Legal Update 24 of 2011

 Insurance – whether terms not defined in the policy can be defined using the Penal Code

CASE:

Malaysian Motor Insurance Pool (formerly known as HRMIP) v Naza Motor Trading Sdn Bhd [2012] 1 MLJ 16 Federal Court, Putrajaya.

ISSUE:

Insurance – whether terms not defined in the policy can be defined using the Penal Code

BRIEF FACTS:

• The Plaintiff (Naza) was the owner of a Mercedes Benz E230 (“the Car”) which was insured by the Defendant (MMIP).
• The policy was expressed to cover and indemnify Naza for, among other things, theft of the Car.
• One customer pretending to be a Dato’ requested to test drive the Car and a Naza sales representative accompanied the Dato’ during the test drive.
• During the test drive, the Dato’ asked the sales representative to buy fried chicken for him and while he was gone, the Dato’ drove off with the car.
• Naza duly lodged a police report and made a claim for RM263,779.34 under the insurance policy.
• MMIP however, disputed the claim and sought to exclude liability based on clause 8 of the policy which provided that it was not responsible for the loss of the Car if it was due to cheating not theft.
• The High Court found that the loss was due to cheating and not theft and dismissed Naza’s claim. However, the Court of Appeal found that the loss was due to theft.
• MMPI appealed to the Federal Court and contended that the loss was not due to theft as defined in the Penal Code and was excluded by virtue of clause 8.

DECISION: MMPI’s appeal dismissed with costs.

• The term ‘theft’ in the insurance policy was not defined whereas the term ‘cheating’ was defined in the policy as following same definition in the Penal Code.
• Since liability of MMPI under the policy hinged upon the commission criminal offences, namely theft or cheating, the definitions of the Penal Code ought to apply.
• In this case, the Car was dishonestly taken away by the Dato’ without the consent of the sales representative, thus the loss was due to theft and not cheating.
• Furthermore, the facts of the case could not fit into any definition of ‘cheating’ under the Penal Code.
• Clause 8 would only apply if the events leading to the loss were the proximate or inevitable cause of the loss.
• Here, the proximate or inevitable cause of the loss was the theft by the Dato’ and notcheating by pretending to be a customer wanting to test drive the Car.