Case Summary: Chen Boon Kwee v. Berjaya Sompo Insurance Bhd [2025] 2 CLJ 169 – Landmark Federal Court Decision on Third-Party Motor Insurance and Employment Passengers

Introduction

The Federal Court in Chen Boon Kwee v. Berjaya Sompo Insurance Bhd addressed critical legal questions surrounding the Road Transport Act 1987 (RTA), third-party motor insurance liability, and the rights of passengers traveling due to employment contracts. This landmark case clarified the need for separate recovery actions and the protection afforded to employment-related passengers under third-party motor insurance policies.

Background Facts

• The appellant, Chen Boon Kwee, was injured in a road accident while traveling as a passenger in a vehicle owned by Tan Saw Kheng (TSK), insured by Berjaya Sompo Insurance Bhd.
• The driver, Masri Tamin, was authorized by TSK and was a colleague of Chen. The journey was work-related for an audit at an aquaculture hatchery in Desaru.
• After a full trial, the Sessions Court found Masri 100% liable, and TSK vicariously liable. Damages were awarded to Chen.
• Berjaya Sompo refused to indemnify TSK, arguing Chen was not a covered “third party” under Section 96 of the RTA due to lack of passenger coverage.

Legal Issues

Three questions of law were presented:

1. Does the third-party protection under Section 96(1) of the RTA extend to passengers traveling due to a contract of employment?
2. Is a separate recovery action necessary for the victim to enforce the judgment against the insurer?
3. Is Section 96(3) of the RTA the sole legal remedy for an insurer to challenge its liability?

The Federal Court’s Decision

The Federal Court allowed the appeal, setting aside the decisions of the High Court and the Court of Appeal. Key findings include:

1. Employment Passengers Are Covered Under Third-Party Protection

• Section 96(1) read with Section 91(1)(b) of the RTA is designed to protect any person, including passengers traveling under a contract of employment.
• The appellant was on official duty and not on a frolic of his own or a family trip.
• Berjaya Sompo was statutorily liable to indemnify TSK and pay the judgment sum to Chen.
• Employment-related passengers are legally recognized third parties under Malaysia’s Road Transport Act 1987.

2. No Need for Separate Recovery Action

• The RTA does not mandate a two-tier system of litigation: one for tortious liability and another for recovery.
• Requiring a recovery action would undermine the RTA’s social purpose of protecting road users and cause unnecessary delays and costs.
• Once judgment is obtained and notice given under Section 96(2) RTA, the insurer is directly liable.
• Victims of road accidents can enforce judgments against insurers directly without filing separate recovery actions in Malaysia.

3. Section 96(3) of RTA Is Not the Sole Recourse for Insurers

• Insurers may:
  • Apply for a declaration under Section 96(3) RTA;
  • Intervene in the tort liability suit;
  • Defend based on exceptions within the policy.
• However, failing to act at the liability stage bars later attempts to challenge liability post-judgment.
• Insurers must act during the liability trial stage if they intend to deny coverage based on policy terms.

Key Legal Principles Established

• The RTA is social legislation favoring road user protection.
• Courts should interpret it liberally and broadly to achieve its purpose.
• Recovery actions are redundant unless exceptional circumstances exist (e.g., fake policies).
• Insurers must protect their interests during the primary tort case, not through separate recovery actions later.

Case Significance for Motor Insurance in Malaysia

This Federal Court ruling sets a clear precedent: ✅ Employment passengers are “third parties” under Malaysian law.
✅ Recovery actions are not required – victims can enforce judgments against insurers directly.
✅ Insurers must intervene early if they wish to deny liability.

Practical Implications for the Public and Insurance Industry

• For Victims: Faster claims and access to compensation without prolonged litigation.
• For Insurers: Need to actively monitor and intervene in cases involving their policyholders.
• For Employers: Assurance that employees traveling for work are covered under third-party policies.

Conclusion

The Chen Boon Kwee v. Berjaya Sompo Insurance Bhd case strengthens third-party protection in Malaysia’s motor insurance framework, reinforcing the RTA’s social intent. Employers, employees, and insurers must take note of this significant decision that enhances clarity and fairness in motor accident claims.

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Disclaimer: The above proposition is subject to actual facts and circumstances and shall never be referred as the actual law without seeking legal advice. Consult us for more information!