The dispute between the two insurers was over whether Chubb was liable to pay Allianz its 6% share of a RM71.5 million payout to Prai Power under a machinery breakdown policy.
The claim arose in 2015, when Prai suffered physical damage to the compressor section of its gas turbine resulting in a forced outage.
In her written judgment, Justice SM Komathy said Allianz had acted with utmost good faith, and in a business-like manner when settling Prai’s claim.
“It is unlikely that the reinsurers would have followed Allianz’s settlement if Allianz had not acted properly and in a business-like manner,” she said, noting that lead insurer Munich Re, Lonpac and Scor Re agreed to pay their respective contributions.
Komathy noted that Allianz had also promptly notified Prai’s claim to its reinsurers and engaged loss adjusters McLarens to investigate the loss.
“It also appointed an experienced legal advisor based in Singapore with extensive experience and expertise and substantial reputation to provide a legal opinion.
“(Singapore law firm) Global Law Alliance (GLA) issued a comprehensive legal opinion advising that policy liability attached and that Allianz was liable to pay Prai’s claim under the policy.
“Allianz accepted the opinion and notified the reinsurers that it would pay the claim,” said Komathy.
That opinion was rendered by Malaysia-born lawyer Niru Pillai, whom trial judge Ahmad Fairuz Zainal Abidin acknowledged as having “extensive experience and expertise on complex insurance disputes both regionally and in the London market”.
In his written judgment, Ahmad Fairuz had agreed with Pillai that Allianz would not be able to invoke the policy’s exclusion clauses to avoid liability. “Allianz was entitled to rely on GLA as their expert on the interpretation of the exclusions,” he said.
Komathy said the Court of Appeal saw no reason to disturb those findings.
She also rejected Chubb’s contention that Allianz had not cooperated when it refused to hand over another legal opinion by GLA on the prospects of recovery against manufacturer General Electric (GE) for the catastrophic breakdown.
“It is difficult to fathom how (the GLA recovery report) is relevant to the claim when it deals with the prospects of recovery against GE once the claim was settled,” said Komathy.
The judge also rejected Chubb’s contention that it was entitled to receive prior notice of Allianz’s intention to pay Prai’s claim, pointing out that the claims cooperation clause did not contain such a requirement.
She said Allianz was under no obligation to work with Chubb’s loss adjusters when investigating Prai’s claim.
“To yield to Chubb’s argument would result in chaos and confusion as this would mean each reinsurer would be entitled to appoint its own adjusters,” said Komathy.
Earlier, the Court of Appeal rejected Chubb’s contention that claims cooperation was a condition precedent to recovery under a “follow-the-settlements” clause in the reinsurance contract.
“The clause does not say that Allianz must comply with the claims cooperation clause before it can take the benefit of the follow-the-settlements clause,” said Komathy.
The three-member Court of Appeal panel, which included Justices P Ravinthran and Hashim Hamzah, upheld the High Court’s judgment awarding Allianz RM4,503,881.22, damages to be assessed, interest at 5% per annum calculated from the date of the writ, and costs of RM300,000.
The appeals court also ordered Chubb to pay Allianz an additional net sum of RM50,000 as the costs of the appeal.
Liew Teck Huat, Ong Kang Nyong, Kathleen George and Lim Qi Si represented Allianz. Chubb was represented by Cyrus V Das and Oskar Tang.