On 9 February, the Malaysian Court of Appeal delivered a significant insurance decision involving a RM1.5 million motor insurance claim.
The ruling reinforces a core principle in Malaysian insurance law — the duty of utmost good faith Malaysia.
The case serves as a strong reminder to all policyholders:
Failure to disclose material facts can result in insurance claim repudiation in Malaysia, even after a settlement offer has been made.
Background of the Case
In October 2018, a Ferrari insured for RM1.79 million was involved in an accident on the MEX Highway.
The insured reported that:
- The vehicle swerved to avoid an unknown car
- The driver lost control
- The car spun and was subsequently hit
Based on this version of events, the insurer offered RM1.5 million as settlement.
However, CCTV footage later revealed that the Ferrari had been driven against the flow of traffic for a considerable distance before the collision.
Upon discovering this material fact, the insurer revoked the settlement and repudiated the claim.
Why the Court Allowed Insurance Claim Repudiation in Malaysia
In its 9 February ruling, the Court of Appeal held that the insurer was justified in repudiating the claim.
The Court found:
- The insured failed to disclose a material fact
- The claim narrative was misleading
- There was a breach of the duty of utmost good faith Malaysia
The judges emphasised that insurance contracts require the highest standard of honesty and transparency.
Driving against traffic was clearly relevant to:
- Assessment of recklessness
- Evaluation of liability
- Determination of policy response
Because this fact was not disclosed, the insurer was legally entitled to revoke its conditional settlement offer.
The insurer was also awarded RM100,000 in costs.
This Court of Appeal insurance decision clarifies that insurers may withdraw settlement offers if later evidence reveals misrepresentation.
What Is the Duty of Utmost Good Faith in Malaysia?
Under Malaysian insurance law, insurance contracts operate on the principle of uberrimae fidei — utmost good faith.
This means policyholders must:
- Disclose all material facts at proposal stage
- Provide complete and accurate information during claims
- Avoid misrepresentation or omission of relevant facts
A “material fact” is any fact that would influence a prudent insurer’s decision to:
- Accept the risk
- Set premium terms
- Pay or decline a claim
Failure to comply may result in:
- Insurance claim repudiation Malaysia
- Policy avoidance
- Revocation of settlement offers
Can an Insurance Settlement Be Revoked in Malaysia?
Yes.
This Court of Appeal insurance decision confirms that settlement offers are often conditional upon:
- Full compliance with policy terms
- Accurate disclosure
- Absence of misrepresentation
If new evidence surfaces showing material non-disclosure, insurers may legally revoke the offer.
This is particularly relevant today, where:
- CCTV evidence
- Telematics data
- Digital forensics
are increasingly used in claims investigations.
Key Lessons for Policyholders in Malaysia
1. Full Disclosure Is Critical
Never simplify or omit details that may influence claim assessment.
2. Misrepresentation Can Void Large Claims
Even a RM1.5 million claim can be repudiated due to non-disclosure.
3. Settlement Offers Are Not Always Final
Conditional offers can be withdrawn if material facts are later discovered.
4. Insurance Protects Disclosed Risk — Not Concealed Conduct
Transparency is essential for policy protection to respond.
Why This Court of Appeal Insurance Decision Matters
This 9 February ruling strengthens legal clarity on:
- Insurance claim repudiation Malaysia
- Duty of utmost good faith Malaysia
- Material non-disclosure in insurance claims
- Insurer’s right to revoke settlement offers
It also signals that Malaysian courts will uphold insurers’ rights where policyholders breach their disclosure obligations.
For businesses and high-value asset owners, understanding these obligations is essential to risk management.
Final Thoughts
Insurance is built on trust.
The duty of utmost good faith Malaysia is not a minor technical clause — it is the foundation of the insurance contract.
This Court of Appeal insurance decision demonstrates that when material facts are withheld, insurers are legally entitled to repudiate claims — even after offering settlement.
For policyholders, the safest approach is always full and honest disclosure.
Because when a claim arises, the facts will eventually surface.
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Reference & Credit
Jayadarshiniy Sankar is a Senior Insurance Advisory Manager with a background in law and over 5 years of experience in professional indemnity and general insurance. She specializes in regulatory compliance and client solutions, delivering tailored coverage with prompt, results-driven support while actively educating clients through industry content and guidance.