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ROAD ACCIDENT – MOTOR INSURANCE CLAIM – FEDERAL COURT TO INSURERS – NO MORE DELAYING THIRD-PARTY PAYOUTS!

1. Summary and Facts

Chen Boon Kwee v Berjaya Sompo Insurance Bhd [2025] 1 MLJ 158 the Federal Court addressed a significant issue in motor insurance claims – whether an insurer can refuse payment of a judgment sum until a separate recovery suit is filed.

The appellant, Chen Boon Kwee, was injured while traveling in a vehicle owned by his wife Tan Saw Kheng (TSK) and insured by Berjaya Sompo Insurance Bhd. After a court ruling found the driver liable for the accident, Berjaya Sompo refused to pay the damages awarded, arguing that the appellant needed to file a separate recovery action.

Both the High Court and Court of Appeal sided with the insurer, prompting an appeal to the Federal Court.

2. Legal Issues

i. Whether Section 91(1)(b)(bb) of the Road Transport Act 1987 (“RTA”) excluded the insurer’s liability for passenger injury?
ii. Whether Chen Boon Kwee could enforce the judgment directly against the insurer under Section 96(1) of the RTA, or if he needed to file a separate recovery suit?
iii. Whether the insurer’s failure to obtain a court declaration under Section 96(3) of the RTA prevented it from avoiding liability?

3. Court Findings

• The Federal Court ruled in favor of Chen Boon Kwee, overturning the earlier decisions and making key rulings:
• Under Section 96(1) of the RTA, an insurer must pay the judgment sum directly once a third party has obtained a judgment against the insured. The court clarified that previous rulings requiring a separate lawsuit were incorrect and placed an unfair burden on accident victims.
• If an insurer wants to deny liability, it must seek a court declaration under Section 96(3) of the RTA before the judgment is entered. Since Berjaya Sompo did not take this step, it could not refuse payment.
• The appellant was traveling for work, which qualified him for coverage under Section 91(1)(b)(bb) of the RTA. The insurer’s attempt to deny coverage on this basis was rejected.

4. Practical Implications

This ruling significantly benefits third-party accident victims by ensuring that insurers cannot create unnecessary legal hurdles to delay payouts. The decision reinforces that:

• Third-party claimants do not need to file a separate recovery suit once they have secured a court judgment.
• Insurers must obtain a court declaration before disputing liability – failure to do so means they must pay.
• The RTA is a social protection law meant to safeguard accident victims, and insurers cannot rely on technicalities to avoid payment.

This case strengthens consumer protection in motor insurance claims and ensures a faster, fairer process for accident victims.

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