Legal News & Analysis – Asia Pacific – Singapore – Insurance & Reinsurance

Singapore is very much a hub for the broader South East (SE) Asian market. It is not just the insurance industry using Singapore as their SE Asian base, but a range of professionals who provide services throughout the region. Their legal exposures are increasingly complex and uncertain due to the differing legal environments. This overview looks at some of the claims handling issues that arise as a result.

Claims Handling Across Borders 

In Singapore insurers are increasingly seeing claims being pursued outside the insured’s home jurisdiction. Because of this insurers need to ensure that they are well-equipped to handle the practicalities of managing claims across borders. They are seeking to ensure consistency in what their products do whilst maintaining flexibility to adapt to local conditions. Below is a list of some of the difficulties in cross border handling in South East Asia:

Cultural Differences – In many parts of South East Asia both insureds and their brokers’ understanding of their obligations under a liability policy, particularly in relation to notifying and reporting to insurers, is very low. Combine this with a culture of seeking to settle disputes quietly behind closed doors and you have a recipe for coverage problems. The need for good relationships and effective communication between the various stakeholders is therefore paramount in seeking to ensure happy outcomes and in avoiding surprises

Language Difficulties – English will not be the first language of either the courts or, frequently, the parties yet the insurance wording or the relevant contractual documents might be in English. Whilst there are translation costs to bear, the greater issue is the risk of meaning being lost in translation

Procedural Issues – For example, in Indonesia the court takes an inquisitorial approach rather than an adversarial one. There is no disclosure process and mediation is mandatory 

Practical Issues – Issues to watch out for are the length of time it can take the litigation to complete. For example, in Indonesia it can take six years to get a decision from the Supreme Court and even then a final judgment may not be final. Each party bears its own costs so there is no deterrent for those with weaker claims to bear the costs of the other side if they lose

Differing Laws And Legal Systems – Legal systems in the area differ markedly, both in terms of the law of the land, but also the applicable litigation procedure. For instance Singapore follows the English common law system closely whereas Thailand and Indonesia rely on civil law, where English origins of the wordings and related interpretations bear little weight, and the basis for liability can differ markedly

The enforceability of non-reliance/disclaimer clauses is currently under the spotlight following a number of high profile cases. The common law principle in contract is that a party is generally bound by his signature even if he is unaware of the existence or effect of some particular term. The exception to the rule is if a defendant can successfully plead and establish that he was mentally incapacitated or misled into signing the contract. Prior to the two cases noted below, linguistic illiteracy was not considered a defence.

In Als Memasa v UBS the Singapore Court of Appeal looked at non-reliance clauses. This was a claim brought against UBS following the loss of USD 3.8m investment. It was initially struck out and the claimant was precluded from relying upon misrepresentations due to non-reliance clauses. The Court of Appeal overturned that decision, holding that the case should go to trial and suggesting that the lower courts should look at two specific issues:

• Whether non-reliance clauses are subject to the Unfair Contract Terms Act
• Reconsider whether financial institutions should be accorded full immunity from ‘misconduct’ by relying on non-reliance clauses which unsophisticated customers might have been induced to sign without truly understanding their effect

Als Memasa was referred to by the High Court of Singapore in the case of Deutsche Bank AG v Chang Tse Wen (Dec 2012). This was another case of lost investment, this time arising out of complex derivative products. The High Court held that:

• The bank had undertaken a pre-contractual duty to advise the customer on the management of his wealth
• That duty was not subsequently negated by the customer signing documentation containing non-reliance, own judgment and non-advisory clauses
• There was no evidential estoppel as the bank could not provide evidence to show that the clauses were brought to the customer’s attention and so could not show that the customer intended the bank to rely on them
• The doctrine of contractual estoppel did not apply

Both cases are being appealed, but if upheld they indicate a shift in the court’s approach to the application of disclaimer provisions of this kind, and bring into question the extent to which a party can limit its exposure though such a clause when dealing with unsophisticated customers.

For further information, please contact:

Ian Roberts, Partner, Clyde  & Co

[email protected]

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