Hanwha Non-Life Insurance v Alba Pte Ltd: Reinsurance Contract Dispute over Fire Loss

Hanwha Non-Life Insurance Co Ltd (Plaintiff) sued Alba Pte Ltd (Defendant) in the High Court of Singapore on 30 December 2011, seeking indemnity under a reinsurance contract for a fire loss at a model house in Korea. Alba contended the fire loss was not within the ambit of its reinsurance contract. The court found that the reinsurance contract was open obligatory, obliging Alba to provide reinsurance cover. The court ruled in favor of Hanwha, finding Alba liable to indemnify Hanwha for the fire loss.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Judgment for Plaintiff

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Reinsurance dispute over a fire loss. The court found Alba liable to indemnify Hanwha under an open obligatory reinsurance contract.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Hanwha Non-Life Insurance Co LtdPlaintiffCorporationJudgment for Plaintiff, Judgment for PlaintiffWon, WonToh Kian Sing, Elaine Tay Ling Yan, Tang Bik Kwan Hazel
Alba Pte LtdDefendantCorporationJudgment Against Defendant, Judgment Against DefendantLost, LostThio Shen Yi, Kong Shu Hui Charmaine

3. Judges

Judge NameTitleDelivered Judgment
Tan Lee MengJudgeYes

4. Counsels

Counsel NameOrganization
Toh Kian SingRajah & Tann LLP
Elaine Tay Ling YanRajah & Tann LLP
Tang Bik Kwan HazelRajah & Tann LLP
Thio Shen YiTSMP Law Corporation
Kong Shu Hui CharmaineTSMP Law Corporation

4. Facts

  1. FFM issued a Master Contractors All Risks policy to Dae Hye Construction Co Ltd.
  2. FFM requested BRM Korea to reinsure part of the risks under its proposed insurance contract with Dae Hye.
  3. BRM approached Alba for reinsurance cover.
  4. Alba agreed to provide reinsurance cover to FFM.
  5. A fire occurred at the Daewoo Kangnam Model House (DMH).
  6. FFM issued an endorsement extending the insurance period and increasing the sum insured.
  7. Alba initially took a keen interest in the fire loss and asserted its entitlement to information.
  8. Alba accepted the premium for the extended insurance cover after being informed of the fire.

5. Formal Citations

  1. Hanwha Non-Life Insurance Co Ltd v Alba Pte Ltd, Suit No 927 of 2008/N, [2011] SGHC 271

6. Timeline

DateEvent
Dae Hye Construction Co Ltd successfully bid for a project to renovate the Daewoo Kangnam Model House.
Dae Hye approached FFM to insure its liability in relation to the construction of model houses and apartments in Korea.
BRM approached Alba for reinsurance cover.
Alba agreed to provide reinsurance cover to FFM.
FFM issued Dae Hye a Master Contractors All Risks policy.
Alba forwarded a signed document specifying the terms of the reinsurance contract to BRM.
BRM forwarded the first monthly declaration to Alba.
Preliminary construction work commenced on the DMH.
FFM insured the DMH under the Master CAR policy.
The original cover for the DMH was included in the third monthly declaration sent by BRM to Alba.
A written construction contract was signed between Dae Hye and Daewoo for the DMH.
The original cover for the DMH expired.
The construction contract for the DMH was amended.
Dae Hye forwarded a copy of the amended construction contract for the DMH to FFM.
FFM issued an endorsement to Dae Hye, effecting changes to the insurance cover.
FFM informed BRM about the amendments to the original cover in relation to the DMH.
The retrospective monthly declaration of projects covered by the Master CAR policy in November 2007 was forwarded to Alba.
A fire extensively damaged the DMH.
Mr. Moon was informed about the fire at the DMH.
Mr. Moon notified Alba about the fire at the DMH.
FFM’s loss adjusters, IASCO, submitted a preliminary report on the fire at the DMH.
Mr. Moon emailed a copy of the IASCO report to Alba.
Ms. Sze To wrote to FFM, requesting more information on the fire.
An interim report by IASCO was forwarded to Alba.
Alba engaged its own loss adjusters, McLarens Young International, to investigate the fire loss at the DMH.
FFM paid the reinsurance premium for the 19 November Endorsement.
FFM demanded an indemnity from Alba for the cost of repairing the fire damage.
FFM paid KRW2.5bn to Dae Hye.
Alba repudiated liability for the damage at the DMH.
FFM paid a further sum of around KRW1.7bn to Dae Hye.
FFM commenced proceedings against Alba.
Hanwha Non-Life Insurance Co Ltd merged with First Fire & Marine Insurance Co Ltd.
Judgment was delivered.

7. Legal Issues

  1. Interpretation of Reinsurance Contract
    • Outcome: The court held that the reinsurance contract was open obligatory in nature.
    • Category: Substantive
    • Sub-Issues:
      • Facultative reinsurance vs. open obligatory reinsurance
      • Incorporation of terms from underlying insurance contract
    • Related Cases:
      • [1998] 1 WLR 896
      • [2009] 3 SLR(R) 1029
  2. Acceptance of Risk
    • Outcome: The court found that Alba had accepted the risk of the extended cover afforded by FFM to Dae Hye.
    • Category: Substantive
    • Sub-Issues:
      • Waiver of right to reject risk
      • Conduct implying acceptance of risk
    • Related Cases:
      • [2002] 1 Lloyd’s Rep 574
  3. Validity of Endorsement
    • Outcome: The court held that the 19 November Endorsement was valid and effective in extending the reinsurance cover.
    • Category: Substantive
    • Sub-Issues:
      • Maximum period of reinsurance cover
      • Requirement of written approval
  4. Material Non-Disclosure
    • Outcome: The court rejected Alba's defense of material non-disclosure.
    • Category: Substantive

8. Remedies Sought

  1. Indemnity
  2. Monetary Damages
  3. Interest
  4. Costs

9. Cause of Actions

  • Breach of Reinsurance Contract
  • Failure to Indemnify

10. Practice Areas

  • Commercial Litigation
  • Reinsurance
  • Insurance

11. Industries

  • Insurance
  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Investors Compensation Scheme Ltd v West Bromwich Building SocietyN/AYes[1998] 1 WLR 896England and WalesCited for the contextual approach to the interpretation of contracts.
Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte LtdCourt of AppealYes[2009] 3 SLR(R) 1029SingaporeEndorsed the contextual approach for the interpretation of a contract.
Street v MountfordN/AYes[1985] 1 AC 809England and WalesCited for the principle that the court looks at the substance of the transaction and not the labels parties attached to it.
Glencore International AG v RyanN/AYes[2002] 1 Lloyd’s Rep 574N/ACited for the principle that the attachment of risk under the reinsurance contract was independent of the submission of declaration of the risk.
Home Insurance Company of New York v Victoria-Montreal Fire Insurance CompanyHouse of LordsYes[1907] AC 59United KingdomCited for the principle that the terms of an underlying insurance contract are referred to in the reinsurance contract without necessarily incorporating those terms into the reinsurance contract.
Forsikringsaktieselskapet Vesta v ButcherHouse of LordsYes[1989] 1 AC 852United KingdomCited for the principle that the terms of an underlying insurance contract are referred to in the reinsurance contract without necessarily incorporating those terms into the reinsurance contract.
HIH Casualty and General Insurance Ltd v New Hampshire Insurance CoN/AYes[2001] Lloyd’s Rep IR 224England and WalesLaid down the conditions for the incorporation of a term in an underlying insurance contract into a reinsurance contract.
HIH Casualty and General Insurance Ltd v New Hampshire Insurance CoEnglish Court of AppealYes[2001] Lloyd’s Rep IR 596England and WalesApproved the approach for the incorporation of a term in an underlying insurance contract into a reinsurance contract.
CNA International Reinsurance Co v Companhia de Seguros Tranquilidade SAN/AYes[1999] Lloyd’s Rep IR 289N/AHeld that a clause in the underlying insurance contract did not apply because of the absence of any attached schedule in the reinsurance contract.
Miramar Maritime Corporation v Holborn Oil Trading LtdHouse of LordsYes[1984] 1 AC 676United KingdomMade it plain that in deciding whether verbal manipulation of a clause in another contract should be allowed, the commercial context of the terms and the contracts in question should be considered.
Wasa International Co Ltd v Lexington Insurance CoHouse of LordsYes[2010] 1 AC 180United KingdomReiterated that an insurer seeking indemnity under a reinsurance contract must, in the absence of special terms, establish both its liability under the terms of the insurance policy issued by it and its entitlement to indemnity under the terms of the reinsurance contract.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Evidence ActSingapore

15. Key Terms and Keywords

15.1 Key Terms

  • Reinsurance
  • Open Obligatory Reinsurance
  • Facultative Reinsurance
  • Master CAR Policy
  • 19 November Endorsement
  • Reinsurance Premium
  • Fire Loss
  • Declaration
  • Indemnity
  • Construction Contract

15.2 Keywords

  • reinsurance
  • fire loss
  • contract
  • insurance
  • construction
  • indemnity

16. Subjects

  • Reinsurance
  • Insurance
  • Contract Law
  • Construction

17. Areas of Law

  • Reinsurance Law
  • Contract Law
  • Insurance Law