Article - The Richard v. Cox Conundrum

In light of the recent Federal Court decision on Malaysian Motor Insurance Pool v. Tirumeniyar Singara Veloo [2019] 10 CLJ 731 (‘Tirumeniyar’)it is worthwhile to revisit the legal quandary posed by Richard v Cox [1942] 2 All ER 624 CA (‘Richard v. Cox’). In applying the majority decision of House of Lords in Digby v. General Accident Fire and Life Assurance Corporation Ltd [1942] 2 All ER 319 HL, Richard v. Cox decided that in a motor insurance policy that only mentions ‘Insured’, the law will presume that there is a ‘second policy in existence’ that will cover the authorised driver as well. This discussion focusses on the seminal authority of Richard v. Cox in guiding the Federal Court in delivering its decision on Tirumeniyar. Richard v. Cox has been referred to and considered in several cases (Chan Kum Fook & Ors v Welfare Insurance Co Ltd [1975] 1 LNS 6; United Oriental Assurance Sdn Bhd v Lim Eng Yew [1991] 1 CLJ (Rep) 484 SC; Manap Bin Mat v General Accident Fire and Life Assurance Corporation Ltd [1972] 2 MLJ 217) interestingly involving Exception clauses under the Malaysia motor insurance policy which allows the Insurer to defeat any claim for recovery (under Section 96 of the Road Transport Act 1987 ‘RTA’) pursuant to a judgment entered against an insured’s authorised driver. The relevant standard exception clauses are off courses drafted in echoing the spirit of statutory legislation under <em>proviso (aa) of Section 91 (1) of RTA.

The wording of relevant exception clause in current tariff Malaysian motor insurance policy is slightly different from the policy wording in Richard v Cox. In the latter, the Exception clause reads as follows;- 

Provided always that the company shall not be liable in respect of (b) death of or bodily injury to any person in the employment of the insured arising out of and in the course of such employment;

The relevant Exception clause in the current Malaysian motor policy read as follows:- 

We will not pay for:-

(b) death or bodily injury to any person where such death or injury arise out of and in the course of employment of such person by You or by Your Authorized driver;

Commenting on the changes, in his book The Law of Motor Insurance (see pages 107-110) Mr. Dass concludes that the current Malaysian motor insurance policy has rendered older Malaysian cases namely Manap and Lim Eng Yew, to no longer be relevant, in that, the Insurer would also be able to defeat any recovery action if the Plaintiff was an employee of the authorised driver, a conclusion which is perfectly consistent with Richard v. Cox and does not address the issue beforehand – ie whether in a case where judgment (in running down matters) has been entered against the authorised driver by a Plaintiff who was an employee of the Insured, the Insurer will be able to defeat a recovery action taking into consideration the present wording of Exception Clauses in current Malaysian motor insurance policies. Having read the clause as it stands, there is definitely room for argument to support the notion that an Insurer would be able to defeat any claim for recovery pursuant to a judgment entered against an authorised driver. What must be contrasted here is the relevant Exception clause in current motor policies against the Exception clause in Richard v. Cox (and our old local authorities such as Manap, Chan Kum Fook and Lim Eng Yew). The changes in the wording of the policy (tariff policies in particular) must be given effect.It is pertinent to note that in Tirumeniyar, the arguments by both sides were not confined to one single clause (ie Exception b). 

Though the Insurance company claimed that the Plaintiff was employed by the Insured and hence was in the course of employment at the time of accident, the Plaintiff’s solicitors in abundance of caution had drafted the claim on the premise that the Plaintiff was a passenger in the m/lorry at the time he was carrying out his duties as a lorry attendant. Can a person be a passenger and lorry attendant at the same time? To answer this, one must appreciate and juxtapose travelling ‘in the course of employment’ and travelling ‘pursuant to contract of employment’. In a practical sense, the former refers to a scenario where the vehicle is the Plaintiff’s office (ie bus conductor, lorry attendant, travel guide, and etc). The works start when those person is in the vehicle. He must be employed with the insured policy holder. As for the latter, Plaintiff is required by his contract of employment to travel from point A to point B, but his work only starts when he reaches point B - the insured vehicle is not his office but he is required to travel in it. Those persons carried by the insured vehicle in pursuance to the contract of employment may or may not necessarily be in the employment of the insured. (ie salesman selling biscuit travelling from place to place in employer’s vehicle - Lim Eng Yew, engineer travelling to worksite - Chan Kum Fook, factory workers, lorry attendant and etc). 

Interestingly ‘lorry attendants’ fit into either category. This would depend very much on the factual scenario and how each individual case is argued. In overwhelming cases involving lorry attendants, the employment the same will be with the Insured (ie the company) and not with the authorised driver. Most of the time, a lorry attendant’s job scope will encompass assisting the driver throughout the journey and this includes assisting the driver with the traffic and repair works in the event of a breakdown. However, there are cases where the job scope of a lorry attendant is strictly limited to loading (at Point A) and unloading (at Point B) items carried, and such scenario allows the Plaintiff to place their case in the latter. No matter how it is argued, lorry attendant cannot claim to be a passenger at the same time. This might be tricky as some policy wordings under exception (c) to Exception B are drafted as ‘passenger’ whereas some others are drafted as ‘any other person’. In Tirumeniyar, though the Plaintiff had drafted his case as a passenger travelling in pursuance to a contract of employment (under exception (c) to Exception B of the policy), there were overwhelming evidence showing that the Plaintiff was, as a matter of fact, employed by the Insured. Thus, the panel in appreciating the evidence presented (not limited to the Plaintiff’s SOCSO contributions, salary slips and his admission in the Adjuster report) concluded that the Plaintiff was indeed the Insured’s employee and NOT a mere passenger and the authorised driver, therefore falls within exception of proviso (aa) to Section 91 (1) RTA and clause (b) to Exception B of the policy. The Federal Court ruled that the insurance company was liable to cover the judgment obtained against the authorised driver on the basis that there were two separate contract of coverage, following Richard v. Cox. The “two contract approach” ought to be considered correct based on Section 91(3) RTA which reads:

“(3) Notwithstanding anything in any written law, a person issuing a policy of insurance under this section shall be liable to indemnify the person or class of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or class of person” 

In formation of a contract, it is prerequisite that the contract shall confer rights or impose obligations arising under it on the parties to the contract. Prior to the existence of Section 91(3) RTA, any claim against an authorised driver would be unenforceable as an authorised driver is not a privy to the insurance policy. Section 91(3) RTA provides an exception to bypass the requirement of privity of contract. The authorised driver gained the right to claim indemnity notwithstanding that no consideration was paid by him towards the policy. Hence, there are two separate contract of coverage formed in the insurance policy which provide coverage in respect of the policyholder and another in respect of the authorised driver. The exception of proviso (aa) to Section 91 (1) RTA and clause (b) to Exception B of the policy shall only apply to the coverage of the policyholder based on the employer-employee relationship between the policyholder and the Plaintiff. It is pertinent to note that the Plaintiff was not an employee of the authorised driver and thus, the Plaintiff as the injured person therefore should be indemnified by the coverage of the authorised driver.Consequently, in a claim for personal injury by an employee pursuant to such policy, the employee may not only seek indemnity against the authorised driver, over whom the insurer could not refuse coverage, but the employee also able to simultaneously claim for workmen's compensation from the employer for the same injury.

It is very unfortunate that the factual background of Tirumeniyar does not correspond with the changes made by Insurance company as it does not provide for a scenario involving employment with the authorised driver - the very circumstance that the Insurance companies tried to address post Manap and Lim Eng Yew. As it stands, one thing is very clear. We have revisited Richard v. Cox over and over again (from pre to post Manap and Lim Eng Yew) only to stand by its conundrum. We are not ready to depart albeit changes being made. Perhaps it is about time for insurance motor policies to be treated, interpreted and respected as a binding contract document in giving its true meaning.