Case commentary: Su Hock Guan v AXA Affin General Insurance Malaysia Berhad
17 February 2021
The High Court in SU HOCK GUAN V AXA AFFIN GENERAL INSURANCE MALAYSIA BERHAD  1 AMR 205 held that the cause of action against an insurer under an indemnity insurance accrues upon the occurrence of loss, not upon the repudiation of liability by the insurer.
The Appellant (“Insured”) had obtained a motor vehicle insurance policy (“Policy”) with the Respondent (“Insurer”). The Insured intimated a claim to the Insurer pursuant to the Policy alleging that a fire on 24 April 2010 caused the motor vehicle to be damaged beyond repair. On 15 June 2012, the Insurer repudiated the Insured’s claim on the ground that the Policy was void ab initio.
On 16 May 2016, which was 6 years after the date of the fire incident, the Insured initiated a court action against the Insurer seeking compensation under the Policy. The Insurer filed an application to strike out the Insured’s action on the ground that it was time-barred pursuant to Section 6 of the Limitation Act 1963. The striking out application was allowed by the Sessions Court Judge. The Insured filed an appeal to the High Court against the Sessions Court Judge’s decision.
FINDINGS BY THE HIGH COURT
The High Court upheld the decision of the Sessions Court and held that the cause of action arises upon the occurrence of the loss (i.e. the fire incident), and not upon the repudiation of liability by the Insurer. In arriving at the decision, Ong Chee Kwan JC (“Learned JC”) in Su Hock Guan had analysed earlier cases / authorities which had decided on a similar issue including Tan Boon Yen & 3 Yang Lain v Mayban General Assurance Berhad  3 AMR 678, Ayob bin Salleh v AmGeneral Insurance Berhad & Anor  5 AMR 123 and Mohd Sultan Dastagir Syed Ibrahim v AXA Affin General Insurance Bhd (Rayuan Sivil No. PA-12ANCvC-47-09/2019) (unreported).
The three cases cited above reflect two divergent lines of authorities by the High Court, one holding that the cause of action accrues at the time of the loss, and the other holding that the cause of action accrues upon the repudiation of liability by the insurer.
Tan Boon Yen v Mayban General Assurance Berhad
In Tan Boon Yen, the claim was made under a life policy where the insurer repudiated liability on the ground that the death was caused by suicide, which was excluded under the life policy. However, a subsequent inquest showed that the cause of death was murder. The suit initiated by the beneficiaries against the insurer was taken 6 years after the date of repudiation of liability by the insurer. The High Court, in holding that the claim was time-barred, held that cause of action accrued at the date of repudiation by the insurer.
Ayob bin Salleh v AmGeneral Insurance Berhad
In Ayob bin Salleh, the insured made a claim under the policy to the insurer for theft of his vehicle. However, the insurer concluded that there was no theft as the key was handed over by the insured voluntarily and thus, repudiated the claim. The insured later filed an action against the insurer for wrongful repudiation. The High Court similarly held that the action was time-barred and held that the critical date for computing limitation was the date of repudiation by the insurer.
Mohd Sultan Dastagir Syed Ibrahim v AXA Affin General Insurance Bhd
In Mohd Sultan Dastagir Syed Ibrahim, the High Court did not subscribe to the view in Tan Boon Yen and Ayob bin Salleh. Instead, the Court held that the cause of action in respect of indemnity insurance arises upon the occurrence of the insured peril / loss. The reason being that the Federal Court in the case of ALW Car Workshop Sdn Bhd v AXA Affin General Insurance Berhad  1 AMR 225 remarked that it was trite that the relevant date to ascertain loss of claim under fire insurance is at the date of loss. Further, the High Court also referred to Versloot Dredging BV v HDI Gerling Industrie Versicherung AG  UKSC 45 where it was held by the UK Supreme Court that the insured’s right to indemnity arises as soon as the loss is suffered and it is not a precondition for a claim to be made to the insurer for the liability to arise.
The Learned JC in Su Hock Guan, after discussing the two divergent lines of authorities, decided that the latter view (i.e. cause of action accrues at the time of the loss) is the correct view, as it is in line with the view of the UK jurisdiction and academic articles, for instance, the UK Supreme Court case of Connect Shipping Inc v Sveriges Angfartygs Assurans Forening “The Renos”  UKSC 29, the New South Wales Court of Appeal case of Globe Church Incorporated v Allianz Australia Insurance Ltd  NSWCA 27 and the article, “When Does an Insured's Cause of Action Against an Insurer Arise: At the Time of the Event/Loss or After the Insurer has Disclaimed Liability?" by S Kalyana Kumar published in  3 MLJ cxxxi.
In arriving at the decision, the Learned JC held that unless the insurance policy otherwise provides, the cause of action in an indemnity insurance will arise on the date of the loss and not the date of repudiation of liability by the insurer.
One of the reasons adopted by the Learned JC was that by Lord Sumption in The Renos where it was held that the nature of indemnity insurance is to hold the insured harmless against any potential loss, and therefore as soon as the damage occurs, it is said that the insurer is already in breach of the obligation. The Learned JC also stated that this is distinguished from policies of liability insurance where the cause of action will only arise upon the liability of the insured being established by judgment, arbitration or binding agreement.
Further, the Learned JC also supported his decision with the reason that if the cause of action arises only upon repudiation of liability, this will enable the insurer to postpone the limitation period at its will by withholding repudiation. Further, it may also pose difficulty where there is more than one claimant to the indemnity insurance arising from the occurrence of the same event. In such event, a situation will arise where there will be different commencement dates for each claimant’s cause of action if the insurer repudiates liability at different times for each of the claimants even though their claims arise from the same event.
In short, the principle laid down in the present case is that unless the insurance policy otherwise provides, the cause of action under an indemnity insurance accrues from the date of the loss, and not from the date of repudiation of liability by the insurer. While it is acknowledged that there are divergent authorities by the High Court on the matter, it will be prudent for an insured to prepare for any potential suit against the insurer on the premise that the cause of action arises on the date on which the loss occurs to prevent the claim being time-barred.
Alert prepared by Ms Loo Peh Fern (Partner) of the Insurance and Reinsurance Practice of Skrine.