Insurance Litigation 2023 Comparisons

Basis of Insurance and Reinsurance Law

The main statute governing the regulation and the conduct of (re)insurance business in Singapore is the Insurance Act 1966 (the “Insurance Act”). However, provisions from the UK Life Assurance Act 1774 and the UK Fire Prevention Metropolis Act 1774 that deal with insurable interest and accidental fire, respectively, have been adopted (with some modification) in the Insurance Act.

Apart from the Insurance Act, there are other pieces of legislation which govern specific types of insurance contracts or substantive points of insurance law. For example, Singapore has largely adopted the Third Parties (Rights against Insurers) Act 1930 via the Application of English Law Act 1993, and has a Marine Insurance Act 1906 that codifies principles of law applicable to marine insurance. Likewise, legislation such as the Motor Vehicles (Third Party Risks & Compensation) Act 1960 and Work Injury Compensation Act 2019 govern substantive aspects of insurance law in those areas.

When it comes to disputes relating to contracts of insurance, as a common law jurisdiction, Singapore relies heavily on common law principles and case law authorities. Singapore’s highest court and court of final appeal is the Court of Appeal, whose decision is binding on the lower courts (for example, the High Court and the State Courts). In the absence of local case precedent, case authorities from Commonwealth jurisdictions (especially England & Wales and to an increasing extent in recent years, Australia), though not binding on the Singapore courts, are likely to be of persuasive effect. Cases from the United States of America may also be of some persuasive authority (typically less so compared to Commonwealth cases) before the Singapore courts.

Regulation of Insurance and Reinsurance Business

The insurance and reinsurance industry is regulated by the Monetary Authority of Singapore (MAS) and the Insurance Act, which contains provisions to regulate the conduct of insurance business in Singapore. The Insurance Act is supplemented by various subsidiary legislation which consist of regulations setting out in greater detail the statutory requirements that (re)insurance companies and intermediaries have to adhere to. These regulations have the same legislative effect as if their provisions had been contained in the parent Act. The MAS may also issue various types of papers, which can be legally binding and have the force of law.

Forums for Resolving Insurance Disputes

There is no specific statutory or procedural framework that governs insurance coverage disputes. As most (if not all) coverage disputes are contractual in nature, parties will be able to avail themselves of the usual dispute resolution mechanisms and forums – ie, by commencing court proceedings or arbitration (if there is an arbitration clause in the insurance policy or if parties otherwise agree to refer the matter to arbitration). Apart from commencing an action in court or referring the matter to arbitration, there are other platforms where specific types of insurance disputes may be heard and resolved.

FIDReC

In 2005, the Financial Industry Disputes Resolution Centre Ltd (“FIDReC”) was launched as an independent and impartial alternative dispute resolution institution that offers services to resolve disputes between insureds and insurers in an amicable, expeditious and affordable manner. FIDReC offers two schemes, both of which consists of a mediation and adjudication stage:

• the FIDReC Non-Injury Motor Accident Scheme (“FIDReC NIMA Scheme”) which applies to third-party motor accident claims (ie, where the insured is making a claim against an insurer which is not their own insurer) where no bodily injury is suffered and if the claim amount is below SGD3,000; and
• the FIDReC Dispute Resolution Scheme.

It is mandatory for matters which fall within the FIDReC NIMA Scheme to be first heard by the FIDReC before court proceedings may be commenced.

FIDReC has a track record of handling claims made against insurers, pertaining to the following:

• market conduct issues such as mis-selling or misrepresentation of the product sold to the consumer in life insurance, accident and health insurance and investment-linked products; and
• disputes on liability relating to general insurers involving policies such as travel insurance, motor insurance, and accident and health insurance.

Further, with regard to a claim dispute arising out of an Integrated Shield Plan (IP), which is an optional health insurance coverage provided by private insurance companies typically as an add-on or supplement to the basic and compulsory health insurance scheme for Singapore citizens and permanent residents, insureds can also make use of the Clinical Claims Resolution Process (CCRP). The CCRP is an initiative proposed by the Multilateral Healthcare Insurance Committee commissioned by the Ministry of Health on 27 April 2021 to provide a platform to address issues related to health insurance. The CCRP accepts requests from parties who agree to seek a final and binding determination of their dispute of a clinical nature related to a claim under an IP. The CCRP Panel only hears cases from IP policyholders (ie, patients), medical practitioners and institutions and IP insurers.

Litigation Process

Depending on the nature and quantum of the claim, civil proceedings are either instituted in the State Courts (which consists of the Magistrates’ Court and the District Court) or the General Division of the High Court.

The jurisdictional limits of the different courts are set out below:

• if the value of the claim is lower than SGD60,000, the case should be filed in the Magistrate’s Court;
• if the value of the claim is between SGD60,000 and SGD250,000, the case should be filed in the District Court; and
• if the value of the claim is more than SGD250,000, the case should be filed in the General Division of the High Court.

Additionally, specifically with regard to road traffic accident claims or claims for personal injuries arising out of industrial accidents:

• if the value of the claim is less than or equal to SGD500,000, the case should be filed in the District Court; and
• if the value of the claim is more than SGD500,000, the case should be filed in the General Division of the High Court.

Civil claims are typically first heard in the General Division of the High Court or the State Court (depending on the quantum of the claim and the nature of the relief sought as the High Court only hear claims which exceed SSGD250,000). Appeals from the State Courts are heard in the General Division of the High Court and appeals from the High Court are heard in the Appellate Division of the High Court or Court of Appeal.

The litigation process typically commences with the claimant, known as the plaintiff, filing a writ of summons and a statement of claim, which is served on the defendant, who then files a defence. A litigant can commence an action either by filing an originating claim (OC) or originating application (OA). An OA is appropriate for a civil claim if it is required by law, or if it concerns some question of law and the material facts are not in dispute. Otherwise, an OC would be appropriate. Parties then move on to the exchange of affidavits of evidence-in-chief (ie, witness statements) before the discovery stage (which involves the disclosure of documents). Singapore does not have jury trials and all trials are before a judge (or in the lower courts, a magistrate).

The statutory regime that governs civil procedure is the Rules of Court 2021 (the “ROC 2021”). The ROC 2021 seeks to achieve the following in civil procedure in Singapore:

• fair access to justice;
• expeditious proceedings;
• cost‑effective work proportionate to:
1. the nature and importance of the action;
2. the complexity of the claim as well as the difficulty or novelty of the issues and questions it raises; and
3. the amount or value of the claim;
• efficient use of court resources; and
• fair and practical results suited to the needs of the parties.

The Singapore judiciary is well-known for its expediency and efficiency in hearing matters and, as a general guide, the High Court aims to hear and decide on all claims within 18 months from the time the matter is first filed in Court to the time when judgment is rendered.

Singapore International Commercial Court

In 2015, the Singapore International Commercial Court (SICC) was established as a dedicated division of the Singapore High Court (the other two divisions being the General Division and the Appellate Division) to cater to the litigation needs of international parties. Generally, the SICC has jurisdiction to hear claims, regardless of the law governing the dispute, as long as the claims are of an international and commercial nature and parties agree to submit to the jurisdiction of the SICC.

As parties who refer their disputes to the SICC will be able to adopt a more flexible procedure (as compared to the traditional process in the Singapore courts) which is in line with the international best practices for commercial disputes while still retaining the advantage of obtaining a Singapore court judgment at the end of the process, the SICC is fast becoming a popular alternative to litigation and arbitration in the realm of international commercial disputes. The fact that disputes before the SICC are heard by judges drawn from a diverse panel of distinguished local and international jurists can be an appealing factor if the dispute (for example, coverage disputes under insurance contracts) can be heard by an adjudicator with specialised knowledge of the industry.

However, given the requirements that the nature of the disputes referred to SICC be of an international nature and that parties would have to agree to submit to the jurisdiction of SICC, the SICC has not been a popular forum for insurance coverage disputes, which are still predominantly referred to arbitration.

Rules on Limitation

With regard to the statutory rules on limitation, Section 6 of the Limitation Act 1959 provides that the limitation period for the following actions is six years from the date on which the cause of action accrued:

• actions founded on a contract or on tort;
• actions to enforce a recognisance;
• actions to enforce an award;
• actions to recover any sum recoverable by virtue of any written law other than a penalty or forfeiture or sum by way of penalty or forfeiture.

Given that policy coverage disputes are largely contractual disputes, the limitation period of six years will start to run from the time when the insured’s cause of action arises under the policy. That said, as it is not unusual for insurance policies to provide for a separate contractual limitation period, it would be prudent to ensure that the terms of the policy do not provide for any time period for commencing action.

ADR is prevalent and strongly encouraged in Singapore. In fact, before the commencement of any civil court proceedings, and during the course of any action, parties have a duty to consider amicable resolution of their dispute. The ROC 2021 requires a party to make an offer of amicable resolution before commencing the action, unless the party has reasonable grounds not to do so. Failure to do so might lead to adverse cost orders against the successful party. Additionally, the effort or attempt to reach an amicable resolution to a matter is a factor which the courts will consider in making the appropriate costs awards for court proceedings.

Apart from the avenues for ADR through FIDReC and CCRP stated at 1.1 Statutory and Procedural Regime, other forms of ADR are available in Singapore:

• Mediation – where a neutral third party (the mediator) guides parties to find an amicable resolution. This is usually administered by the Singapore Mediation Centre or the Singapore International Mediation Centre.
• Conciliation – where a neutral third party with expertise in the subject matter suggests possible solutions and the parties involved can try to come to an agreement based on these suggestions.
• Neutral evaluation – a neutral third party with expertise in the subject matter provides an early assessment of the case and estimates the likelihood of success at trial. This is currently only available for matters heard in the State Courts.
• Arbitration – see 3. Arbitration and Insurance Disputes for further detail.
• Expert determination – an independent expert will give an opinion and the parties involved can decide whether they agree to a settlement based on the expert’s opinion. This is currently only for cases heard in the Supreme Court involving an expert’s opinion.

Where there is a dispute over jurisdiction, it would first be necessary to determine whether the parties’ agreement contains a jurisdiction clause, and if that jurisdiction clause is an exclusive jurisdiction clause or a non-exclusive jurisdiction clause.

Exclusive Jurisdiction Clause

Where there is an exclusive jurisdiction clause, parties typically agree to refer all disputes arising from such contracts to a particular jurisdiction in a bid to avoid disputes over the proper forum. The selected forum would have exclusive jurisdiction (Vinmar Overseas (Singapore) Pte Ltd v PTT International Trading Pte Ltd [2018] 2 SLR 1271). An applicant seeking to enforce an exclusive jurisdiction clause bears the burden of showing a “good arguable case” that an exclusive jurisdiction agreement exists and governs the dispute in question. A party who commences proceedings in a court not named in the exclusive jurisdiction clause would be in breach of the exclusive jurisdiction clause. The non-breaching party can then apply to stay proceedings commenced in breach of the exclusive jurisdiction clause, and the breaching party would have to satisfy the “strong cause” test, which sets a high threshold for a court to refuse a stay of proceedings commenced in breach of an exclusive jurisdiction agreement.

Non-Exclusive Jurisdiction Clause

Where there is a non-exclusive jurisdiction clause, it indicates that the parties thought that the forum named in the clause was an appropriate forum, and that an agreement to submit to the non-exclusive jurisdiction of one forum does not entail an obligation to sue in that forum (Shanghai Turbo Enterprises Ltd v Liu Ming [2019] SGCA 11). Where Singapore is the forum named in the non-exclusive jurisdiction clause, the defendant must show strong cause why it should not be bound to its contractual agreement to submit. If Singapore is not the named forum in the non-exclusive jurisdiction clause, then the defendant may apply for a stay or to set aside service on the basis that Singapore is forum non conveniens.

Hague Convention on Choice of Court Agreements

The common law position on exclusive jurisdiction clause has now been slightly altered with the promulgation of the Hague Convention on Choice of Court Agreements (“Hague Convention”) on 1 October 2005, and its ratification by Singapore on 2 June 2016 by way of the Choice of Court Agreements Act 2016 (CCCA). Under common law, the courts retain discretion to refuse a stay despite the existence of an exclusive jurisdiction clause, but under the Hague Convention, the court is required to grant the stay should certain conditions be fulfilled. This will have an impact on court proceedings involving exclusive jurisdiction clauses in favour of Hague Convention Contracting States (for example, the USA and some jurisdictions in the European Union).

In the case of 6DM (S) Pte Ltd v AE Brands Korea Ltd and others and another matter [2021] SGHC 257, the High Court held that the question on whether the court is mandated to grant a stay under the CCCA involves a two-stage test:

• First, the court must consider whether there exists an exclusive jurisdiction clause which does not designate Singapore as a chosen court, and which applies to the proceedings at hand.
• Second, if the exclusive jurisdiction clause is found to be applicable, the court must then consider whether any of the five exceptions provided in the CCCA (which the High Court found to be a closed category of exceptions) apply to justify the court’s refusal to order a stay or dismissal of proceedings.

Dispute over Choice of Law

Where there is a dispute over choice of law, the approach to determining the governing law of the agreement is a three-stage test laid out in Pacific Recreation Pte Ltd v S Y Technology Inc and another appeal [2008] SGCA 1:

• Firstly, the court would determine if there was an express choice of governing law.
• The second stage was whether an intention of the parties to choose a governing law could be inferred.
• However, if the court was faced with a multiplicity of factors, each pointing to a different governing law, then the proper approach would be to move on to the third stage, which was to determine the law with the closest and most real connection with the contract. This is not an exercise to divine any “intent” of the parties, but to consider, on balance, which law had the most connection with the contract in question and the circumstances surrounding the inception of that contract.

Reciprocal Enforcement of Foreign Judgments Act

Previously, if the foreign judgment were from a foreign jurisdiction specified in the Reciprocal Enforcement of Commonwealth Judgments Act (Cap 264) (RECJA) or the Reciprocal Enforcement of Foreign Judgments Act (Cap 265) (REFJA), the foreign judgment could only be enforced against an insurer if it were registered in the General Division of the High Court.

However, the RECJA was repealed with effect from 1 March 2023. With the repeal of RECJA, Singapore’s legal framework for the statutory recognition and enforcement of foreign judgments in civil proceedings is streamlined and consolidated under the REFJA. Final money judgments from the superior courts of Brunei, Australia, India, Malaysia, New Zealand, Pakistan, Papua New Guinea, Sri Lanka, and the United Kingdom and Hong Kong SAR are now registrable under the REFJA.

CCCA

In addition, Section 18 of the CCCA specifically provides that the High Court may not limit or refuse the recognition or enforcement of a foreign judgment of liability under the terms of a contract of insurance or reinsurance on the ground that the liability under the contract includes liability to indemnify the insured or reinsured in respect of a matter to which the CCCA does not apply, or an award of damages that will not be recognised or enforced under Section 16 of the CCCA. Judgments from contracting states of the Hague Convention will therefore be recognised and enforced in Singapore Courts.

Common Law

If the foreign judgment is not from a foreign jurisdiction specified in the REFJA or CCCA, the position in common law would have to be relied on to enforce foreign judgments. Under the common law, a foreign judgment in personam given by a foreign court of competent jurisdiction may be enforced by an action for the amount due under it so long as the foreign judgment is final and conclusive as between the same parties (Hong Pian Tee v Les Placements Germain Gauthier Inc [2002] 1 SLR(R) 515). Additionally, a foreign judgment may be enforced by an action for the amount due under it only if it is a judgment for a definite sum of money (Poh Soon Kiat v Desert Palace Inc (trading as Caesars Palace) [2010] 1 SLR 1129).

With the introduction of the ROC 2021 in April 2022, civil procedure in Singapore has seen a few significant changes which may have an impact on the way insurers litigate their claims or strategise their litigation. The most important of these changes are as follows:

• As mentioned in 1.3 Alternative Dispute Resolution (ADR), before the commencement of any proceedings, and during the course of any action, parties have the duty to consider amicable resolution of their dispute. On this, a party is to make an offer of amicable resolution before commencing the action unless the party has reasonable grounds not to do so. Failure to do so might lead to adverse cost orders against the successful party. The requirement for attempts at amicable resolution means that insurers will need to explore and try to exhaust the possibility of settlement before resorting to litigation.
• Introducing a single application pending trial to deal with all interlocutory matters necessary for the case to proceed expeditiously at that stage of the proceedings (including the discovery process and request for further and better particulars of the pleadings). This replaces the previous common practice of litigating in a systematic fashion and parties taking out multiple interlocutory applications progressively before trial. With this, insurers will have to be more strategic about the interlocutory applications which they take out.
• Exchanging affidavits of evidence-in-chief (ie, witness statements) before (instead of after) the production of documents, to crystallise and streamline the issues in dispute. Apart from compelling insurers to crystallise their case and evidence at an early stage of the proceedings, this also means a huge portion of the legal expenses will be incurred at an earlier stage.
• Appointing a single expert, via a court-supervised process when, previously, parties would typically appoint their own experts.

Courts generally enforce arbitration provisions in commercial contracts of insurance and reinsurance. Courts have taken a generous approach in construing arbitration clauses and the rule of construction is that all disputes between parties are assumed to fall within the scope of the arbitration clause unless shown otherwise (Silverlink Resorts Limited v MS First Capital Insurance Limited [2020] SGHC 251).

Singapore is subject to the New York Convention (the “Convention”) as a result of its accession to the Convention in 1986. The Convention is encapsulated in Part III of the International Arbitration Act 1994 (IAA).

Arbitral awards handed down in other jurisdictions can be enforced pursuant to Section 29 of the IAA if it is an arbitral award made pursuant to an arbitration agreement in the territory of a “contracting state” within the meaning of the Convention. Section 30 of the IAA elaborates on the evidence that a person seeking to enforce a foreign award by virtue of Part III of the IAA has to produce to the court. This includes, for example, the duly authenticated original award.

Finally, the grounds on which the Singapore court might refuse enforcement are provided for in Section 31 of the IAA. This includes, for example, if a party to the arbitration agreement pursuant to which the award was made was under some incapacity at the time when the agreement was made, or if a party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings.

Popularity of Arbitration

Arbitration is a significant and popular form of insurance dispute resolution forum in Singapore. This is largely due to the fact that it is common for insurance policies to contain an arbitration clause. There is no data specific to insurance litigation and the lines of insurance business that arbitration is common in. However, the Singapore International Arbitration Centre (SIAC) has seen its new case filings rising steadily, with 357 new case filings in 2022 and 332 new case filings in the first quarter of 2023. Additionally, the cases filed with the SIAC comes from a strong international user base, with users from more than 100 jurisdictions with diverse legal systems choosing to have the SIAC administer their disputes in the past five years. Additionally, the SIAC is the most preferred arbitral institution in Asia-Pacific and ranked second in the world among the world’s top five arbitral institutions.

Arbitration Rules

In Singapore, the IAA governs international arbitration, whereas the Arbitration Act 2001 (AA) applies to cases of domestic arbitration, where Singapore is the place of arbitration and where Part II of the IAA is inapplicable.

Parties’ choice of arbitration rules (for example, the SIAC Rules) in the arbitration clause will typically be binding on parties.

Confidentiality of Arbitration

Arbitration proceedings (including the award) are generally confidential in nature. Specifically, arbitration administered by the SIAC is private unless parties agree otherwise:

• Rule 39.1 of the SIAC Rules 2016 lays down the rules relating to confidentiality of all matters relating to the arbitral proceedings, as well as the arbitral award.
• Rule 39.2 of the SIAC Rules 2016 provides for certain exceptions to confidentiality. This includes, for example, disclosure for the purposes of enforcing or challenging the award, or for compliance with the provisions of the laws of any state, which are binding on the party making the disclosure.

Parties’ Right to Appeal

The following applies to the parties’ rights to appeal against an arbitral award:

• For international arbitration governed by the IAA, the IAA does not provide for a right of appeal against the award.
• For domestic arbitration governed by the AA, parties can appeal against the award pursuant to Section 49 of the AA subject to certain requirements and restrictions. In particular, pursuant to Section 50(2) of the AA, the appellant must have first exhausted any available arbitral process of appeal or review and any available recourse under Section 43 of the AA (correction or interpretation of award and additional award).

An insurer’s right of subrogation is implied by law into an indemnity insurance contract (Sompo Insurance Singapore Pte Ltd v Royal & Sun Alliance Insurance plc [2021] SGHC 152. Based on this implied term, the insured promises to take specific steps or actions so that it will not be overcompensated and the insurer’s interest in paying only for the insured’s actual loss is protected.

Common law also implies a duty of utmost good faith (uberrima fides) in all insurance and reinsurance contracts. For marine insurance contracts, this duty is codified in the Marine Insurance Act 1906. The duty requires both parties to act in good faith and with regard to the interests of the other party. It is particularly relevant where the policy requires the insured to provide information and assistance to the insurer in particular circumstances (in particular, at the pre-contractual stage and before the placement of the policy).

As mentioned at 4.1 Implied Terms, insurance contracts are contracts uberrimae fidei (ie, requiring the utmost good faith). This obligation to exercise the utmost good faith (imposed under common law and also codified in the Marine Insurance Act 1906) has arisen frequently in connection with the insured’s duty to make a full and frank disclosure of all material facts to the insurer prior to the acceptance of the risk by the insurer. This is based on the assumption that the insured alone possesses the facts which would influence the mind of a prudent insurer in its computation of the risk and there must be disclosure of such material facts in order to enable the insurer to assess the risk.

The insured must disclose to the insurer all facts material to an insurer’s appraisal of the risk which are known or deemed to be known by the insured but neither known nor deemed to be known by the insurer. Non-disclosure of material facts must have induced the making of the policy on the relevant terms. If an insured fails to disclose material information that influences the insurer’s assessment of the risk, the insurer would be entitled to avoid the contract of insurance and repudiate liability for any claim that has arisen. With regard to what constitutes “material information”, the test of materiality is that information must be considered material in the eyes of a prudent and reasonable insurer.

An insurance law reform sub-committee (the “Committee”) was formed by the Singapore Academy of Law’s Law Reform Committee in March 2017 to review the key areas of Singapore insurance contract law that were in likely need of reform. The main focus of the Committee’s work and review was on , amongst other things, the duty of utmost good faith and the duty of disclosure. The “Report on Reforming Insurance Law in Singapore” was published by the Singapore Academy of Law’s Law Reform Committee in February 2020 and some of the proposed changes recommended by the Committee includes different remedies for non-disclosure depending on whether non-disclosure was deliberate or reckless and avoidance of policy only if the insurer would not have underwritten the risk if not for non-disclosure. In light of the Committee’s recommendations, changes to the law on material non-disclosure are expected to be seen in the near future.

Among the more significant coverage litigation heard by the Singapore Courts in the past 12 months has been a dispute under a professional liability insurance policy as to whether a consent judgment falls within the insuring clause of the said policy. The litigation on coverage disputes that has been seen in the Singapore courts is not significant and prolific enough, in the authors’ view, to constitute any discernible trend, however.

Globally, the past year has seen a surge in high-value disputes between insurers and their policyholders over sanctions related claims and COVID-19 business interruption losses disputes. The spectre of pandemic-related business interruption insurance claims also continued to hang over the industry with a deluge of disputes, following the most anticipated decision of Corbin & King v AXA Insurance UK Plc [2022] EWHC 409 (Comm), where the English High Court ruled in favour of a restaurant business that a prevention of access clause in its policy was triggered by government-mandated lockdowns. This is likely to continue to prompt more litigation relating to COVID-19 business interruption losses. That said, this trend is unlikely to catch on in Singapore. This is largely because the wording of the infectious disease extension in East Asia has been carefully reviewed and tightened since the SARS pandemic in 2002, so Singapore has not seen and is unlikely to see significant litigation and disputes arising from claims related to COVID-19. As for sanctions-related claims, which seem to be on the upwards trend globally, there has not been a significant quantity of coverage disputes in the region, but as noted in 7.1 Type and Amount of Litigation, this may be an emerging trend in insurance coverage disputes.

As mentioned at 1.1 Statutory and Procedural Regime, insurance and reinsurance coverage disputes can generally be resolved either in court, or through ADR avenues. However, given that insurance and reinsurance contracts typically include arbitration clauses, most coverage disputes are referred to arbitration, rather than court.

Where the law views the insured party as a consumer, this does have an effect on claims, as additional protection and remedies are offered to consumers under Singapore law.

Under the Consumer Protection (Fair Trading) Act 2003, consumers can commence legal action against suppliers of services if a supplier has engaged in an unfair practice.

An unfair practice is defined as, amongst others:

• doing or saying anything, or omitting to say something, if it reasonably results in a consumer being deceived or misled;
• making a false claim; and
• taking advantage of a consumer if the supplier knows (or ought to have known) that the consumer is not in a position to protect its own interests, or is not reasonably able to understand the character, nature, language or effect of the transaction or any matter related to the transaction

Further, if the insured party is a consumer, as mentioned at 1.1 Statutory and Procedural Regime, they can contact the FIDReC, which is an independent institution that provides consumers with an avenue to resolve disputes in the financial industry, including in the insurance sector.

Preliminarily, the doctrine of privity of contract applies to contracts of insurance as well. Thus, a third party who is not privy to the contract cannot enforce an insurance contract or sue an insurer in connection with an insurance contract. However, there are some exceptions where legislation has intervened to provide for certain remedies:

• the Contracts (Rights of Third Parties) Act 1999;
• the Third Parties (Rights Against Insurers) Act 1930; and
• the Motor Vehicles (Third Party Risks and Compensation) Act 1960.

Contracts (Rights of Third Parties) Act 1999

Under the Contracts (Rights of Third Parties) Act 1999, a third party may enforce an insurance contract if the contract of insurance either expressly provides that the third party may enforce its rights, or if the terms of the contract purport to confer a benefit on the third party. It is common for insurance policies to exclude the application of this statute.

Third Parties (Rights Against Insurers) Act 1930

Under the Third Parties (Rights Against Insurers) Act 1930, where an insured takes out a policy against liability to third parties and the insured becomes bankrupt, the third party would be entitled to step into the shoes of the insured and make a claim against the insurers directly.

Motor Vehicles (Third Party Risks and Compensation) Act 1960

Under the Motor Vehicle (Third-Party Risks and Compensation) Act 1960, an insurer must comply with judgments made in favour of a third party following a motor vehicle accident. Where the insured has become bankrupt or has been wound up, a victim of an accident or an involuntary creditor may be entitled to recover its judgment debt directly from the bankrupt tortfeasor’s insurer under the Motor Vehicle (Third Party Risks and Compensation) Act 1960.

There is no concept of bad faith under Singapore insurance law.

There are no statutory penalties for insurers for paying claims late. Neither is there penalty imposed by common law for late payment of claims. There is therefore no penalty for late claims payment unless the policy provides for it. Insurance policies sometimes (but seldom) provide for such penalties.

Brokers are independent agents appointed by the insured to carry out functions including advice and placement, post-contractual assistance and claims handling services. Generally, a broker acts as the agent of the insured in giving advice to the insured and in dealing with the insurer. Thus, any errors made by the broker while acting on the insured’s behalf (for example, misrepresentations) and within the scope of the broker’s actual or ostensible authority will bind the insured.

The Lloyd’s Asia platform is the only statutorily recognised delegated underwriting arrangement in Singapore. In April 2015, the MAS gave the green light for Lloyd’s Asia service companies to sub-delegate their underwriting authority to insurance intermediaries (known as coverholders) in Singapore. There has been no reported Singapore case on litigation arising out of such arrangements from the few coverholders in Singapore.

Claims handing authority arrangements are common for personal lines products and the engagement of such third-party claims administrators (TPAs) has grown over the years in Singapore. Most issues and complaints against such TPAs and their principals will be handled by FIDReC.

Insurers would typically fund the defence of insureds of liability insurance. The main areas of claims where insurers fund the defence costs of insureds include bodily injury, property damage, professional indemnity, and advertising injuries.

Given that these are common claims in liability insurance, it is unlikely that there would be a change in the areas of claims. However, the development of technology might simplify the process of resolving such claims. For instance, in the context of traffic accidents giving rise to bodily injury and property damage where motor insurance would typically be engaged, the Singapore Academy of Law had developed an online traffic accident claims simulator called the Motor Accident Claims Online (“Maco”). Maco churns out estimated figures for claimants involved in such accidents, for insurers in cases where there are differing accounts or evidence offered by both parties, or if one party is dissatisfied with the insurance payout.

With regard to claims for personal injuries, pursuant to a recent amendment of the Supreme Court and State Courts Practice Directions, Singapore courts will refer to actuarial tables published by the Singapore Academy of Law (the “Actuarial Tables”) to determine an appropriate multiplier in personal injury and death claims. This applies for proceedings for the assessment of damages in personal injury and death claims heard on or after 1 April 2021. The aim of the Actuarial Tables is to introduce greater certainty and precision in the quantification of damages in personal injury and death claims.

Upon the recommendation of the Personal Injury Damages Committee, the Actuarial Tables were developed by a multi-disciplinary committee comprising members from the Monetary Authority of Singapore, the General Insurance Association, the Singapore Actuarial Society, and the Law Society of Singapore, among others. The Actuarial Tables set out the exact multiplier to be applied for a claimant at any given age, based on the claimant’s gender, life expectancy and/or the length of their remaining working life.

With the introduction of the Actuarial Tables and greater certainty on the quantum for claims for future losses, it is likely that fewer cases involving personal injuries will be litigated in court. Prior to the implementation of the Actuarial Tables, the bulk of the personal injuries disputes related to the issue of the appropriate multiplier to be adopted.

A claimant can buy protection against costs risk in connection with such claims. There are possibly two options available to a claimant.

First, an insured can procure legal expenses insurance, which enables the insured to be protected against the cost of litigation. Typically, such insurance will provide that expenses are payable only if the insured has a reasonable prospect of success in bringing or defending the proceedings, and that in the event of a dispute, the opinion of counsel may be sought.

Next, there is also the option of purchasing an after-the-event (ATE) insurance, where a party to a litigation can be indemnified against costs awarded against it if it does not succeed in its case. ATE insurance is purchased after a cause of action has accrued. The claimant’s case would typically be assessed to determine whether it stood at least a 50% chance of success and whether the sum recoverable would likely exceed a minimum figure. If certain criteria are fulfilled, a policy would be issued, and the claimant would be granted credit for the amount of the premium. If the claimant’s case succeeded, the amount of the ATE premium would form part of the claimant’s costs, and recovery would be sought from the defendant.

Under the common law, the insurer has the right of subrogation, which will allow it to recover sums from third-party tortfeasors. The right of subrogation is sometimes expressly provided for under the policy. Subrogation only applies to indemnity policies and the insurer can only avail itself of subrogation rights after it has made full payment to the insured. In the subrogation process, the insurer assumes or takes on the rights or conditions of the insured that arose as a result of the loss or diminishment that the insured is insured for.

The right to subrogation is found in common law and has not been statutorily codified.

In a subrogation action, the claim is in the name of the insured as the cause of action for damages remains with the insured. However, if the insured has made an express assignment of rights to the insurer, the insurer can exercise the rights that originally belonged to the insured in its own name.

ESG

With ESG becoming a global movement that only seems to be gaining traction and with no signs of slowing, ESG-related risks are increasing as governments exert pressure on businesses to change their ways for the greater good. Climate change is already a top boardroom issue, as companies and their directors face an array of physical and liability-related risks from a more extreme climate and from the transition to a low or zero-carbon economy.

Climate change-related litigation is on the rise and is likely to become a significant source of liability exposure for companies and their directors in coming years. As more ESG-related claims are seen (eg, for non-compliance with ESG requirements or misrepresentation claims for “greenwashing”), the insurance industry is also likely to see more claims under its directors’ and officers’ liability insurance policies.

Sanctions

The Russia-Ukraine conflict has led to an avalanche of sanctions imposed against Russia’s and Belarus’ financial institutions, state-owned entities, businesses and other targets by the United States, the United Kingdom, the European Union and their allies including Singapore. Apart from the direct impact felt by companies that conduct business or have assets in Ukraine, Russia or Belarus, there is an emerging trend of sanctions-related litigation, in particular, relating to the enforceability and scope of sanctions clauses.

In the Singapore case of Kuvera Resources Pte Ltd v JP Morgan Chase Bank, NA [2022] SGHC 213, the Singapore courts examined the enforceability of a sanctions clause which is very similar to the standard “LMA3100 sanctions clause” wording often seen in insurance policies. The court stated that a clause which requires a party to comply with “all sanctions, embargoes and other laws and regulations of the U.S. and of other applicable jurisdictions to the extent they do not conflict with such U.S. laws and regulations” includes the entire regulatory superstructure and infrastructure of the US sanctions laws and regulations, including guidelines on the standards that it expects US persons to adhere to in order to avoid breaching US sanctions and US Office of Foreign Assets Control’s (OFAC) approach to investigating and penalising breaches of US sanctions.

In another English High Court case of Mamancochet Mining Ltd v Aegis Managing Agency Ltd and others [2019] 1 All ER (Comm) 335, which involved a sanctions clause in a marine insurance policy, the Court upheld the sanctions clause and highlighted the importance of the wording of the clause in determining whether insurers can rely on the sanctions clause to deny liability under the policy.

The authors do not expect the type and amount of litigation to change in the next 12 months. For both ESG and sanctions-related litigation, it seems likely that litigation is only starting to emerge and claims only starting to come in. This trend is probably only beginning and will likely continue in the next year.

ESG-related litigation and claims have not given rise to specific coverage issues or test cases of significant importance in Singapore. As for sanctions-related claims, the influx of claims has prompted many insurers to rethink the scope and efficacy of their sanctions exclusions. In particular, insurers that have the standard “LMA3100 sanctions clause” – which typically excludes payment of claims which would expose insurers to any sanction, prohibition or restriction under a United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union or United Kingdom or United States of America – in their policies are beginning to review whether there is a gap between the sanctions imposed by the jurisdictions and bodies covered in the clause and the sanctions imposed by their local jurisdiction.

The macroeconomic factors that have been considered in this chapter are yet to have any clear impact on the scope of insurance cover available or to have changed appetites for risks to date, but it is very likely that insurers will reconsider and tighten their sanctions exclusion clause(s).

There has definitely been increased cognisance and integrating of ESG factors into insurance businesses.

The MAS has recognised the need for a transition into a sustainable future and that this involves the transformation of the real economy. As such, it had released Guidelines on Environmental Risk Management for Insurers in 2020 to enhance insurers’ resilience to and management of environmental risk. Specifically in relation to underwriting, the MAS had advised that underwriters should be provided with the means to check the potential impact of the proposed transaction on the environment, and should also assess each customer’s environmental risk as part of its underwriting assessment, particularly for sectors with higher environmental risk. It also advised that insurers should develop quantitative and qualitative tools and metrics to monitor and assess its underwriting exposures to environmental risk, where material. More recently, in May 2022, the MAS also issued an Information Paper on Environmental Risk Management (Insurers) with various focus areas for insurers.

Whilst the above represents what the MAS perceives to be “best practices” and sets out the MAS’ expectations for the industry, they do not have the force of law and insurers are not required to comply with these requirements. That said, a majority of the insurers (especially international insurers who are already well-acquainted with the concept of ESG) have already started to integrate ESG considerations into their business and operations, in particular, at the underwriting stage.

All insurance companies and intermediaries licensed to operate in Singapore are subject to the Personal Data Protection Act 2012 (PDPA), which provides a baseline standard of protection for personal data in Singapore. It complements sector-specific legislative and regulatory frameworks such as the Insurance Act and imposes on insurance companies and intermediaries various requirements relating to the collection, use, disclosure and care of personal data in Singapore. The MAS has also released circulars such as ID 03/23 on the Notification of Data Breaches to the MAS which sets out expectations for licensed insurers regarding notification of data breaches to MAS.

Currently, organisations must notify the Personal Data Protection Commission (PDPC) of significant-scale data breaches, which occur on or after 1 February 2021. A significant-scale breach is one that affects or is likely to affect 500 or more people. Organisations must also notify both the PDPC and affected individuals when a data breach results in or is likely to result in significant harm to individuals. This includes a combination of personal data and, often, financial, health or other sensitive data. The maximum fine amount was increased in 2021 to up to SGD1 million or 10% of annual turnover in Singapore, whichever is higher.

As the issue of data protection becomes of more significant importance and as organisations become increasingly aware of the potentially severe ramifications of cyber-attacks or data breaches (both in terms of financial penalties and reputational damage), there has been an increasing awareness and demand for cybersecurity insurance policies.

Actuarial Tables

The impact of the Actuarial Tables which came into force in April 2021 is discussed at 5.3 Trends in the Cost or Complexity of Litigation. The most immediate consequence of the Actuarial Tables is that awards for future damages in personal injuries matters are likely to increase in quantum. Not only will this impact the way insurers assess claims and strategise litigation, it will likely also have an impact on premiums for certain types of insurance policies, in particular, motor insurance policies.

ROC 2021

The changes brought about by ROC 2021 represent a marked shift in the overall approach to court litigation. The express imposition of a duty to consider and explore amicable resolution and the “front-loading” of litigation costs to an earlier stage of the proceedings – notably, affidavits of evidence-in-chief, which are traditionally responsible for the bulk of the pre-litigation legal costs, are now to be exchanged before the disclosure of documents – will likely have the intended effect of reducing the number of cases which are litigated in court and proceed to trial. This will likely translate into less insurance litigation and also lower defence costs borne by insurers.