Liberty Insurance Berhad v Koay Ghee Seong & Ors

Appellant(s): Liberty Insurance Berhad

Respondent(s):

• Koay Ghee Seong
• Mohamad Munir Bin A. Hasan

• YA Datuk Mohamed Zaini Bin Mazlan
• YA Datuk Leonard David Shim
• YA Dato' Hajah Aliza binti Sulaiman

• The appellant insurer issued a compulsory third-party motor vehicle indemnity policy in the name of a sole proprietorship business, in fact owned by an individual who had died approximately four years before the policy was renewed, with the deceased's son (as administrator of the estate) procuring the renewal.
• The insured lorry, driven by the deceased's son, was involved in an accident causing severe injury (paralysis) to a motorcyclist, who subsequently gave notice under s.96(2) of the Road Transport Act 1987 (RTA 1987) and commenced a separate suit against the driver and the deceased's estate.
• The insurer filed an Originating Summons seeking a declaration that the policy was void and unenforceable on grounds of non-disclosure of the insured's death, breach of utmost good faith, lack of capacity to contract, and lack of insurable interest; the High Court dismissed this application, prompting the appeal.

• Whether a compulsory third-party motor vehicle insurance policy remains valid and enforceable against an innocent third party despite the death of the named insured prior to renewal, having regard to s.101(2) of the RTA 1987.
• Whether an insurer can avoid liability to an innocent third-party claimant under s.96 of the RTA 1987 by relying on contractual defences such as non-disclosure, breach of utmost good faith, lack of capacity to contract, or absence of insurable interest.
• Whether the insurer's failure to verify information in the proposal form or to pursue incomplete disclosure amounted to a deemed waiver under Schedule 9 of the Financial Services Act 2013 (FSA 2013).

• The Court held that s.101(2) of the RTA 1987 expressly preserves the validity of a policy notwithstanding the death of the insured, and absent fraud or collusion, the policy remained enforceable against the innocent third-party victim.
• Following binding Federal Court authority, the Court affirmed that the statutory scheme under ss.94, 95 and 96 of the RTA 1987 is social legislation designed to protect innocent third parties, such that contractual defences available between insurer and insured (non-disclosure, utmost good faith, capacity, insurable interest) cannot defeat a third party's statutory right to recover under the policy.
• The Court further found that the insurer's failure to verify the proposal form and pursue unanswered questions amounted to a deemed waiver of the disclosure duty under paragraph 4(3), Part 2, Schedule 9 of the FSA 2013; the appeal was accordingly dismissed with costs of RM40,000 to the injured third party, affirming the High Court's decision.