Insurers must give notice before rejecting ‘tainted’ claims, rules court

The Court of Appeal says third party claimants without notice are entitled to enforce a judgment in their favour as of right.

The Court of Appeal rules insurer Alianz cannot repudiate liability to third party claimants Norbiyah Mat Aris and Rahmat Embong as they did not give notice under Section 96(3) of the Road Transport Act 1987.

PUTRAJAYA:

 The Court of Appeal has ruled that insurers must notify third-party claimants if they refuse to honour motor vehicle negligence claims they allege are tainted by fraud.

Justice Aliza Sulaiman, in affirming a High Court ruling, said strict compliance with Section 96(3) of the Road Transport Act 1987 is mandatory.

She said Allianz General Insurans Company Bhd was obliged to inform the respondents — Norbiyah Mat Aris and Rahmat Embong — that it was seeking a declaration from the High Court that the insurance policy relied on was void or unenforceable.

“The appellant (Allianz) knew the respondents’ intention to commence civil action. The appellant was bound to give notice to the respondents of its intention to repudiate liability,” she said in broad grounds of judgment delivered last week.

Aliza said the respondents were entitled to enforce a judgment in their favour without needing to set aside the court declaration, since the order obtained by Allianz was legally ineffective due to non-compliance with Section 96(3).

“It is our unanimous decision that there are no appealable errors by the High Court and appellate intervention is not warranted,” the judge said.

The panel, which also comprised Justices Zaini Mazlan and Evrol Mariette Peters, awarded Norbiyah and Rahmat RM35,000 in costs.

Allianz had sought a declaration from the Kuala Terengganu High Court that the insurance policy relied on by Norbiyah and Rahmat was void and unenforceable, but did not notify them of the proceedings.

Norbiyah and Rahmat obtained judgment in the Kuala Terengganu sessions court for RM448,000 in a negligence suit following a 2019 road accident.

When Allianz refused to honour the verdict delivered, Norbiyah and Rahmat moved to garnish the insurer’s account.

Lawyers for Allianz then sought a stay and injunction to prevent the duo from executing the garnishing order.

In 2023, the High Court dismissed the application. Justice Ahmad Fairoz Zainol Abidin, now a Court of Appeal judge, ruled that the notice requirement was sacrosanct, and must be complied with.

According to the facts of the case, Norbiyah was riding a motorcycle that belonged to Rahmat.

She was involved in an accident with another motorcyclist, Nur Najmi Ismail, at Jalan Hiliran, Kuala Terengganu at about 7pm on March 7, 2015, and sustained bodily injuries.

Ismail Abdul Rahman, owner of the second motorcycle, had insured the vehicle with Allianz.

Allianz sought the declaration based on an adjuster’s suspicion that the suit was fraudulent.

Lawyers JS Naicker and Rosmaria Daud appeared for Allianz, while R Ganavathy Naidu represented Norbiyah and Rahmat.

Naicker said Allianz intends to seek leave to appeal the decision to the Federal Court. - FMT