Allianz Failed to Decline Claim

The High Court here has upheld a lower court decision in favor of a bankrupt who had purchased insurance, saying the onus was on his insurer to carry out due diligence. The court also said that any contract entered into good faith was legally binding even when one party was bankrupt.

Allianz Declined Claim - The High Court ruled that Allianz General Insurance Company (Malaysia) Berhad must now honor a policy it sold to 58-year-old mechanic Chong Hing Fook, who lost his left thumb in a workplace incident more than six years ago. Chong had to have his left thumb amputated after a car jack failed, causing a car tyre to land on and crush it on May 20, 2018, at TDS Tamil Enterprise in Gurun, Kedah.

Chong, who had purchased the policy from Allianz on March 13 that same year, had sought treatment at a private hospital in Sungai Petani, with the insurer covering the RM11,279.65 surgery. However, when he claimed for the remainder of the sum and permanent disability benefits, the insurer declined on grounds that his failure to disclose his bankruptcy when purchasing the policy was a material non-disclosure.

Bankrupt - Allianz found that Tan had been declared a bankrupt in 2004. According to court filings, the insurer argued that had they been aware of Chong’s financial standing, they would have not insured him from the onset.

The insurer also claimed that Chong had failed to secure the permission of the insolvency director-general prior to applying for the policy. Chong subsequently filed an originating summons against Allianz, and the sessions court here ruled in his favor in 2022.

Allianz Underwriting - In its ruling, the lower court found that Allianz failed to conduct due diligence on Chong and failed to question him on his bankruptcy status. 

Citing Sections 38 and 54 of the Insolvency Act 1967, sessions judge Nasir Nordin ruled that being a bankrupt did not prevent a bankrupt from entering into a bona fide (good faith) transaction.

Section 38 states that a bankrupt can maintain an action for damages in respect of an injury to his person without the previous sanction of the insolvency director-general, while Section 54 provides that a bankrupt’s transactions are valid if entered in good faith.

The court also considered various provisions in the Financial Services Act 2013, particularly Section 5 and Schedule 9, which outlines the insurer’s duty to perform due diligence and ensure all necessary information is obtained before considering the insurance proposal form submitted by Chong.

The High Court upheld the sessions court’s ruling and dismissed Allianz’s appeal.