Buying Your Motor Insurance with Passenger Liability Extension Cover?

This posting is about Legal Liability to Passengers (LLP) or in simple term, “Passenger Liability” – talks about what’s being covered and what’s not, including the insurers’ obligation under the Road Transport Act (RTA) to cover passenger liability in identified situation and circumstances.

 

When I first wrote a posting on Passenger liability: Your kids are not covered……. a year ago little did I know there would be more than 1,600 over hits on this. There were lots more comments than the 21 comments found on that posting. Many people including agents emailed directly to my inbox for clarification including feeling cheated…. by the no liability cover to family members while traveling as passengers. I guess people are now realising that their family members, especially their kids are not covered while they are traveling as passengers in their car despite having purchased a passengers’ liability (or legal liability to passengers) extension cover.

 

Many were amazed that despite purchasing the Legal Liability to Passenger (LLP) extension cover, the coverage is actually worse off than the basic coverage!

 

Even if this is not an issue the difficulty in understanding the coverage and exclusion part of legal liability to passengers within the Malaysian motor insurance context is indeed baffling. As a consumer you would likely be confused by the manner the basic exclusions of Section B (Liability to Third Parties) were drafted, simply because the exclusions were never properly structured, thus allowing those exclusions that directly relate to liability to passengers being mixed up with the other forms of exclusion, i.e. non-passengers or non-employment contract related whatever the case maybe.

 

What are those coverage issues that relate directly to Passenger Liability?

Firstly, take a look at the basic cover surrounding Legal Liability to Third Parties:

 SECTION B – LIABILITY TO THIRD PARTIES
1. We will indemnify You or Your authorized driver for the amount which You or Your authorized driver are legally liable to pay (including claimants’ costs and expenses) for:-(a) death or bodily injury to any person except those specifically excluded under Exceptions to Section B

(b) damage to property as a result of an accident arising out of the use of Your Vehicle.

provided Your authorised driver also complies with all the terms and conditions of the policy that You are subject to.

2. Limits of Our Liability (in respect of any one claim or series of claims arising out of one event)

  •  Our total liability under this Section B1(a) is unlimited
  • Our total liability under Section B1(b) is limited to RM3 million

3. Cover for Legal Representatives

Following the death of any person covered under this Policy We will indemnify that person’s legal representatives for liability covered under this Section, provided such legal representatives comply with all terms and conditions of the policy.

4. Legal Costs

We will pay legal costs incurred up to a maximum of RM2,000.00 for defence of any charge including the charge of causing death by driving the Motor Vehicle (other than murder) if Our prior written agreement had been secured.

5. EXCEPTIONS TO SECTION B

We will NOT pay for:

(a) death or bodily injury to any passenger being carried for hire or reward.

(b) death or bodily injury to any person where such death or injury arises out of and in the course of the employment of such person by You or by Your authorised driver.

(c) damage to property belonging to or in the custody of or control of or held in trust by You an/or Your authorized driver and/or any member of Your and/or Your authorized driver’s household.

(d) liability to any person who is a member of Your and/or Your authorized driver’s household who is a passenger in Your Vehicle unless he/she is required to be carried in or on Your Vehicle by reason of or in pursuance of his/her contract of employment with You and/or Your authorized driver and/or his/her employer.

(e) any claims brought against any person in any country in courts outside Malaysia, the Republic of Singapore or Negara Brunei Darussalam.

(f) all legal costs and expenses which are not incurred in or recoverable in Malaysia, the Republic of Singapore or Negara Brunei Darussalam.

Endorsement 100 (E100) is a basic inclusion to the basic policy, i.e. where passengers liability risks are not covered.

Endorsement 100 – Exclusion of Legal Liability to Passengers (Private Car only)
The cover provided under Section B1(a) of this Policy shall not apply to death of or bodily injury to any person being carried in or upon or entering or getting on to or alighting from Your Vehicle (other than a passenger required to be carried in or on Your Vehicle by reason of his/her contract of employment with You and/or Your authorised driver and/or his/her employer).Subject otherwise to the Terms and Conditions of this Policy.

The above wordings are part of your private vehicle motor insurance policy. Endorsement 100 (E100) is a basic inclusion where Legal Liability to Passengers (LLP) is not (extended) purchased.

 

What do the wordings tell you about your Passenger Liability?

Without being complicated with our thought process, just focus on sections relating to, “5. EXCEPTION TO SECTION B” and Endorsement 100 (E100).

Under section titled “5. EXCEPTION TO SECTION B”, focus on the exclusion (a), (b) and (d). All these have an impact on how passenger liability risks are being covered.

Exception (a) is straightforward since a private vehicle is barred from being used to carry passengers for hire and rewards.

Exception (b) simply means your (including those of your authorized driver) employees, whether they are passengers in your vehicle or otherwise…. they are not part of this third party liability section.

Exception (d) is much more complicated, it revolves around Your (including your authorized driver) household members where they are not within the coverage UNLESS they are being carried in your vehicle in pursuant of an employment contract with your or your authorized diver. It did not stop here however…. it further extend the coverage to the household members who are passengers in your vehicle while pursuing an employment with their employer, which has nothing to do with You (or your authorized driver). It is sort of a very wide extension given to “household members” in the sense.

 ”Your kids are never intended for passenger liability cover”

I don’t think you would have difficulty understanding the above exceptions. The basic coverage accords enough protection to your household members who are in employment (whether with you or otherwise….) at the time he or she is a passenger in your vehicle. The leisure part is therefore not covered.

“Endorsement 100 (E100) complicates the interpretation….”

The complication is in E100 wordings: E100 states it does not intend to cover your (including your authorized driver) passenger liability risks unless he or she is being carried in the pursuance of a contract of employment….compare this to Exception 5(b). Despite the use of the phrase, “subject otherwise to terms and conditions of this policy” it confuses people – it puts interpretation pressure on exception 5(b)… As stated earlier exception 5(b) is very wide, it deals both with passenger and non-passenger liability risks, thus if E100 provides that legal liability to passengers being carried in pursuance of a contract of employment is being covered then there would be a head-on clash.

My take on this is, contra proferentum rules shall apply, meaning E100 is likely interpreted by the courts to override exception 5(b), which also translates into, “all passengers….in the pursuance of a contract of employment are covered!”

Sometimes we wonder why our motor insurance policy for private vehicle is so complicatedly worded…. I supposed this arose mainly a result of Section 91(1), in particularly subsection (bb) (refer below) and also the Union Insurance Malaysia Sdn Bhd vv Y.Y. Chan (Court of Appeal, 1995) case decision…..

“My take…. E100 is also Road Transport Act driven, therefore it is likely to override all contradictory wordings…. Union Insurance case: If there is any ambiguity in the language used in a policy, it is to be construed more strongly against the party who prepared it, that is in the majority of cases, against the company. A policy ought to be so framed that he who runs can read.”

Road Transport Act 1987:

Section 91. Requirements in respect of policies.

(1) In order to comply with the requirements of this Part, a policy of insurance must be a policy which-

(a) is issued by a person who is an authorized insurer within the meaning of this Part; and

(b) insures such person, or class of persons as may be specified in the policy in respect of any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle or land implement drawn thereby on a road:

Provided that such policy shall not be required to cover-

(aa) liability in respect of the death arising out of and in the course of his employment of a person in the employment of a person insured by the policy or of bodily injury sustained by such a person arising out of and in the course of his employment; or

(bb) except in the case of a motor vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, liability in respect of the death of or bodily injury to persons being carried in or upon or entering or getting onto or alighting from the motor vehicle at the time of the occurrence of the event out of which the claims arise; or

(cc) any contractual liability.

Section 91 (1) (bb) can be interpreted as, insurers are not required under the Act to provide legal liability coverage in respect of passengers risks…. but they are required to provide cover if the passengers are being carried:

  • for hire or reward, or
  • in pursuance of a contract of employment….
I do not think we will have any problem with “hire or reward” since private vehicles under the same Act are not allowed to be used for such purposes. Thus, excluding this outright as per exception 5 (a) is appropriate and in line with the Act. However, the Act insists that passengers…. being carried in pursuance of a contract of employment must necessarily be covered. Which also means, household members under any such contract of employment…. must be covered under the basic policy coverage.

Of course the Union Insurance case complicated the issue by allowing household members to successfully filed a claim for negligence committed by the authorised driver who is the son of the claimant. As a result, certain exceptions were rewritten…. including perhaps the incorporation of E100, which unknowingly complicates the coverage parameters.

 

What if you have decided to extend Passenger Liability cover?

If you have purchased the Legal Liability to Passengers cover, E100 would be taken down, which means there will be no E100 to cause any more interpretation headache. In other words after paying additional premium you may be worse off than if you had not extended this part of the coverage!

“Simply say…. extending the passenger liability cover means your passengers who are under a contract of employment with you (or your authorised driver) are outright not covered although your household members under a contract of employment are held covered”

 

Is there any way to improve those wordings – Exception 5(a), (b) and (d) including the standard E100?

Suggested wordings to improve understanding of exception 5(a), (b) and (d) and yet compliant with the requirements of the Act
5. EXCEPTIONS TO SECTION BWe will NOT pay for:

(a) Death or bodily injury to any person who is a passenger in Your Vehicle while being carried in or upon or entering or getting onto or alighting from. However this exception shall not apply where the passenger is being carried by reason of or in pursuant of a contract of employment with You and/or Your authorised driver and/or his/her employer.

(b) Death or bodily injury to any person who is not a passenger in Your Vehicle where such death or injury arises out of and in the course of the employment of such person by You or by Your authorized driver.

Exception 5(a) and (d) are complied and summarised as in 5(a) here, and 5(b) is taken as applicable for non-passengers.

 What about rewording E100?

Endorsement 100: reworded to EXTENSION TO LEGAL LIABILITY TO PASSENGERS 
This policy is extended to cover legal liability for death or bodily injury to any passengers being carried in including getting on to or alighting from Your Vehicle unless they are being carried for hire or reward but excluding members of your and/or your authorised driver’s household unless they are being carried by reason of or in pursuance of a contract of employment.

Naturally not deviating from the original intention of the existing policy wordings, the above proposed enhanced version still dictate that YOUR KIDS AND WIFE ARE STILL NOT COVERED!

Then, what is wrong with the insurance industry, insurers could have proposed a higher premium and incorporate household members as part of the coverage even if they are being carried for leisure purposes…. 

“Nothing is wrong with incorporating coverage for household members being carried for leisure….. matter of adequacy in premium and if the other relevant laws (i.e. Civil Law Act and Married Women Ordinance) do not forbid. Perhaps this is the time for the industry to enhance coverage in this aspect.”

Did I made any mistake with my comments? Do let me know…. gonna be great for discussion.

 

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22 comments for “Buying Your Motor Insurance with Passenger Liability Extension Cover?

  1. John Mic
    April 24, 2014 at 17:56

    My family got into accident 2011 in our family vehicle where my wife and my beloved son badly with multiple injury. Just 2 days ago my insurance lawyer sent a letter ” Notis Permohonan Untuk Peguam Menarik Diri”. Called up saying that your is family is not cover even has been taken up.
    Legal Liability to Passengers and
    Exclusion of Legal Liability to Passengers.
    I’m got no words to say.
    Any help please!!!!. my friends.

  2. mical tan
    March 2, 2013 at 14:02

    I am insurance personnel but still cannot understand this passenger liabilities stuff! I think having a plain language policy helps, the consumers need not have to get lawyers to interpret, worse, my lawyer friends can’t tell me what exactly was intended when we discuss the many scenario how a passengers may be injured by the negligence of drive! Hope you can elaborate more in plain language!

    • March 3, 2013 at 12:44

      Yes, the RTA and courts decisions over the many years made understand very difficult, and this situation further compounded by insurers not able to really understand the core issues….

      • Dev
        April 29, 2014 at 23:29

        I am actually totally ashamed of the Malaysian insurance industry. Specifically insurers. In reality the insurer or underwriter is deemed to be a gentleman. He has to live up to the promise that he made when he collected premium for exchange of a promise to payup when an event contemplated at the time of entering into the contract materialises. The legal liability to passangers issue is not rocket science. Its plain and simple. But yet, the drafter of the policies, the maker of the promise, for reasons best known to them only, instead of using their own intellect, prefer to engage third parties i.e lawyers to interpret their intention when a demand is made under their policy.

        This to me is unforgiveable. It is like a teacher saying – i dont know what i am teaching. I have got no respect at all for any insurer who relies on third party to determine whether his/her policy should trigger.

        If that is the case – the insurer might as well contract out the underwritting and the claims to third parties completely and become mere managers of funds.

        But sadly this has been the case in Malaysia.

        Will we change – never.

        In the last 15 years – all i have seen is more incompetent lazy people joining the fray.

        • May 3, 2014 at 15:54

          There are too many twists and turns in those wordings until it became difficult to decide. …

  3. Anonymous
    February 23, 2013 at 23:41

    http://motoring.asiaone.com/Motoring/News/Story/A1Story20090503-138884.html
    http://www.asiaone.com/Motoring/Drivers/Story/A1Story20081110-99638.html
    These two sites described clearly the established laws in 2009 relevant to both Malaysia n and Singaporeans drivers.

  4. December 7, 2011 at 13:17

    Hi,

    Thank you for the in-depth analysis. After reading your views, I’m confused whether i should take up the Legal Liability extension for my car insurance. Is there a straightforward answer, from a layman perspective? Please advise.

    Thanks.

    • December 11, 2011 at 22:02

      Yes, We can rethink what we had written form the layman perspective but do wait for awhile.

    • stan
      December 13, 2011 at 08:10

      Despite substantial contradictions in those wordings I am in the opinion that extending legal liability to passenger is still relevant simply because the relevant sections of the Road Traffic Act would accord us with the necessary protection. The laws somehow have the overriding effect on our motor insurance policy coverage.

      • Anonymous
        December 20, 2011 at 23:25

        Wonder why the insurance industry make no efforts in changing such a confusing coverage!

        • December 31, 2011 at 07:20

          Not too sure but generally it is difficult to find the time to articulate over those difficulty legal issues. But I supposed the change is going to be soon with the plain language policy which is to be implemented soon,

  5. Andrew Wong
    November 23, 2011 at 03:51

    I would like to focus on the host’s earlier comments; as extracted and restated hereunder:-

    “Simply say…. extending the passenger liability cover means your passengers who are under a contract of employment with you (or your authorised driver) are outright not covered although your household members under a contract of employment are held covered”

    Let’s look back on Endt 100 where it states inter-alia “….(other than a passenger carried by reason of or in pursuance of contract of employment)” which means this group of category is covered if legal liability against the Insured is established.

    Now we look over on Exceptions to Sect. B under 5 (b) that states “We will not pay for death or bodily injury to any person where such death or injury arises out of and in the course of the employment of such person by You or Your authorized driver”

    The sentences to look at here is “arises out of and in the course of the employment” as opposed to “in pursuance of contract of employment”.

    In other words, if the passenger is namely a bodyguard or foreman/mechanic who was in observation at the material time would not be covered as opposed to an ordinary staff of the Insured who sits in the car would be covered.

    Covered in the sense that the policy would response to the legal liability (defense or finally pay out) if any owes by the Insured to the said passengers. – Would this make some sense?

    • admin
      November 29, 2011 at 14:56

      When we buy an extension to cover legal liability to passengers the E100 would be deleted outright. Thus Section B, Exclusion 5(b) will stand a “free-agent”, i.e. “death or bodily injury to any person where such death or injury arises out of and in the course of the employment of such person by You or by Your authorised driver” is NOT covered in the policy.

      E100 no longer exist within the policy ambit.

      This means if a person is a passenger in the vehicle, he or she will no longer falls within the policy coverage in respect of liability for third party bodily injury / death. Of course and unless he or she was passenger…. not being carried in the course of any employment with the Insured or Insured’s authorised driver.

      Imagine a scenario you being the passenger carried in the course of employment with your company in the company’s vehicle, and the authorised driver being one of the manager…. Would you be covered when E100 was deleted for purpose of extending legal liability to passenger cover? The question is NO in as far as exclusion 5(b) is concerned.

      I know you are trying to differentiate the legal understanding in between the following phrases…. eg. “….injury arises out of and in the course of the employment….” and “by reason of or in pursuance of a contract of employment with….” but the RTA merely made reference to the latter phrase. I also do not think any attempt to differentiate (from a legal perspectives) would eventually makes good laws….

      I agreed with you that the following phrase quoted by me:
      “Simply say…. extending the passenger liability cover means your passengers who are under a contract of employment with you (or your authorised driver) are outright not covered although your household members under a contract of employment are held covered”
      ….is flawed simply because I failed to elaborate on RTA, 1987, Section 91 (1)(bb) where even in the absence of E100 and despite Exclusion 5(b) to Section B dominated the exclusion, aggrieved parties could still pursue under the RTA for assistance to force insurer to settle the claim….

      That’s perhaps why the industry did not make any attempt to change those complicated wordings within our motor insurance policy…. perhaps it is time the Gen-Y of our industry deals with the issue.

      I hope I got this right….

  6. Anonymous
    October 11, 2011 at 18:46

    Why can’t we just extend to cover passenger liability to family members like wife and kids? Your proposed wordings also does not cover them.

    • October 15, 2011 at 21:59

      Hopefully the industry starts thinking outside the box sooner, we can have a limited cover where family members who are passengers on leisure. And also, provided this extension does not contravene other Acts which seek to prevent suit between family members….

  7. cant li
    October 11, 2011 at 07:35

    My agent just sold me the passenger liability cover, she said by deleting endt 100 which is an exclusion to passenger liability my liabilty to my passengers would be covered unless if they are my family members traveling for leisure. Now you are saying here that by buying such cover my staff and clients traveling with me as passengers are not covered! My agent commented otherwise, could you enlighten me here?

    • October 15, 2011 at 21:55

      The Road Transport Act has already provided that your passengers who are you staff must be covered. All insurers are obligated to provide this, insurer trying to avoid do so at their peril. E100 highlighted this section of the Act. Thus by deleting it will means contractually your staff is NOT covered but then the Act nevertheless accord you with the cover. Whether you choose to pay extra premium or not, you are still cover….

  8. Joe Ee
    October 10, 2011 at 09:10

    Do you mean the recent Federal Court decision: Mary Colete John (appellant) vs South East Asia Insurance (respondent) (2008)is not applicable? The Federal court judges disregard the appellant being on a contract of employment with the Insured parties and therefore E100 was applicable, and so on. What is your understanding when comparing this judgement with that of Union Insurance case?

    • October 15, 2011 at 21:44

      A lot of ppl thinks Union case was badly decided but my opinion was it is good decision. On the other hand my opinion of Mary Colete case that Mary was being carried in pursuance of a contract of employment but those judges felt it was not employment rather it was more of a agreement to discharging a contract. Maybe this is still good law simply because Mary was indeed a passenger but have nothing to do with employment. An agreement to do some work cannot be construed as employment.

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