Exclusion Clause: Expired Licence

Adjudication by Ombudsman – Life & General Medical

Brief Background

The Insured’s permanent partial disability claim due to an accident was rejected by the Insurer as he did not possess a valid motorcycle licence at the material time, thereby falling under the policy exclusion clause.

The Case Manager handling this dispute gave her recommendation favouring the Insurer. The Insured who did not accept the recommendation has referred the dispute to Ombudsman for Adjudication.

Issue

The only issue to determine here is whether the Insurer is justified in rejecting the claim based on the circumstances of this case.

Key Findings

“GS3512/A1861233
5. EXCLUSIONS
5.2 Assurance B
No benefits shall be payable for any injury of the Assured life, as a result of, including the consequences of, any of the following:
5.2.2.3 As a result of the Assured Life committing, attempting, or provoking an assault or a felony or from any violation of the law by the Assured life.

GS3579/A3053099
6. EXCLUSIONS
6.2 Assurance B
No benefits shall be payable for any injury of the Assured life, as a result of, including the consequences of, any of the following:
6.2.2.3 As a result of the Assured Life committing, attempting, or provoking an assault or a felony or from any violation of the law by the Assured life.”

1. The relevant exclusion policy provision provides as follows:-

2. The Insured did possess a valid driving licence but he forgot to renew his licence which expired on 02.11.2016. The accident happened on 14.02.2017. Insured had on 28.02.2017 renewed his licence.

Adjudication and reasons

We find that the Insurer here had wrongly interpreted the above exclusion provision of the policy to the factual matrix of this case. Our reasons are as follows:

1. In our view the above stated exclusion clause refers to violation of law of a serious criminal nature and does not apply to road traffic offences.

2. The word any violation of the law in the exclusion clause is a general word following specific words of provoking an assault or a felony.

3. It is trite law that committing an assault or a felony are serious crimes and does not fall within the category of traffic offences. As such the Ejusdem Generis rule would apply here (Caselaw: Pacific & Orient Insurance Sdn Bhd v. Kathirvelu (1992) 1 MLJ 249).

4. This rule is applied when a group of specific words or phrases are followed by a general word or phrase. In this respect the Federal Court in the case of Malaysia National Insurance v Abdul Aziz Bin Mohamed Daud (1979)2MLJ 29, a case also on technical lapse to renew driving license, dealt with the issue of public policy whereby the principle in the context of insurance law is that no man is allowed to profit at another person’s expenses from his own conscious and deliberate crime. The court held that motor manslaughter cases are not within these classes of cases and public policy does not prevent the enforcement of an indemnity. The reason behind it seems to be that the act to be indemnified is one intended by law that people should insure against. The logical test is whether the person seeking indemnity is guilty of a deliberate, intended and unlawful violence or threats of violence. Road traffic cases are not willful and culpable crimes which make them contrary to public policy to allow a person to be indemnified. Similarly, in the present case, the Insurer should not repudiate the claim purely on the technical lapse to renew the driving license which in the most is a traffic offence.

5. The above legal principle is also reflected in Bank Negara Malaysia’a Guidelines on Claims Settlement Practices (BNM/RH/GL/003-9) para 8.7 which states as follows:-

   The Insurer should honour claims where the driving license or the road tax was invalid or had expired at the time of accident provided the person driving is not disqualified from holding or obtaining such a licence to drive the vehicle under any required laws, by laws or regulations.

6. It must remembered that fair and reasonable is the key consideration in OFS’s Terms of Reference, thus being more able to provide redress for consumers than the strict legal approach offered by the courts. We don’t think it is fair to reject the Insured’s claim who had paid the premium for the accidental policy purely on the technical lapse to renew his driving licence.

Based on the above findings, we adjudicate this dispute in favour of the Insured.