and Jessie Koh to work. Based on the authority in Section 91(1)(b) of the Road Transport Act 1987, specifically states that a policy of insurance must be a policy which insures a person in respect of any liability which may be incurred in respect of death or bodily injury caused by or arising out of the use of the vehicle. Section 91(1)(aa) of the same Act, further states that a policy shall not be required to cover liability in respect of death arising out of and in the course of his employment of a person in the employment of person insured by policy. In other words, this particular section excludes the liability to a person in the employment of the Insured when the death or accident occurred in the course of employment. Section 91 (1) (bb) of the same act further provides exception in cases of a motor vehicle in which passengers are carried for hire or reward or in pursuance of a contract of employment. Indirectly, this section provides coverage of an employee of Insured or employee of third party who is being carried as Insured’s passenger.
  • 2 To further understand this concept, the case of Sinnadorai V New Zealand Insurance Company Ltd shall be discussed. In this case, the plaintiff was injured in an accident while being a passenger in a car driven by the insured. Plaintiff obtained judgment against the insured and now sought to enforce against the insurer. The court held that the passenger could not claim because he was the passenger of the insured based on Section 96 of Road Transport Act. In application, since Jessie Koh, was in the car at the time of the accident happened and obviously she was the passenger of the car driven by Joe Lee, therefore she does not have any claim whatsoever by virtue of the above-mentioned case and section. Now, moving on to the second issue of the problematic question at hand. The issue is whether Renee, Sam Lee’s first wife may successfully claim the policy monies from ASIA Insurance Berhad and EURO Insurance Berhad as being part of the estate. In order to answer this issue, it is important to ascertain the legal standing or position of Renee as Sam Lee’s first wife in the eyes of the Insurance Law. By virtue of Section 163 of the Insurance Act 1996, it stipulates that a policy owner may nominate a natural person to receive the policy moneys payable upon his death under the policy and in the event of the nomination had been made in accordance with the act, the insurer should by virtue of section 165 (1) of the Act pay the policy moneys of the deceased policy owner according to the direction of the nomination upon receipt of a claim by the nominee. Therefore, it can be safely concluded that, section 163 and 165 of the Act made it clear that the beneficiary of a policy of insurance was not confined to a specific person who has legal standing such as a wife, child etc. The word “natural person” in Section 163 denotes that the policyholder is free to nominate anyone. To illustrate this point, reference has to be made to case Lee Heng Moy V John Hancock Life Insurance Bhd & Anor whereby the facts of the case revolve around the issue of the nomination of ‘second wife’ (mistress) as the beneficiary of the policy and issue of the insurer faced with the competing claims by the first wife and ‘second wife’ to the insured sum amounting RM352, 229.39. The court held that the ‘second wife’ to be the lawful beneficiary of the policy as Section 163 and 165 of the
  • 3 Insurance Act 1996 made it clear that the beneficiary of a policy was not confined to a wife and that since the deceased policyholder had in fact nominated the ‘second wife’, she was the lawful beneficiary of the policy. The court further commented that under section 167 (1) of the Act, the position of the ‘second wife’ as the nominee under the said policy is to be held and received the policy moneys as an executor and not solely as a beneficiary. In applying the relevant principle with the situation at hand, the fact that Sam Lee did not nominate Renee as the beneficiary of the policy and named his foster mother, Sally Tan as the beneficiary of the second life insurance policy indicates that the policyholder in this case, Sam Lee clearly wanted his foster mother and not his first wife to receive the policy monies payable upon the occurrence of his death under the said policy. Besides, according to Lee Heng Moy case, Section 163 and 165 of the Act do not expressly state that the scope of naming the beneficiary is restricted to a wife only. Thus, the insurer, ASIA Insurance Berhad, shall pay the policy moneys of the deceased policy owner according to the direction of the nomination upon the receipt of a claim by the nominee, Sally Tan. Moreover, the position of Sally Tan as the nominee under the said policy is to be held and received the policy moneys as an executor and not solely as a beneficiary by virtue of Section167 of the Act and any payment to her shall form part of the estate of Sam Lee and be subjected to his debts. Next, the issue of Jessie Koh’s rights over the monies has to be addressed accordingly. As per statement of fact, Sam Lee had assigned the rights to his wife Jessie Koh and the children when he took a life insurance policy for RM500, 000 with EURO Insurance. This particular issue concerns with the issue of the rights of an assignee in which assignee shall have the priority over the claim of the nominee. If balance of money remains after the payment to the assignee, then the insurer shall pay the remaining sum to the nominee according to Section 168 of the Insurance Act 1996. In application, since Sam Lee had assigned Jessie Koh and children with the policy moneys therefore, priority is given to her over the claim of the nominee and subject to the rights under the security or the assignment being preserved, EURO Insurance shall pay the balance of the policy moneys to the nominee.
  • 4 Another minor issue that needs to be addressed here would be whether Renee would succeed in her claim against MINI Insurance Berhad under the motor insurance policy. The general coverage in motor insurance policy would be it covers the personal injuries or death of the insured, authorized driver and third party as well as the damage to property of the insured and others. These general principles are laid down in Section 90 (1) of the Road Transport Act 1987 and the effect of contravention is highlighted in Section 90 (2) of the same Act whereby fine, or imprisonment and disqualification from holding or obtaining a driving license may be imposed. In order for the insured to successfully recover his claim, it must be proven that Joe Lee is the authorized driver. Here, it can be safely deduced that Joe Lee had obtained permission to drive the said car from Sam Lee as he was driving both the insured and Jessie Koh to work in Kuala Lumpur. In the case of Chan Tian Hock V PP, policyholder may give either expressly or impliedly the said consent. In application, the insured, Sam Lee may recover his claim against MINI Insurance Berhad under the motor insurance policy as it has been proven that the tortfeasor, Joe Lee was in fact the authorized driver of the said car. Thus, there is a compliance with the statutory duty to insure as the situation at hand is of a tort case when Joe Lee had negligently drove the car at a speed of 130 kmph and thereby causing the car to collide with a bus carrying factory workers home. In conclusion, MINI Insurance Policy must indemnified the losses that the insured, Sam Lee suffered and referring to the statement of facts of the question, Sam Lee eventually died from the internal bleeding and obviously, this incident fall within the risk insured between Sam Lee and MINI Insurance Berhad. Since, Sam Lee died in the tragic accident, therefore, his wife is able to recover the sum insured as she is in the right legal standing to do so. The third major issue of the question is whether MINI Insurance can exercise its rights under the subrogation laws against Sam Lee’s estate.
  • 5 Subrogation is the right of the Insurer, having indemnified the insured (under the legal obligation to do so) to stand in place of the insured and avail him of all the rights and remedies of the insured. This principle is exemplified in the case of Burnand V Rodocanachi. Besides, subrogation rights can only arise out of indemnity as per case Scottish Union and National Insurance V Davies. Since the above problematic question concerns with the issue of indemnity, therefore, the doctrine of subrogation is applicable in this matter. Having said this, it has to be noted that the subrogation rights arise in torts cases where the insured has sustained some damage, lost rights or incurred liability due to the tortuous acts of some other person then the insurer, having indemnified him for his loss is entitled to take action to recover the outlay from the wrongdoer. The effect of the subrogation rights would be the insured would have a right in tort against the individuals involved. The insurers on the other hand, will assume these rights and make an attempt to recover their outlays from the tortfeasor. In the event of the insurers decided to initiate an action, they will have to use the name of the insured by virtue of the case Lister V Ramford Ice. Applying all the ahove-mentioned principles to the situation at hand, subrogation rights arise in the above case whereby the tortious act was done by the authorized driver, Joe Lee who was driving the insured, Sam Lee and Jessie Koh to work in Kuala Lumpur at the speed of 130 kmph. As far as the law in Malaysia is concerned, the speed limit of driving via highway would be 110 kmph and clearly, here, Joe Lee had disobeyed the rule, which led them to the incident of colliding with a bus- carrying factory workers home. Thus, MINI Insurance having indemnified the insured (under the obligation to do so) to stand in the place of Sam Lee and indirectly, making MINI Insurance entitled to all the rights and remedies of Sam Lee in mitigation of the loss. In addition, MINI Insurance may initiate an action against the tortfeasor, in which in this case would be Joe Lee and enforce its rights and remedies in the name of Sam Lee relying on the authority of the case Lister V Romford Ice. To conclude this, MINI Insurance cannot enforce its rights under subrogation laws against Sam Lee’s estate instead MINI Insurance may enforce its claims and remedies under subrogation laws against the wrongdoer, Joe Lee.