Federal Court: Crash victims should be automatically compensated

(Image source: Bloomberg)

In a groundbreaking decision, the Federal Court ruled that insurance companies should automatically compensate accident victims for their losses without the need for legal action.

According to Federal Court judge Abdul Rahman Sebli, provisions in the Road Transport Act of 1987 should be read to protect all drivers, including those who have been injured in crashes. In a 140-page ruling permitting appeals involving eight separate drivers, seven of whom suffered injuries in incidents, he stated that the Act's aim when it was passed by Parliament also included the protection of innocent third-party road users.

According to the report, of the eight appeals, five involved Pacific & Orient Insurance, Amgeneral Insurance, Allianz General Insurance Company, and Malaysian Motor Insurance Pool. The three-person bench, comprised of Rahman as well as Hasnah Mohammed Hashim and Rhodzariah Bujang, awarded RM150,000 in costs to each of the successful parties in the appeal.

The FMT report stated that the appeals resulted from the insurance firms obtaining a declaration from the High Court to invalidate the policies of drivers due to claims of wrongdoing on the part of the car owners. The appeals were necessary because this action had denied accident victims the financial recompense that was legally theirs.

According to FMT, in one of the situations, the owner of the car sold the vehicle to a third party using "sambung bayar" without telling the insurance provider. Later, the owner requested that the court nullify their insurance policy. The insurer had declined to pay for the victim's damages on the basis of that order.

In another instance, the insurance company refused to cover the costs of the collision the driver caused even after a thorough trial at a lower court ruled the driver to be at fault, claiming it had been duped.

The case victim was eventually found to merely hold a paper judgement, which the Federal Court said was “not even worth the paper it was written on,” continuing that it was unfair because the victim’s constitutional rights to be treated fairly had been infringed.

(Image sourceL: PaulTan.org)

According to the law, the road transport department cannot issue a road tax without insurance, so according to Rahman, all car owners are expected to have mandatory insurance coverage. In the event of an accident, a person hurt by a car may sue the car's owner, but if the car has insurance, the insurer (or insurance company) will step in and pay the victim's losses on behalf of the drivers.

Two conflicting interests had to be balanced in the Road Transport Act. Rahman noted that while it must protect innocent third parties from danger, it also must protect insurance companies from being taken advantage of by false claims.

The Federal Court decided that such a loss should be borne by the insurer, in accordance with the concept established by the 1959 Indian Supreme Court case of British India General Insurance vs. Capt Itbar Singh, which included balancing two conflicting interests.