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ROAD TRANSPORT ACT – INSURANCE – DECLARATION TO NOT INDEMNIFY THE INSURANCE

1. Summary and Facts

In Mohd Riza bin Mat Rani & Ors v Zurich General Takaful Malaysia Bhd & Anor [2025] 2 MLJ 224, an appeal case involving an accident between a car driven by the 1st appellant and a motorcycle ridden by the 2nd appellant and 3rd appellant (pillion). The car’s insurance policy was issued by Zurich General to the registered owner. The investigation revealed that the chassis number of the car in the accident differed from that insurance policy, asserting the car was a ‘cloned’ car. Zurich applied under Section 96 Road Transport Act 1987 (“RTA”) for a declaration that the policy was void, arguing they did not insure the actual vehicle involved.

The High Court granted the declaration, therefore the appellants appealed.

2. Legal Issues

• Whether Zurich Takaful General Malaysia as the insurer at the time of the accident can avoid the policy given by relying on the basis that the car was ‘cloned’.
• Whether the absence of “insurable interest” defeats the third-party claims.

3. Court’s Findings

• The Court of Appeal allowed the appeal by the appellants and set aside the High Court’s decision.
• Under Section 96 of RTA 1987, compulsory third-party insurance exists to protect innocent third-party road users as it reflects a social policy.
• The insurers cannot avoid liability by relying solely on contractual terms as it was a statutory liability which did not prejudice innocent third-parties.
• The insurer remained liable for the coverage as long the registration number of the car and owner was matched with JPJ records.
• Zurich failed to explain renewal circumstances and did not show compliance with para 5, Schedule 9, Financial Services Act 2013.

4. Practical Implications

This decision affirms several important legal principles governing the rights and liabilities of insured road users under Malaysian motor insurance law:
• Section 96 of RTA 1987 mandates that insurers indemnify third-party claimants once a policy is valid and subsisting, irrespective of disputes between the insurer and insured.
• The absence of insurable interest does not invalidate the insurer’s obligation to satisfy judgments in favour of third parties, provided registration number and registered owner match official JPJ records.
• An insurer cannot rely on discrepancies in vehicle particulars to avoid liability if, under para 5, Sch 9 FSA 2013, it failed to exercise its continuing duty of utmost good faith and diligence in verifying the risk at renewal, especially for third-party claims under s 96 RTA 1987.

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