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Will insurance help?

Diterbitkan: Selasa, 16 Disember 2008 12:00 AM

(Ubah saiz teks)

THE recent tragedy at Bukit Antarabangsa once again highlights the importance of contractual terms.

While any compensation in financial form can never address the loss and suffering of those who are undergoing the trauma, it may be some source of comfort for those who have insurance cover to protect their property.

Compensation from any other source is unlikely. This is because on the basis of existing laws and how these are viewed, the courts will not hold the government or any of it branches liable for giving approval which ought not to have been given or not acting to stop activities that could have caused the loss.

Otherwise, in so far as contractors and developers are concern­ed they will likely disclaim any role in causing the tragedy. Those who built the houses that were affected will rightly say that they are not in any way responsible because they had properly cons­truc­ted the houses. There is there­fore no wrongdoing on their part.

To the extent that activity has been carried out on the adjoining land by others, there will be explanation of what contributed to the occurrence. Even otherwise, such work may have been done a considerable time ago and the organisation that did the work may no longer be around.

In other cases such an organisation, though identifiable, may no longer have the ability to meet the claims.

The result of all this is that the houseowner who suffers property damage arising from such an occurrence is left very much to fend for himself. The much announced help in terms of accommodation whether in ordinary or luxurious premises can only be, at best, a temporary measure.

This incident, like many others, serves as a reminder of the risks in purchasing and living in what earlier on would appear to be an ideal location. Such properties, when purchased whether before or after construction, also come at premium prices.

Of course such properties appear to be safe at the time the decision to purchase is made. At that time there would be no reason to believe that activities would take place which would alter the surrounding areas.

For those who have the financial resources, the damage or loss of a house may be a negligible or, at worst, a tolerable loss. How­ever, for the person for whom the property is the only asset paid for immediately with savings and through instalments paid from monthly earnings, the occurrence represents a mighty loss.

To some extent, insurance would provide a measure of protection. If there is adequate insurance cover, substantial financial compensation can at least be expected and will help. This is not to say that it will always provide absolute and complete restitution.

Contractual provisions

However, insurance by itself is not a magical word that will solve all problem. Many people are lured into a false sense of comfort after being told that the property is insured. Whatever virtues in the insurance cover that may be touted, it is after all merely a contractual document.

When a loan is obtained, there is usually a requirement that the property must be insured. In such cases, the lending institution arranges the insurance cover and will usually use part of the loan proceeds to pay the premium initially at the outset.

Thereafter, if the insurance premium is not promptly paid by the borrower, the financial institution will pay the amount and debit the borrower’s account for the amount payable. This is to ensure that the property is insured. But to what end?

Many house buyers neither have the inclination nor the time to scrutinise the effect of the insurance cover being obtained. More likely they consider it a mandatory requirement to be complied with to get the loan rather then what it really means and provides.

An insurance policy is a contract between an insurer and the insured. It is in terms of law a contract of indemnity a word sometimes used commonly alongside the word “guarantee”.

The difference is that whereas a guarantee creates an obligation to make a specific payment where there is a default on the part of a debtor, an indemnity is an agreement to make payment on the occurrence of a specific event irrespective of the default element.

However, it is in reality a contract between the parties involved. In fact, it is a contract which, unlike other contracts, places even more importance on good faith. Because of this it can be invalidated because of a breach on account of non-disclosure of material facts.

The fine print

One must not be contented because one is covered by insurance. It is important to know to what extent the policy provides coverage. A person will only be protected in terms of being compensated if the loss suffered is within the scope of what has been agreed to.

In addition, there may be exclusion clauses in the contract of insurance which would exclude coverage for loss or losses suffered in relation to or arising out of certain events.

Earlier insurance policies had broader coverage. However, the approach taken by insurers has been to exclude coverage for certain events and to provide coverage for such events upon payment of additional premium. Sometimes, of course, damage caused in certain circumstances may not be capable of being covered at all.