On 7 April 2025, the High Court in
Allianz General Insurance Company (Malaysia) Berhad v Mohd Shahrizam bin Lazim & 3 Ors [2025] 2 AMR 699 (“
Allianz General Insurance”) held that while Section 91(1)(b) of the Road Transport Act 1987 (“
RTA”) requires every vehicle owner to purchase an insurance policy to insure against liability for death or bodily injury to any person caused by or arising out of the use of the vehicle, Section 91(1)(b) proviso (bb) of RTA exempts this insurance from being required to cover liability for death or bodily injury to passengers unless the passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment.
In light of this recent decision, it is timely to revisit the issue of Legal Liability to Passengers (“
LLP”), also known as passenger cover, in the context of motor vehicle insurance in Malaysia.
LLP / Passenger Cover
So, what is an LLP / passenger cover in the context of a motor vehicle insurance policy?
LLP / passenger cover is a type of car insurance that safeguards the vehicle owner and an authorised driver, i.e. a person who is authorised by the owner to drive the vehicle, from liability for injuries or damages sustained by passengers due to the vehicle owner’s / driver's negligence.
As explained in
Allianz General Insurance, under Section 91(1)(b) of RTA, it is mandatory in Malaysia for every vehicle owner to purchase an insurance policy to insure against liability for death or bodily injury to any person caused by or arising out of the use of the vehicle. In other words, in Malaysia, if the vehicle owner and/or an authorised driver caused any death or bodily injury to any third party as a result of the use of the vehicle, the insurance policy will cover the third party risks.
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However, under Section 91(1)(b) proviso (bb) of RTA, LLP / passenger cover is not mandatory in Malaysia. In other words, a standard motor vehicle insurance policy in Malaysia does not automatically cover passenger risk. The vehicle owner is required to purchase a separate cover at an additional premium to cover this risk. This is normally done by an endorsement added to the standard motor vehicle insurance policy.
The Malaysian Parliament’s intention behind Section 91(1)(b) and proviso (bb) of RTA
The initial Malaysian legislation governing compulsory motor vehicle insurance against third party risks arising out of the use of the motor vehicle was the Road Traffic Ordinance 1958 (“
RTO”). The RTO was repealed and replaced by the RTA, which came into force on 1 January 1988.
Section 91(1)(b) of RTA (which is similar to Section 75(1)(b) of RTO) imposes a statutory duty on the vehicle owner to purchase an insurance policy to cover third party risks. On the other hand, Section 91(1)(b) proviso (bb) of RTA (which is similar to Section 75(1)(ii) of RTO) states that a motor vehicle insurance policy shall not be required to cover passenger liability, except in the case of a motor vehicle in which passengers are carried for hire or reward or by reason of or under a contract of employment.
Therefore, under both RTO and RTA, a motor vehicle insurance policy is not required to cover passenger liability, except in specific instances.
The High Court in
Motor Insurers’ Bureau of Singapore v Pacific & Orient Insurance Co Bhd [2024] 9 MLJ 691 (“
Motor Insurers’ Bureau”) has taken the liberty of venturing into the discussion of the Malaysian Parliament’s intention behind the legislative framework of RTA, and specifically Sections 91(1)(b) and proviso (bb) of RTA. It was held that:
This is the position prescribed by the Malaysian Parliament through RTA, and is the basis on which the Malaysian insurers provide motor vehicle insurance to the public. It is not the duty of a Malaysian insurer under Malaysian law to pay for passenger risks when the vehicle owner has chosen not to cover and pay an additional premium for it.
Importance of Purchasing Insurance Coverage for LLP / Passenger Cover
Following the above, case law in Malaysia has clearly demonstrated the importance of purchasing insurance coverage for LLP / passenger cover to protect the interests of the vehicle owner and an authorised driver.
In
Allianz General Insurance (supra), the plaintiff is the insurance company which issued the motor vehicle insurance policy to the owner of the motor pickup, i.e., the 2
nd defendant. The 1
st defendant was the driver of the motor pickup. The deceased, who was a passenger in the motor pickup at the material time, died in the accident. The plaintiff filed an application seeking a Court declaration that it has no liability under the motor vehicle insurance policy in respect of the passenger’s claim arising from the accident.
The High Court examined the terms in the motor vehicle insurance policy and held that the plaintiff had structured the policy in accordance with the requirements of the RTA, including the permissible exclusion of liability for death or bodily injury to passengers who are not carried for hire or reward, or by reason of or in pursuance of a contract of employment. Therefore, in the event that the Court finds the 1
st and 2
nd defendants liable for the death of the deceased, they would have to personally pay for the damages awarded against them.
In
Motor Insurers’ Bureau (supra), a pillion rider obtained a Singapore judgment against the Malaysian rider of a motorcycle for SGD985,000 for a road traffic accident that took place in Singapore. The plaintiff, Motor Insurers’ Bureau of Singapore, paid the judgment sum to the pillion rider and sought to register the Singapore judgment against the Malaysian rider’s insurer in Malaysia. At the material time, the Malaysian rider had an insurance policy over the motorcycle which did not include passenger cover.
The High Court held that as passenger cover was not part of the insurance policy, the Malaysian insurer was not liable to compensate any injured passenger or pillion under the insurance policy and the RTA. The Singapore judgment, while deserving due recognition, could not be mechanically enforced without an assessment of its alignment with Malaysian public policy and could not rewrite the Malaysian insurance policy. As a result, the plaintiff could not claim the Singapore judgment sum from the Malaysian insurer and the insured / the Malaysian rider would have to compensate the plaintiff personally.
Comments
The abovementioned cases highlight the importance of purchasing insurance coverage for LLP / passenger cover under a motor vehicle insurance policy in Malaysia to protect the interests of the vehicle owner and an authorised driver. If the vehicle owner does not purchase the additional coverage for LLP / passenger cover, the vehicle owner and/or the authorised driver would be exposed to liabilities to compensate the passenger personally if an accident occurs as a result of the negligence of the vehicle owner and/or the authorised driver as passenger risks are not covered by the standard motor vehicle insurance policy in Malaysia.
As such, it is prudent for the vehicle owners in Malaysia to ensure that their motor vehicle insurance policies include coverage for LLP / passenger cover in the event of an accident. The additional premium payable for such coverage is relatively nominal, yet it provides substantial protection to the vehicle owners and the authorised drivers. In the unfortunate event that a passenger was injured or died in an accident, this additional coverage may shield the vehicle owner and an authorised driver from significant financial and legal exposure to compensate the passenger and/or the estate of the passenger.
Article by Loo Peh Fern (Partner) and Tan Yng Yiin (Associate) of the Insurance and Reinsurance Practice of Skrine.