In the High Court of Kiribati
Civil Jurisdiction

Held at Betio
Republic of Kiribati

High Court Civil Case 135 of 2010

Between:

ANZ Bank (Kiribati) Ltd
Plaintiff

And:

Kiribati Insurance corporation
Defendant

For the Plaintiff: Mr Aomoro Amten
For the Defendant: Ms Ereta Bruce 

Date of Hearing: 27 October 2010

JUDGMENT

On 7 February 2009 a Toyota Double Cab Hilux, BTC 7941 owned by the plaintiff Bank and driven by an employee was involved in a collision with a mini bus. The collision was due to the negligence of the Bank employee. Both vehicles were so badly damaged as to be beyond repair. BTC 7942 was comprehensively insured by the defendant Corporation. The Motor Vehicle Accident Report is dated the same day as the accident, 7 February 2009. The defendant Corporation has settled the claim made by the Bank in relation to BTC 7942. The dispute between the plaintiff and defendant (more correctly the applicant and the respondent) concerns the claim by the Third Party, the owner of the mini bus. The Corporation is resisting meeting the claim contending that first the Bank must settle it and then seek reimbursement to the limit in the Policy, $50,000.

These proceedings are by way of Originating Summons, the plaintiff seeking declarations to the effect that it should be fully reimbursed for any amount it is obliged to pay in settlement of the third party claim, and the defendant contradicting.

Mr Terence Low, the Chief Executive Officer of the Bank on 24 September swore an affidavit in support of the application.

When the action was mentioned on 15 October, Ms Bruce for the defendant said the Corporation would "try to file an affidavit in reply". I made it clear then that the hearing would proceed in any case on 27 October, the date for hearing originally fixed on 1 October.

When the action was called on last Wednesday, 27 October, Ms Bruce told the Court she had been unable to have an affidavit sworn in reply. She did not apply to cross examine Mr Low. The allegations in Mr Low's affidavit, being unchallenged and uncontradicted, I take as the proven facts.

6. ….. on 17 March 2009 at 2 pm Michael Bitamatang, our Premises Officer, and myself approached the KIC to enquire on the compensation of our vehicle TUC 7942 as although we have provided them with every information and despite their assurances to pay, nothing was ever done.

7. We met with the General Manager at his office and discussed our concerns with him in regard to our vehicle and the possible claim from the bus business that our vehicle had an accident with.

8. During our discussion it was verbally resolved that another vehicle would be purchased because we still had a valid insurance cover and that any claims that would arise in relation to the insured vehicle would be directed to them for settlement. The General Manager advised us that since we have a comprehensive cover against third parties we must send to him any claims relating to the accident as soon as we received them. He also advised us tat such claims from third parties should be settled as it is their obligation under the Policy. I did not doubt this advice as we do in fact have a valid Policy against third party liabilities…..

10. On the 20 May 2009, I received a letter from Mr Banuera Berina, acting for the business whose bus was involved in the collision, demanding compensation in the sum of $60,000 ….. Because our Policy prohibited us from negotiating our position and with the view to settle the matter quickly, I relayed the advice of the General Manager to my staff that the matter should be sent to the KIC immediately. In fact one of my staff contacted the General Manager and was again advised to send the letter for their auctioning. Again I was told that the advice relayed to this staff is to the effect that the claim would be settled by them.

11. A copy of the letter was sent to them straightaway via our covering letter dated the 22 May 2009 …..

Mr Berina, on behalf of his client, claimed $60,000 for the loss of the bus and a loss of profit of $155.00 per day and continuing. The Corporation has done nothing to meet or to settle the claim. On 7 July 2010 a writ was issued claiming $90,760.94 damages and continuing. The plaintiff is named as Teene Bonteman t/a Christopher Columbus Bus Service, the first defendant ANZ Bank (Kiribati) Limited and Peter Dorman second defendant. (Peter Dorman was the driver of the ANZ vehicle).

In January Mr Berina had written to the Bank reiterating the claim. The Bank had replied referring Mr Berina to the General Manager of the Corporation and seems to have sent copies of these letters to the Corporation. It took the Corporation six months to respond, then by letter dated 21 July 2010 to the Bank and no reason given for delay:

Thanks for your letter dated 22nd Jan 2010 and apologies for the belated response, but as you may be aware under your motor vehicle insurance policy requires you to settle third party liability first and forward all related documents for our reimbursement to you accordingly should it fall under our Terms and Conditions.

Far too late! The acknowledgment by the General Manager on 17 March 2009 that the Corporation would settle third party claims commits and binds the Corporation. It conforms to Condition 2 of the Policy:

2. No admission offer promise payment or indemnity shall be made or given by or on behalf of the Insured without the written consent of the Corporation which shall be entitled if it so desires to take over and conduct in the name of the Insured for its own benefit any claim for indemnity or damages or otherwise and shall have full discretion in the conduct of any proceedings or in the settlement of any claim and the Insured shall give all such information and assistance as the Corporation may require.

The General Manager in his conversation with Mr Low and Mr Bitamatang in March 2009 indicated a sufficient "desire(s) to take over and conduct ----" the claim. The Bank was entitled to rely on what the General Manager said. The General Manager bound the Corporation. The Corporation now cannot go back on the General Manager's word.

Ms Bruce submitted that her client escaped liability through the General Exceptions in Section 2 of the Policy: Liability to Third Parties:

The Corporation shall not be liable in respect of –

(1)	Any accident injury loss damage or liability caused sustained or incurred whilst any vehicle in any accident of which indemnity is provided under this Policy is -----

(d)	Being driven in an unsafe condition ……

Ms Bruce argued that the driver of the insured vehicle was negligent, therefore the vehicle was being driven "in an unsafe condition". So the driver may have been negligent but the condition relates to the vehicle itself not to the driving of it: faulty steering, defective brakes and so on. The argument is misconceived. As is usual in comprehensive motor vehicle policies – and in this one – mere negligence in the driver is irrelevant. The Insured is covered whether the driver is negligent or not.

Ms Bruce again relying on Section 2: Liability to Third Parties, this time "Limitation of Liability", argued that the limit of liability for third party damage is $50,000. Mr Amten replied that if the Corporation had conducted the claim effectively and quickly it may have been able to settle for less than $50,000. The original claim of $60,000 was, after all, only a claim: the claim may have been capable of settlement for less or assessed by the Court at less. As it is the claim is getting bigger day by day. That is due to the lack of action by the Corporation.

Mr Amten's response is attractive. Insurance is a contract of the utmost good faith, "uberrina fides" – and the good faith is on both sides – the Insurer as well as the Insured. The Corporation had an obligation to conduct the claim so as to settle it for the least it could. It has not discharged the obligation: has been guilty of gross delay which has allowed the claim to go up and up. It cannot now escape the consequences of its failure and because of it saddle the Insured with responsibility to meet anything above $50,000. That may be something for another day but subject to argument I accept that because of its unexplained and inordinate delay, the Corporation should meet the whole amount for which the Third Party claim is settled or assessed but I shall not make a formal declaration to that effect. The Corporation should urgently deal with the claim now and settle or have it assessed for the least amount it can.

I make these Declarations:

(a)	That by virtue of the Insurance Policy the plaintiff is entitled to be indemnified by the Defendant against third party risks.

(b)	That by virtue of the operation of the said Policy the Defendant has a duty to act with utmost good faith in order to protect not only its interest but also those of the Insured, the Plaintiff.

(c)	That the Defendant has an obligation immediately to take over and conduct in the name of the Insured the claim made by the Third Party.

Dated the 29th day of October 2010

THE HON ROBIN MILLHOUSE QC
Chief Justice