Federal Court rules automatic insurance compensation for accident victims – even in sambung bayar cases

A landmark ruling by the Federal Court now holds that road accident victims should be automatically compensated without having to sue the respective insurance companies. One impact of this ruling is that even in sambung bayar cases, third-party road accident victims are still able to claim compensation from the insurance companies.

This development follows eight appeals involving eight different motorists (of which seven were injured) where the court allowed all eight appeals and awarded RM150,000 in costs to each of the successful parties.

Image for illustration purposes only and does not involve cases mentioned.

The appeals came about as the insurance companies had obtained a declaration in the High Court to nullify policies of motorists due to allegations of misconduct on the part of the vehicle owners. This had denied accident victims monetary compensation that had been due to them.

One of the eight cases involved a sambung bayar vehicle (not belonging to the third-party victim). Sambung bayar is when a car is “sold” by continuing the monthly bank loan installment without changing the name of the owner on the Vehicle Ownership Certificate (VOC) and naturally not informing the insurance company. The practice is illegal, just in case you were wondering, but the court has explained that its decision serves to protect innocent third parties.

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Image for illustration purposes only and does not involve cases mentioned.

Free Malaysia Today reports that Federal Court judge Abdul Rahman Sebli said the provisions in the Road Transport Act 1987 should be construed to protect all motorists, including victims of road accidents. He said the intention of Parliament in enacting the Act was to also protect innocent third-party road users.

Rahman said the Act had to balance two competing interests. The first was to protect innocent third parties against the risks. On the other hand, he said, the law had to protect an insurance company from being victimised by fraudulent claims. In setting the balance between these two competing interests, at the end of the day, the loss had to fall on one party – the Act had decided that such a loss should be borne by the insurer.

Image for illustration purposes only and does not involve cases mentioned.

In response to the judgment, a lawyer said that in the last decade, many grey areas had sprung up in motor accident cases. “This uncertainty has caused huge problems for innocent road victims. This case resolves those difficulties in one fell swoop,” the lawyer, who asked not to be named, told FMT.

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