Takaful Motor – Exception

Background

The Takaful Operator had rejected the Participant’s claim for damages to his vehicle on the following grounds:

  1. Participant’s vehicle was used for criminal activity and therefore in accordance with General Exceptions 3(a) of the Certificate, the Takaful Operator is not liable.
  2. Participant’s vehicle was damaged when the custodian driver attempted to escape from the police by knocking into a police vehicle and therefore the damage was caused intentionally and not accidentally contrary to clause 1(a) of Section A of the Certificate.

The Participant denied that his vehicle was used for criminal activity.  According to him, his vehicle was borrowed by a friend, X to take his family to the hospital.  However, he failed to return the vehicle in spite of requesting for it.  The Participant claimed that this amounted to theft of his vehicle by X.  The response by the Takaful Operator to this contention was that since the Participant had voluntarily lent his vehicle to X and the latter had failed to return the vehicle to him, it would fall within the Exceptions to Section A, clause 4(e) of the Certificate which excludes losses arising from Cheating or Criminal Breach of Trust (CBT).

The Participant did not respond to us on the second ground of repudiation as stated above in spite of being requested to do so.

The relevant terms, conditions and exceptions of the Certificate are as follows:

General Exceptions – These apply to the whole Certificate

Takaful Operator will Not pay for any liability under the following circumstances:

(3a) Any loss, damage or liability caused by Participant vehicle being used for an unlawful purpose or being used otherwise than in accordance with the Limitations as to Use by Participant or by some other person with Participant consent.”  

Section A – Loss or Damage to Participant Vehicle

  1. Takaful Operator will cover the Participant if the Participant vehicle is lost or damaged in the following circumstances:
  1. accidental collision or overturning”

4  Exceptions to Section A

Takaful Operator will Not pay for:

  1. any loss or damage caused by or attributed to the act of cheating/criminal breach of trust by any person within the meaning of the definition of the offence of cheating/criminal breach of trust set out in the Penal Code”

 

Investigation and findings

The issue to determine was whether the two grounds of repudiation by the Takaful Operator as stated above are justified.  

  1. First Ground of Repudiation

On the first ground of repudiation that the Participant’s vehicle was used for criminal activity, the Case Manager had requested for proof from the Takaful Operator.  Investigations, as revealed by the Loss Adjuster’s report read together with the police report made by the Participant’s brother showed that the Participant’s vehicle was borrowed by a friend X to fetch his family from the airport.  However, the vehicle had not been returned and X could not be contacted.

Subsequently, the Participant was informed by the Police that his vehicle was involved in a mishap while police were conducting an operation to arrest suspects involved in a robbery. The vehicle was said to be under the custody of one Y while X was said to be an accomplice seated in the front passenger seat of the Participant’s vehicle.  A shoot out had ensued in the operation after Y had tried to run down police personnel involved in the operation.  As a result, X was shot dead by the police whilst the driver, Y was injured.  The police then identified themselves but the driver attempted to escape by knocking into the police personnel car which was used in the operation and two other vehicles which were parked nearby.   Y was finally arrested and the Participant’s damaged vehicle seized.

From the above facts, it was clear that the Participant’s vehicle was damaged when the driver intentionally knocked into the police vehicle and two other parked vehicles in his attempt to escape from the police.  It is also clear that the Participant’s vehicle was not damaged in the course of a criminal activity, e.g. robbery.  On the conduct of the driver in knocking into the vehicles before trying to escape, the Supreme Court in Abdullah Zawawi bin Yusoff v Public Prosecutor [1993] 3 MLJ 1 held that the conduct of the appellant in running away was equally consistent with the appellant being in a state of pure panic.  An innocent man faced with the prospect of arrest on a capital charge might foolishly react in that way.

The Case Manager had requested the Takaful Operator to give further evidence to prove that the Participant’s vehicle was indeed damaged in a criminal activity as alleged in their repudiation letter.  The Takaful Operator had filed a Supplementary Report by the Loss Adjusters which threw some light on the criminal background of Y and X who were alleged to be suspects in an armed robbery case.  The Supplementary Report also revealed that Y was under the influence of drugs and was not in possession of a valid driving licence at the time of loss.  This new evidence prompted the Takaful Operator to add two more grounds of repudiation at that juncture, namely the authorised driver driving under the influence of drugs and not having a valid licence to drive.  The Case Manager opined that the Takaful Operator should have investigated this case thoroughly before repudiating the Participant’s claim.  The Case Manager was of the view that it would be unfair and unconscionable to the Participant to allow the Takaful Operator to add new grounds of repudiation after the issuance of the initial repudiation letter.  Moreover, clause 3.4.2(a) of the Guidelines on Claims Settlement Practices issued by Bank Negara Malaysia states that the Takaful Operator should advise the claimant in writing on the rejection of his claim within seven (7) working days after receipt of the adjuster’s final report stating the reasons for the repudiation in a clear and simple manner.  In this case, the Loss Adjuster’s final report was dated 1 April 2016 and the Takaful Operator’s repudiation letter was dated 20 April 2016.   Notwithstanding the Loss Adjuster’s Supplementary Report dated 20 February 2017, the Case Manager found that the Takaful Operator was still unable to provide with sufficient convincing evidence to prove that the Participant’s vehicle was used for criminal activity.  Thus, the Case Manager was of the view that that the Takaful Operator’s first ground of repudiation lacked merit and therefore cannot be sustained.

 

  1. Second Ground of Repudiation     

The second ground of repudiation was that the Participant’s vehicle was damaged when the custodian driver attempted to escape from the police by knocking into a police vehicle  and two other vehicles and therefore the damage caused was intentional and not accidental.

The Case Manager had requested the Participant to give his views on this ground of repudiation.  However, he had failed to respond.

The definition of ‘accident’ as stated in Black’s Law Dictionary (ninth edition) is “an unintended and unforeseen injurious occurrence; something that does not occur in the usual course of events or that could not be reasonably anticipated.”    The word ‘accidental” is defined as “not having occurred as a result of anyone’s purposeful act, esp., resulting from an event that could not have been prevented by human skill or reasonable foresight.” 

Applying the above-mentioned definitions of ‘accident’ and ‘accidental” to this case, the Case Manager found that that the knocking by the custodian driver Y into a police vehicle and two other vehicles in his attempt to escape from the police was an intentional act.  Therefore, the Case Manager was of the view that liability was not attached.

 

Recommendation

The Case Manager found the first ground of repudiation by the Takaful Operator lacked merit since the Takaful Operator was unable to provide with sufficient evidence to prove that the Participant’s vehicle was used for criminal activity.  Therefore, he contended that the Takaful Operator’s first ground of repudiation cannot be sustained. 

However, the Case Manager found merit and validity in the second ground of repudiation by the Takaful Operator.  For a claim to be payable, there must be accidental collision or overturning as stated in clause 1(a) of Section A of the Certificate.  The facts and evidence of this case clearly pointed out that the damage sustained by the Participant’s vehicle was a result of intentional collision and not accidental collision.

The Case Manager emphasised that in the case of Chiew Swee Chai v British American Insurance Co. (M) Sdn. Bhd. [1987] 1 MLJ 53, it was held that “where the words of the policy are crystal clear, it is the view of this court that the sanctity of the contract should be upheld”.

Based on the above reasons, the Case Manager found that the decision of the Takaful Operator to repudiate the Participant’s claim by virtue of its second ground was in accordance with the terms and conditions of the Certificate.

Under the circumstances, the Case Manager recommended that the decision of the Takaful Operator to repudiate the Participant’s claim be affirmed.

The Participant decided not to refer his dispute to the Ombudsman for adjudication although he was given 30 days to do so.