[This article is a summary of an earlier, but longer article here, which is intended for formal publication in a journal. This is Essay No.2 in the ‘Sa’ Amran series’ of 8 articles. Click here for the Essay-1].

A COMMENTARY ON APPEAL NO.1 IN AMGENERAL INSURANCE BHD v. SA’ AMRAN [2022] 8 CLJ 175; [2022] 5 MLJ 825

I. INTRODUCTION

For decades, Malaysian motor insurance law was marked by confusion and procedural hurdles. Accident victims often faced delays and were forced to file multiple lawsuits to obtain compensation from insurers. The Federal Court’s decision in AmGeneral Insurance Bhd v Sa’ Amran a/l Atan & Ors [2022] 8 CLJ 175 brought a decisive end to this era.¹[2022] 8 CLJ 175  The Court held that victims no longer need to file a separate “recovery action” against insurers. This judgment realigned Malaysian law with its social purpose and with the approach of other Commonwealth jurisdictions.

II. FACTUAL BACKGROUND

Sa’ Amran Atan, an innocent third-party victim, was injured in a road accident. He sued the driver, the registered owner, and the insurer.²[2022] 8 CLJ 175 at para 14 The courts found the driver and owner liable, and judgment was entered against them.³[2022] 8 CLJ 175 at para 15 When Sa’ Amran sought to enforce the judgment against AmGeneral Insurance, the insurer refused, arguing that the policy did not cover the claim and that a separate suit was required.

A key fact was that the registered owner had sold the car years before the accident, but the registration was never updated. The question arose: was the insurer still liable when the insured no longer had an interest in the car but remained the registered owner?⁴[2022] 8 CLJ 175 at para 17

III. THE LEGAL ARGUMENTS

A. The Insurer’s Position

Insurers argued that insurance is a private contract. If the insured no longer had an interest in the car, the policy lapsed. They insisted that a separate recovery action was needed to determine if the policy was still valid.⁵[2022] 8 CLJ 175 at para 22 This approach often left victims with a judgment they could not enforce, forcing them into a second, costly lawsuit.

The insurer also relied on the doctrine of utmost good faith (uberrimae fidei), arguing that a breach of this duty—such as failing to disclose the sale of the vehicle—should render the policy void.⁶[2022] 8 CLJ 175 at para 9

B. The Victim’s Position

Victims argued that the Road Transport Act 1987 (RTA) is a social law designed to protect innocent victims. Section 96(1), read with 91(3) of the RTA states that the insurer must pay any sum due under a judgment against the insured.⁷[2022] 8 CLJ 175 at para 24 Section 109 treats the registered owner as the owner for liability, even if the car was sold. Victims contended that once a judgment is obtained, the insurer’s liability is automatic. No second lawsuit is needed.

IV. THE FEDERAL COURT’S DECISION

A. The Statutory Duty

The Court held that section 96(1) of the RTA creates a direct, mandatory duty for insurers to pay judgments against insured persons.⁸[2022] 8 CLJ 175 at para 25  The words, “the insurer shall… pay” are clear. So also the explicit words in section 91(3): “Notwithstanding anything written in any written law … [an insurer] … shall be liable to indemnify … the person … specified in the policy in respect of any liability which the policy … cover(s).”  There is no need for a second lawsuit. Adding such a step would go against Parliament’s intent and harm victims.⁹[2022] 8 CLJ 175 at para 102

The Court adopted a purposive approach, looking at the law’s purpose: to ensure victims are swiftly and fairly compensated.¹⁰[2022] 8 CLJ 175 at para 50 This approach aligns with the UK’s Road Traffic Act 1988 and other Commonwealth countries.

B. Overruling Old Cases

The Court overruled earlier decisions that required a recovery action, such as Letchumanan a/l Gopal v Pacific Orient & Co Sdn Bhd [2011].¹¹[2011] 5 CLJ 866 It preferred the reasoning in Pacific & Orient Insurance Co Bhd v Muniammah Muniandy [2011] 1 CLJ 947, which held that section 96(1) does not require a second judgment against the insurer.

C. Insurable Interest and Policy Lapse

The insurer argued the policy lapsed when the insured sold the car. The Court rejected this. There was no clause in the policy or the RTA that made the policy void upon sale if it was valid at the time of the accident.¹²[2022] 8 CLJ 175 at para 13, 25, 26, 28-31, 35, 38, 40-43 The Court said registration, not actual ownership, determines liability under the RTA. The doctrine of utmost good faith does not defeat the rights of third parties protected by statute.¹³[2022] 8 CLJ 175 at para 11

D. How Insurers Can Defend

If an insurer wants to contest liability, it must intervene in the original lawsuit or seek a declaration under section 96(3) of the RTA, with proper notice to the third party.¹⁴[2022] 8 CLJ 175 at para 96, 102, 103 All issues should be resolved in one proceeding. This protects victims from multiple lawsuits and upholds their right to fair treatment.¹⁵[2022] 8 CLJ 175 at para 105

V. THE IMPACT OF THE DECISION

A. Third-Party Rights Strengthened

The decision raised third-party rights to a constitutional level.¹⁶[2022] 8 CLJ 175 at para 54, 60 Later cases promptly adopted this approach, cementing its principles as the new standard in Malaysian motor insurance law.

B. Later Cases

In Chen Boon Kwee v Berjaya Sompo Insurance Bhd [2025], the Federal Court confirmed that a recovery action is not needed.¹⁷[2025] 1 MLJ 158  The insurer’s argument for a separate suit to decide a passenger liability exclusion was rejected. Insurers must intervene in the original suit if they want to contest liability.

In Mohd Riza bin Mat Rani & Ors v Zurich General Takaful Malaysia Bhd & Anor [2025], the Court held the insurer liable even in a “cloned car” case, as long as the registration matched official records.¹⁸[2025] 2 MLJ 224 This confirmed that registration, not actual ownership, determines liability in RTA cases.

The Court of Appeal in Mohamed Fayadh bin Abdul Gaffor & Ors v Liberty Insurance Bhd [2024] streamlined the process for victims, overruling earlier cases that required fresh notice for a second suit under section 96(2)(a) RTA.¹⁹ [2024] 6 MLJ

However, the only exception is the common law rule that in compulsory insurance cases, where two insurers cover the same risk event, the earlier policy lapses.²⁰White (A.P.) v. White and The Motor Insurers Bureau [2001] UKHL 9 In cases of double insurance, if the ‘other insurance’ clauses would leave the insured without coverage, courts treat such clauses as cancelling each other out, making both insurers liable in proportion to their coverage.²¹Weddell v. Road Transport & General Insurance Co Ltd [1932] 2 KB 563

The courts’ priority is to ensure accident victims are compensated, regardless of double insurance or policy wording.²²Churchill Insurance Company Limited v Benjamin Wilkinson and Tracy Evans v Equity Claims Limited [2013] 1 WLR 1776 For example, in Tune Insurance Malaysia Bhd v Chan Siang Kai & Ors [2024], the Court found the original insurer’s policy had lapsed because a new policy had been issued in the new owner’s name.²³[2024] MLJU 775 These cases demonstrate that while the “no recovery action” rule is strong, common law itself enables the statutory principles of protection.

C. Shifting the Burden

The Sa’ Amran decision shifted the burden from victims to insurers. Insurers must now act quickly—either pay the judgment or intervene in the original action. Delays and procedural tactics are no longer allowed. This encourages insurers to investigate claims promptly and ensures that victims receive compensation without delay.

D. Extra Protections for Victims

Two further mechanisms protect third-party victims. First, the Motor Insurers’ Bureau (MIB) agreement ensures compensation when insurance is absent or ineffective. Section 89 of the RTA requires all insurers to be MIB members, binding them to compensate victims.²⁴Section 89 RTA 1987 The MIB’s obligations are reinforced by agreements with the Minister of Transport and among insurers. V. Manoharan and G. Naidu affirm this position.²⁵Manoharan Veerasamy ‘Pacific & Orient Insurance Co Bhd v. Hameed Jagubar: ‘Did the Federal Court finally answer all the questions on backdated insurance Cover Notes?’ at [2019] l LNS (A) Ix at p.1; G. Naidu, ‘The role of the MIB and the liability of the insurer concerned under MIB/Domestic agreement’, [2023] CLJ 1 LNS(A) lxxvp.1 The House of Lords has recognised the MIB agreement as having statutory force.²⁶[2001] 2 All ER 43, at 52 at paragraph 35; Hardy v Motor Insurers’ Bureau [1964] 2 All ER 742 at 744, [1964] 2 QB 745 at 757

Second, Parliament’s 2013 reforms, including Schedule 9 of the Financial Services Act 2013 and the Islamic Financial Services Act 2013, further strengthened third-party protection.

VI. SOME INSIGHTS

The Federal Court’s approach in Sa’ Amran is notable for its clear preference for statutory purpose over strict contractual doctrine. The Court’s reasoning is rooted in the need to protect innocent victims and to ensure that the social objectives of the RTA are not frustrated by technicalities. This represents a significant shift from earlier judicial reluctance to permit statutory schemes to supersede common law insurance principles.

The Court’s analysis also draws on comparative law, particularly the UK’s Road Traffic Act 1988, which similarly imposes a direct obligation on insurers to satisfy judgments against insured persons. The Malaysian Court’s alignment with Commonwealth jurisprudence strengthens the coherence and fairness of its approach.

The decision also clarifies the proper procedure for insurers wishing to contest liability. Rather than forcing victims into a second lawsuit, insurers must act within the original proceedings. This not only streamlines litigation but also upholds the constitutional right to fair treatment.

A. Peripheral but Relevant Points

The Court’s decision is also complimented by common law decisions on double insurance. The specific terms of the policy and statutory definitions remain important. For example, in Tune Insurance Malaysia Bhd v Chan Siang Kai & Ors, the existence of a new policy in the new owner’s name meant the original insurer’s policy had lapsed. This demonstrates that the “no recovery action” principle is strong, and that common law rules should supplement it – not override statutory policy.

The decision also has broader implications for the balance of power in litigation. By shifting the burden to insurers, the Court has incentivised early and thorough investigation of claims. This reduces the risk of procedural delay.

And it ensures that the RTA’s core purpose—expeditious and just compensation—is fulfilled.

VII. CONCLUSION

The Federal Court’s decision in AmGeneral Insurance Bhd v Sa’ Amran a/l Atan & Ors ended the era of duplicative recovery actions in Malaysian motor insurance law.

The Court established that in compulsory third-party claims, the RTA’s mandate of social protection overrides conflicting contractual doctrines.

Victims can now enforce judgments directly against insurers, without procedural obstacles.

This decision aligns Malaysian law with Commonwealth best practices and exemplifies purposive statutory interpretation.

The legacy of Sa’ Amran, reinforced by later cases, is clear: it puts the interests of innocent victims at the heart of the law, ensures fairness, and prevents insurers from evading liability through technicalities.

Two consequences flow from this: to repudiate liability, authorised insurers must follow the RTA’s procedures.  They cannot rely on general remedies under the Specific Relief Act 1950.

Thus, if an insurer does not promptly obtain a declaration under section 96(3), it loses the right to deny liability. Section 96(3) states the insurer can only avoid payment under sec 96(1) if it has already obtained a declaration that the policy is void or unenforceable.  Relief must come from the remedies in the Road Transport Act (RTA), and only if there is a pre-existing right: MMIP Services Sdn Bhd v. Mohd Syed Syed Jamaludin [2023].²⁷ [2023] 8 CLJ 217, at p. 229  Thus, a declaration under section 41 of the Specific Relief Act 1950 would not suffice. 

It is also doubtful whether an insurer, having intervened in a tort action, can repudiate liability at that stage, unless the insurer can bring itself within one of the RTA’s specific exclusionary remedies. If insurers exploit the Specific Relief Act 1950 to repudiate, it would undermine the protection given by the RTA and the Financial Services Act 2013, [as well as the Islamic Financial Services Act 2013].

This preserves the protective purpose of the RTA and related financial laws.

The Sa’ Amran  ruling gives real meaning to the social contract behind compulsory motor insurance, benefiting the public, the judiciary, and the insurance industry alike.

∞§∞

Gratitude:

The author thanks UK Menon, Gana Naidu, Mano Veera, Dato Vignesh Kumar, KN Geetha, TP Vaani, JN Lheela, and Lydia Jaynthi.

Acknowledgements: the image is from Lara Markovinovic, Unsplash 

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