Does an insurance policy cover an accident if the policy is bought after the accident?
PACIFIC & OREINT INSURANCE CO BHD V HAMEED JAGUBAR BIN SYED AHMAD  MLJU 1315
- Pacific & Orient Insurance Co. Bhd (“P&O”) is the insurer of a motorcycle which was involved in an accident on 27 October 2011 at 1.30am.
- The motorcycle was registered in the name of Khor Teik Wan (“KTW”).
- KTW knocked into Hameed Jagubar bin Syed Ahmad (“Hameed”).
- Approximately 12 hours after the accident, KTW had applied for insurance cover for the motorcycle from P&O on the same date.
- The cover note of the policy showed that it was issued on 27 October 2011 at 2.16pm. But the Certificate of Insurance issued showed that the effective date of the commencement of insurance was 27.10.2011.
- P&O didn’t know that KTW was involved in an accident at 30am.
- Hameed filed a claim against KTW in the Sessions Court.
- P&O then filed a suit in the High Court for a declaration that the insurance policy issued to KTW was void and unenforceable as KTW had no coverage at the time of the accident.
- Essentially P&O [being the insurer for KTW] didn’t want to pay Hameed’s claim because they argued that at the time of the accident there was no insurance coverage.
- Hameed’s argument was that because the Certificate of Insurance stated that the coverage was effective 27.10.2011, therefore the coverage began at 12.01am and not after the purchase of the coverage.
- The High Court held in favour of P&O and found that P&O was not liable for an accident which had occurred prior to the issuance of the insurance cover.
- Hameed as a party to the suit, then appealed to the Court of Appeal.
- The Court of Appeal found in favour of Hameed and held that by the terms of the contract [Certificate of Insurance], the policy became effective retrospectively and coverage began at midnight on 27 October 2011 when the date comes into existence. As such, P&O was liable under the insurance policy.
- P&O then appealed to the Federal Court.
FEDERAL COURT DECISION – APPEAL ALLOWED!
- The Federal Court allowed the appeal and ruled in favour of P&O.
- The Federal Court held that where the date and time of issue are mentioned in the cover note then that is deemed a “special contract”.
- As such the policy will take effect from the time of issuance of cover note.
- The Federal Court further held that the assumption of risk by P&O only commences once the premiums are paid.
- And since in this case the premiums were paid after the accident the law at the material time prohibits P&O from assuming any risk prior to the premiums being paid.