Policies usually provide for resolution of coverage disputes either by way of arbitration or litigation before the Singapore Courts.  “Hybrid” dispute resolution clauses which provide for one aspect of the dispute (e.g. liability) to be resolved by way of litigation and another aspect of the dispute (e.g. quantum) to be resolved by way of arbitration are also used.

There is no pre-action protocol in litigation specific to insurance disputes. However, insurers who seek to litigate policyholders’ choses in action by way of subrogation in the State Courts may be required to comply with pre-action protocols in respect of the following types of actions:

(a) Personal injury claims (State Courts Practice Directions 2021 (the “StCPD”) paragraph 39(2) and Appendix B);

(b) Non-injury motor accident claims (StCPD paragraph 39(4) and Appendix B);

(c) Medical negligence claims (StCPD paragraph 40 and Appendix E);

(d) Defamation actions (StCPD paragraph 108 and Appendix F).

Yes. The Singapore Courts regularly hear and resolve complex commercial disputes, including insurance disputes. Where the dispute is international in nature, the dispute may also be referred to the Singapore International Commercial Court, which is a specialist division of the General Division of the Singapore High Court (the “General Division”) comprising domestic and international judges.

Order 5 of the Rules of Court 2021 imposes on parties an obligation to consider amicable resolution of the dispute before and during the course of any action or appeal. Furthermore, prior to the commencement of any action, a claimant is obliged to make an offer of amicable resolution unless there are reasonable grounds not to do so.  Similarly, the defendant is also obliged not to reject such an offer unless there are reasonable grounds to do so.

While parties are under an obligation to consider amicable resolution of the dispute, this is not a pre-requisite to the commencement of an action. However, a party found to be in breach of this obligation may be subject to costs consequences. The Court may also order the parties to attempt alternative dispute resolution.

Subject to contrary provision in the policy, costs awarded by Singapore Courts generally follow the event, although the Court possesses a discretion to depart from this norm. Successful policyholders may therefore typically expect to recover costs from insurers. Similar principles are applied by Singapore-seated arbitral tribunals. Costs are typically awarded by the Singapore Courts on a standard, rather than indemnity, basis.

The appellate process in litigation depends on, among other things, where proceedings are first commenced and whether appeals lie as of right, require permission of Court, or are prohibited. Insurance disputes commenced at first instance in the District Court or Magistrate’s Court may be appealed to the High Court, although permission to appeal is required if the amount in dispute does not exceed S$60,000.

For matters commenced in the High Court, appeals typically lie from the General Division to the Appellate Division of the High Court (the “Appellate Division”). Beyond the Appellate Division, permission to bring a further appeal to the Court of Appeal will generally only be granted where (a) the decision appealed from suffers from a prima facie case of error; (b) the appeal would decide a question of general principle for the first time; and/or (c) the appeal raises questions of importance such that a decision of a higher tribunal would inure to the public advantage.

With regard to arbitral awards, this would depend on whether such an award is made in a domestic arbitration or an international arbitration. In the case of domestic arbitrations, there is a limited right of appeal to the High Court on questions of law arising out of an award made in the proceedings under the Arbitration Act 2001.

In the case of international arbitrations, there is no avenue or right to appeal against an arbitral award. Instead, parties may apply to set aside the award and/or challenge enforcement of the award on limited grounds as contained in the International Arbitration Act 1994.

Policyholders are obliged to disclose all information which a prudent insurer would consider material in its risk assessment, independent of whether the policyholder has been asked to complete a proposal form or queried by the insurer. Similarly, in marine insurance policies, the Marine Insurance Act 1906, section 18(2) characterises material circumstances as those which ‘… would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk.’

While there is no exhaustive definition of what constitutes materiality for the purpose of a policyholder’s duty of disclosure, material facts have almost invariably concerned matters which have a bearing on the risk covered by the policy.

Conversely, the policyholder is not obliged to disclose information the receipt of which is waived by the insurer, circumstances that reduce the risk, and matters which the insurer knows or is presumed to know.

Material non-disclosure by policyholders amounts to a breach of an implied obligation of utmost good faith which entitles insurers to avoid the policy and decline payment of claims and/or recover monies which have already been paid to the policyholder. Furthermore, in the context of life insurance, the threshold for rejecting a claim or avoiding a policy is if the policyholder failed to disclose a material fact which was known to the policyholder and which the insurer would have reasonably expected the policyholder to disclose.

At common law in Singapore and subject to the terms of a policy, a policyholder’s duty of disclosure ends when the insurance contract is concluded on issuance of the policy.  An equivalent rule is imposed by statute specifically for marine insurance policies (Marine Insurance Act 1906, section 18(1)). An exception applies where a policy is renewed at the request of the policyholder, in which case the policyholder remains obliged to disclose material facts.

Terms which are contrary to public policy are unenforceable at common law. Common examples of such terms include terms which provide for the commissioning of a crime or which seek to indemnify loss in respect of crimes, and terms which seek to prevent liability from arising or which reduce liability under the policy upon the policyholder’s bankruptcy or insolvency.

Further, certain types of provisions in insurance contracts are prohibited by statute:

(a) Terms in life policies which purport to subject policy moneys to a deduction other than for sums due under the policy or under an agreement charging them on the policy are void (Insurance Act 1966, section 148(1)).

(b) Policy terms are void insofar as they derogate from the compulsory policy terms stipulated under the same act (Work Injury Compensation Act 2019, section 26(3)).

(c) Terms in policies which seek to prevent the statutory vesting from the policyholder to a third-party of the policyholder’s rights against the insurer upon the making of a bankruptcy or winding up order against the policyholder are void (Third Parties (Rights Against Insurers) Act 1930, section 1(3)).

A duty of utmost good faith on the part of both insurers and policyholders is implied at common law in insurance contracts. Prior to the inception of the policy, the duty of utmost good faith obliges policyholders to disclose material facts to insurers, while insurers must disclose unusual clauses which may entitle declinature of a claim, or deprive policyholders of the right to make a claim.

Parties may seek by express terms in the policy to limit the extent of their respective obligations of good faith. However, such terms will need to be clear and unambiguous. Further, it is unclear whether the insurer’s duty to bring unusual clauses to the policyholder’s attention would preclude contractual terms which attempt to relieve the insurer of this duty.

In marine policies, a duty of utmost good faith is implied by statute under the Marine Insurance Act 1906, section 17.

Terms implied in fact arise to fill in gaps left by parties in the policy in circumstances where the term is necessary to give effect to business efficacy under the policy. The terms and circumstances in which these implied terms arise are therefore highly fact-contingent. At present, Singapore law does not import implied terms specifically in consumer insurance contracts.

The Motor Vehicles (Third-Party Risks and Compensation) Act 1960 (the “MVA”) renders void the following defences which insurers may seek to incorporate into a third party motor insurance policy:

(a) Conditions which provide that no liability arises or any liability so arising ceases in the event of some specified occurrence or omission after the happening of the event giving rise to a claim under the policy (section 7(1));

(b) Terms which seek to restrict coverage by reference to the (a) age or physical or mental condition of drivers; (b) condition of the vehicle; (c) number of persons that the vehicle carries; (d) weight or physical characteristics of goods the vehicle carries; (e) times and places within which the vehicle is used; (f) horsepower or value of the vehicle; (g) carrying on the vehicle of any particular apparatus; or (h) the carrying on the vehicle of any particular means of identification other than what is required under the Road Traffic Act 1961 (section 8(1)).

Where a third party obtains judgment against a policyholder in respect of liability covered by a policy under section 3 of the MVA, the insurer has a duty to satisfy the judgment debt.  Under section 9(1) of the MVA, this duty applies even though the insurer may be entitled to, or has exercised, a right to avoid or cancel the policy. However, this obligation is subject to various exceptions, including:

(a) where the insurer has not been notified of the bringing of the proceedings before or within 7 days after the commencement of the proceedings, or where enforcement of the judgment is stayed pending an appeal (section 9(6)); and

(b) where the insurers’ right to avoid the policy arises from non-disclosure of a material fact or from a misrepresentation (section 9(7)).

Coverage under first party insurance is usually triggered on the occurrence of the specified risk or the incurring of the loss by the policyholder. Coverage under liability claims varies extensively, but often arises upon liability being established. Less commonly, policies covering liability claims may respond on a ‘claims made’ basis to cover liability for any claims made against the policyholder during the term of the policy, regardless whether the claims result in the liability of the policyholder being established.

Typical loss exclusions vary according to the type of policy and the risks insured thereunder. Common exclusions include:

(a) Losses arising from ordinary wear and tear, wilful conduct or inherent vice of property.
(b) War exclusions for losses caused by war, civil war, insurrection etc.
(c) Strikes exclusions for losses from strikes, civil commotion or riots.
(d) Losses from nuclear weapons and radioactivity.
(e) Damage from insects, mildew, mould & contamination.
(f) Accidents occurring under specified circumstances, such as intoxication or the policyholder’s own criminal act.

The applicable test of causation depends on the policy wording. Words such as ‘as a result of’ are taken to refer to the proximate cause test, requiring loss to flow from an immediate and not remote covered risk.

In wide area damage scenarios, the exact words used by parties to limit the geographic or temporal scope of coverage (if at all) are likely to be crucial. In the context of an infectious disease extension clause contained in an industrial all-risks policy which required that a public authority’s order to close identified premises (the “Closure Order”) had to occur ‘as a result of’ an outbreak of infectious disease ‘at the premise’, the General Division (see QBE Insurance (Singapore) Pte Ltd and another v Relax Beach Co Ltd [2023] SGCA 45 (“Relax Beach”) at [23]) held that a single case of COVID-19 occurring at the premises (the “Incident Case”) could be regarded as the proximate cause of the closure order. This was despite the fact that other cases of COVID-19 occurring in the jurisdiction may have influenced the public authority to issue the Closure Order, because the Incident Case could be taken as acting in combination with other cases of COVID-19 so as to amount to one of multiple proximate causes of the Closure Order.

Although the insurer’s appeal to the Court of Appeal was withdrawn and the Court of Appeal was not required to consider the merits of the said appeal, in its decision on costs, the Court of Appeal observed that the inclusion of the phrase “at the premise” to limit the geographic radius of risk made it difficult to accept that cases of COVID-19 occurring outside the premises could combine with the Incident Case to form concurrent proximate causes of the Closure Order: Relax Beach at [55]. While the observations of the Court of Appeal on this issue is not binding, this may suggest hesitance in finding concurrent proximate causes of loss where the policy limits the scope of risk to a given radius or geography.

Loss may still be covered if the covered risk is the proximate cause of the loss, or if the covered risk can be regarded as being equal in efficacy with other losses in bringing about the loss so that the Court regards the loss as arising from multiple concurrent proximate causes. However, the insurer is not liable if at least one of the proximate causes of loss falls under an exclusion clause in the policy.

The express terms of the policy often stipulate that breach of policy conditions entitles termination of the policy. Even absent an express term, breach of a condition by the policyholder generally entitles the insurer to treat the policy as at an end and avoid liability occurring from the date the insurer communicates its election to terminate the policy. However:

(a) Where the condition seeks to define the risk descriptively rather than require promissory obligations on the part of the policyholder, the insurer is limited to asserting that liability under the policy has not fallen due instead of terminating the policy.

(b) Where the condition in question is a condition subsequent which prescribes the requirements to be met before a claim is made, breach of the condition by the policyholder renders the claim premature, but generally does not allow the insurer to avoid the policy.

Policy terms which are by a true construction of the policy regarded as conditions will entitle the insurer to discharge the policy upon breach by the policyholder, even though the actual consequences of the breach may be minor. However, absent express provision in the policy, minor breaches of a warranty or innominate term in a policy will not generally permit an insurer to avoid the policy or a claim brought under a policy.

Generally, it is immaterial that breach of a policy term was unintentional on the part of the policyholder. The exception is where the unintentional breach arises because the term is inherently impossible to perform, in which case the term is treated as a nullity.

Breach of a policy by one co-assured (A) which entitles discharge of the policy generally only allows the insurer to invalidate the cover of another co-assured (B) if the policy is one of joint insurance, namely, where the policy covers risks interests of A and B which are inseparably connected so that a loss or gain to one necessarily affects the other.

Otherwise, the Courts are likely to construe that the parties have entered into a composite policy, under which separate insurable interests are covered under discrete contracts of insurance. In these circumstances, breach by A would invalidate A’s cover but not B’s.

Absent an express term to the contrary, conditions to be complied with by the policyholder are independent of declinature by the insurer. An insured that chooses not to comply with policy conditions runs the risk of prejudicing its claim in the event that the insurer’s declinature is subsequently found to be wrongful.

Resolution of the quantum is governed by the terms of the policy. Typically, policies provide for the assessment of quantum first by way of loss adjusters, with disputes as to the quantum to be determined by arbitration or the exclusive jurisdiction of a specified court.  Hybrid or ‘multi-tier’ dispute resolution clauses which assign different dispute resolution mechanisms to different aspects of an insurance claim are increasingly becoming more common, and parties should carefully consider which chosen dispute resolution mechanism applies to the quantum claim.

The insurer’s duties in reinstatement are limited to restoring the property substantially to the same state as before the loss, independent of any intended change of use or alteration of the property after loss.

At common law, insurers who have fully paid the liabilities of policyholders in respect of the subject matter covered under the policy are subrogated to the rights of policyholders against third parties responsible for the loss. However, the insurer’s rights by way of subrogation may be circumscribed by express terms in the policy. Likewise, the insurer may not pursue recovery against a third party where the policy was taken out to benefit the third party.

Yes, claims may generally still be brought under policies by the company’s insolvency representative. In the case of third party liability insurance, section 1(b) of the Third Parties (Rights Against Insurers) Act 1930 provides that the insolvent policyholder’s rights against his insurer are subrogated to the third party to whom the policyholder’s liability was incurred.

The Singapore Courts have been increasingly more willing to grapple with complex causation & interpretative arguments in liability disputes. While the Court of Appeal in Relax Beach did not have the opportunity to fully determine the proper approach to concurrent proximate causation disputes in infectious disease extension causes, it is likely that the Singapore Courts may in future be asked to revisit the issue in light of the United Kingdom Supreme Court’s decision in Financial Conduct Authority v Arch Insurance (UK) Ltd and others Hiscox Action Group Intervening) [2021] 2 WLR 123 and the English High Court’s decision in London International Exhibition Centre Plc v Royal & Sun Alliance Insurance Plc & others [2023] EWHC 1481 (Comm).

We anticipate substantial room for growth and development in liability and first loss insurance covering the risk of loss of banking depositor assets. Singapore has in recent years seen a surge in scams, frauds and phishing attacks on consumers. On 25 October 2023, the Monetary Authority of Singapore (“MAS”) proposed a dispute-resolution and loss-sharing framework to regulate claims brought by consumers as a result of losses from successful scams. Under the framework, financial institutions and telecommunications providers are expected to undertake various measures to safeguard consumer monies, and are expected to compensate the consumer if these measures are not undertaken. However, consumers are expected to shoulder the risk of loss in the event a scam is successful despite the taking of preventative measures by financial institutions and telecommunications.

It is highly likely that consumers and/or financial institutions may in future seek to reallocate the risk of loss arising under these circumstances. In particular, financial institutions may seek to explore employee’s risk and/or director’s risk policies to cater to the risk of liability to consumers if they are to be found to have failed to implement preventative measures under any loss-sharing framework put in place by MAS.