CHUI MAN KWAN v. BANK OF CHINA GROUP INSURANCE CO LTD AND ANOTHER

 DCMP 211/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL JURISDICTION

MISCELLANEOUS PROCEEDINGS NO. 211 OF 2008

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JUDGMENT

1.   The Defendant ("Bank of China") claims contribution from the Third Party ("Tugu") in respect of a judgment entered against Bank of China on 9 October 2006, for payment of a net sum of $260,000, interest and costs in favor of the Plaintiff in this action.  Both Bank of China and Tugu had issued insurance policies covering the liability of contractors to their employees in respect of bodily injury or death that may be sustained by them arising out of and in the course of their employment in a construction project.

2.    The following facts are not in dispute.

3.  The Plaintiff was injured in an accident which occurred on 14 January 2004.  The accident arose in the course of his employment by Chak Luen Construction Company Ltd. ("Chak Luen").  At the material time, Chak Luen was insured under an Employees' Compensation Insurance Policy issued by Bank of China, which covered Chak Luen's liability to its employees in respect of bodily injury or death sustained by them arising out of and in the course of their employment with Chak Luen.

4.  Tugu also issued an Employees' Compensation Insurance Policy, under which Tugu agreed to indemnify the Hong Kong Polytechnic University as principal, and/or Vibro (Hong Kong) Ltd. as the principal contractor and/or their subcontractors of any tier against their liability in respect of the bodily injury or death by accident occurring to any of their employees out of and in the course of their employment.

5.  There is no dispute that at the material time, Chak Luen was a subcontractor of Vibro (Hong Kong) Ltd.

6.  Both the policies of Bank of China and Tugu therefore provide coverage for Chak Luen in respect of its liability to pay compensation for the injury of its employees such as the Plaintiff in this action.

7.  The policy issued by Bank of China contains the following clause :

"Other Insurance.  If at the time a claim is made by the Insured under the Policy there is any other insurance covering the same liability the Company shall not be liable to pay or contribute more than its rateable proportion of any such claim and costs and expenses in connection therewith."

8.    The policy issued by Tugu contains an identical clause under "Claims Settlement Conditions" :

"Other Insurance.  If at the time a claim is made by the Insured under this Policy there is any other insurance covering the same liability the Company shall not be liable to pay or contribute more than its ratable proportion of any such claim and costs and expenses in connection therewith."

9.  The Tugu policy contains an additional Memorandum B known as the Non-contribution Clause :

"Notwithstanding claims settlement condition (D) of this policy, if at the time of any claim under this policy there is any other insurance indemnifying any person or insured or insureds who are entitled to be indemnified under this policy, this policy is not to be called upon in contribution and, subject to the policy limits of indemnity, is only to pay any amount if and so far as not recoverable under such other insurance."

10.  On the basis of the provisions of the 2 policies referred to above, Counsel for Bank of China argues that the court should follow the approach adopted in Weddell & Anr v, Road Transport and General Insurance Company Ltd. [1932] 2 KB 563 and hold that the provisions are cancelled by each other such that Bank of China and Tugu should share liability for the claim on an equal basis.

11.  I agree with Counsel for Tugu that it is not appropriate for the court to simply follow the approach adopted in Weddell and to hold that the provisions in the Bank of China policy and the Tugu policy cancel each other out and to hold that both insurers are liable subject to the rateable proportion clauses.  In Weddell, the court was endeavoring to avoid creating an absurd result whereby the insured would not be covered under either policy, when both the policies contained provisions which purported to exclude the insurer's liability to indemnify the insured in the event of the existence of some other insurance policy.  In the present case, neither the Bank of China policy nor the Tugu policy has any clause which attempts to vitiate the policy if the insured is also covered by insurance under another policy.

12.  As opposed to simply following a decision in any previous case, the relevant provisions of the policies in question should be reviewed closely for the possible legal effect.  Each clause has to be construed on its own wording given that the language may vary from policy to policy. 

13.  In the present case, it is clear that the rateable proportion clause in the Tugu policy is made subject to the non-contribution clause in Memorandum B.  The language used is clear.  Memorandum B begins with the words : "Notwithstanding claims settlement condition (D) of this policy".  Counsel for Tugu has also pointed out that the ratable proportion clause in claims settlement condition (D) of the Tugu policy is a general provision, whereas the endorsement Memorandum B is a special provision.

14.  I accept Tugu's submission that in making its claim against Tugu for contribution, the Bank of China must take the non-contribution clause in Memorandum B as it finds it.

15.  Under Memorandum B, if there is any other insurance indemnifying the person entitled to be indemnified under the Tugu policy, the Tugu policy is not to be called upon in contribution and is only to pay any amount if and so far as not recoverable under such other insurance.  I agree with Counsel for Tugu that Memorandum B is tantamount to providing for excess insurance.

16.  Counsel for Tugu also argued that at the time when claim was made under the Bank of China policy, the Tugu insurance is not "insurance covering the same liability" within the meaning of Bank of China's rateable proportion clause, but only a policy covering any amount over and above that recoverable under any other insurance policy.  As such, counsel for Tugu argued that the Bank of China is not entitled to rely on its rateable proportion clause to pay only its rateable proportion of the claim, but should fully indemnify its insured.  As the insured is entitled to full indemnity under the Bank of China policy, Memorandum B in the Tugu policy is not triggered.  I accept these submissions.  As Counsel has pointed out, this is consistent with the approach adopted by the Court in State Fire Insurance Managers v. Liverpool & London Globe Insurance Co. [1952] N.Z.L.R. 5.

17.  Construing Memorandum B and the rateable proportion clause in the Bank of China policy, I find that the Tugu policy places no obligation upon Tugu to indemnify its insured until the Bank of China has first been called upon for the indemnity provided under the Bank of China policy.  The Tugu policy applies only to the balance of any loss remaining after payment in full has been made under the Bank of China policy to Chak Luen.

18.  Bank of China's claim against Tugu for contribution is dismissed, with costs and Certificate for Counsel, to be taxed if not agreed.