PUTRAJAYA: In a landmark ruling, the Federal Court has held that road accident victims should be automatically compensated without having to sue insurance companies.
Federal Court judge Abdul Rahman Sebli said the provisions in the Road Transport Act 1987 should be construed to protect all motorists, including victims of road accidents.
He said the intention of Parliament in enacting the Act was to also protect innocent third party road users.
Rahman, who led a three-member bench, said this in his 140-page judgment that allowed appeals involving eight different motorists, seven of whom were injured in accidents.
Of the eight appeals, five involved Pacific & Orient Insurance Co Bhd, Amgeneral Insurance Bhd, Allianz General Insurance Company (M) Bhd, and Malaysian Motor Insurance Pool.
The bench, also consisting of Hasnah Mohammed Hashim and Rhodzariah Bujang, awarded RM150,000 in costs to each of the successful parties in the appeal.
In explaining the court’s decision, delivered last week, Rahman said all vehicle owners had to have compulsory insurance coverage.
The law was that without insurance coverage, the road transport department would not issue the road tax, he said.
If a vehicle injured a victim, that person could sue the owner or the driver of the vehicle.
This was because if the vehicle owner had insurance coverage, the insurer (insurance company) would automatically step in and “indemnify” the victim, without the victim having to sue the insurer.
In some cases, compensation could run into millions of ringgit and insurance companies would pay the damages to the victims on behalf of the motorists.
Rahman said the Act had to balance two competing interests. The first was to protect innocent third parties against the risks.
On the other hand, he said, the law had to protect an insurance company from being victimised by fraudulent claims.
In setting the balance between these two competing interests, at the end of the day, the loss had to fall on one party.
In following the principle established in a 1959 Indian Supreme Court case (British India General Insurance v Capt Itbar Singh), the apex court said that if the loss had to fall on one party, the Act had decided that such a loss should be borne by the insurer.
The victims had filed a negligence suit in the sessions courts against owners of vehicles and/or drivers for damages.
The appeals came about as the insurance companies had obtained a declaration in the High Court to nullify policies of motorists due to allegations of misconduct on the part of the vehicle owners.
This had denied accident victims monetary compensation that had been due to them.
In one of the cases, the vehicle owner had “sold” the vehicle to a third party through what is known as “sambung bayar” (continuing payments), without informing the insurance company.
They succeeded in asking the High Court to declare the policies void. Using that order, the insurance companies refused to cover the victim’s loss. In the end the victims lost out.
In another case, despite the fact that after a full trial the sessions court had found the driver of the vehicle negligent, the insurance company had taken a court order, alleging it had been defrauded. It declined to pay the vehicle owner.
Eventually, the victim merely held a paper judgment, which the Federal Court said was “not even worth the paper it was written on”.
The court said this was unfair because the victim’s constitutional rights to be treated fairly had been infringed.
The road victims were represented by lawyers Ganavathy Naidu, Harjeet Singh Sidhu, Rajan Ayapan, Siva Subramaniam, Adrian Thambyrajah, Manoharan Veerasamy, G Ravichandran, BP Jayaprathap and GK Ganesan.
The insurers were represented by RK Nathan, Vinod Kamalanathan, Silva Velu, Reuben Netto, VK Dasaratha Raj and R Ratha Davi.
In response to the judgment, a lawyer said that in the last decade, many grey areas had sprung up in motor accident cases
“This uncertainty has caused huge problems for innocent road victims. This case resolves those difficulties in one fell swoop,” the lawyer, who asked not to be named, told FMT.
V Anbalagan -August 9, 2022 11:21 AM