Insurable Interest

The following is a case study published in OFS Annual report:

Nomi was involved in an accident and made an OD claim against her insurance company for repairing her vehicle.

The insurer repudiated the claim because the vehicle had been sold to Kala. Thus, Nomi did not hold an insurable interest in the vehicle at the time of the accident, and she had breached her duty of disclosure by not informing the insurer of the sale.

Nomi sold her car to Kala on a Sambung Bayar (“continue payment”) basis in 2015. Nomi had yet to settle the loan at the time of the accident. The transfer of ownership could not be performed because Kala could not obtain a hire purchase loan from a financier.

The Ombudsman adjudicated the case in favour of Nomi on the following grounds:
– The Federal Court held in Nanyang Insurance Co Ltd V. Salbiah & Anor (1967) 1 MLJ 94 that the owner still had an insurable interest
in the vehicle until the purchaser’s obligation was completed under the sale agreement.
– Additionally, in the case of People’s Insurance Co of Malaya Ltd V Ho Ah Kum & Anor [1967] 2 MLJ 134, it was held that the ownership
of the vehicle would not pass to the purchaser until the purchaser had completed the sales agreement. The ownership of the vehicle would remain with the vendor, and the vendor’s insurance policy would remain in force until there was a transfer of ownership to the purchaser.
– Since there was no transfer of an insurable interest in Nomi’s case, she was under no duty to disclose the information regarding the sale of her car to Kala.