The court also said that any contract entered into good faith was legally binding even when one party was bankrupt.
The High Court ruled that Allianz General Insurance Company (Malaysia) Berhad must now honour a policy it sold to 58-year-old mechanic Chong Hing Fook, who lost his left thumb in a workplace incident more than six years ago.
Chong had to have his left thumb amputated after a car jack failed, causing a car tyre to land on and crush it on May 20, 2018, at TDS Tamil Enterprise in Gurun, Kedah.
Chong, who had purchased the policy from Allianz on March 13 that same year, had sought treatment at a private hospital in Sungai Petani, with the insurer covering the RM11,279.65 surgery.
However, when he claimed for the remainder of the sum and permanent disability benefits, the insurer declined on grounds that his failure to disclose his bankruptcy when purchasing the policy was a material non-disclosure.
Allianz found that Tan had been declared a bankrupt in 2004.
According to court filings, the insurer argued that had they been aware of Chong’s financial standing, they would have not insured him from the onset.
The insurer also claimed that Chong had failed to secure the permission of the insolvency director-general prior to applying for the policy.
Chong subsequently filed an originating summons against Allianz, and the sessions court here ruled in his favour in 2022.
In its ruling, the lower court found that Allianz failed to conduct due diligence on Chong and failed to question him on his bankruptcy status.
Citing Sections 38 and 54 of the Insolvency Act 1967, sessions judge Nasir Nordin ruled that being a bankrupt did not prevent a bankrupt from entering into a bona fide (good faith) transaction.
Section 38 states that a bankrupt can maintain an action for damages in respect of an injury to his person without the previous sanction of the insolvency director-general, while Section 54 provides that a bankrupt’s transactions are valid if entered in good faith.
The court also considered various provisions in the Financial Services Act 2013, particularly Section 5 and Schedule 9, which outlines the insurer’s duty to perform due diligence and ensure all necessary information is obtained before considering the insurance proposal form submitted by Chong.
In the High Court, Justice Rozana Yusoff upheld the sessions court’s ruling and dismissed Allianz’s appeal.
Lawyer E Gnasegaran, representing Chong, said with the liability aspect of the case settled, the sessions court will now assess the damages to be paid out to his client.
He said given the policy offers a RM600,000 benefit for disability, Chong would seek at least RM300,000 in damages.
Gnasegaran said his client’s claim is supported by a doctor’s certification that Chong suffered 48% disability from the loss of his left thumb and minor injuries to other fingers on the same hand.
Audrey Wee also appeared for Chong.
Allianz’s lawyer P Paannimalar, when contacted, said her client has instructed her to file an appeal.