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Breach of policy requirement not to settle or disclaim liability does not include plea in criminal proceedings

14 July 2017 Patrick Bracher, Norton Rose Fulbright
Patrick Bracher from Norton Rose Fulbright.

Patrick Bracher from Norton Rose Fulbright.

An insurer in Singapore alleged that the insured had breached the obligation not to ‘make any admission in connection with any claim’ by pleading guilty to five charges of failing to comply with fire regulations. The defence was rejected on the basis that a person’s unfettered freedom of choice as to how to plead in criminal proceedings is highly important. Any restraint imposed on that freedom of choice by a condition in a contract is contrary to public policy and cannot be construed that way.

The court also held that a plea of guilty is not an ‘admission’ within the meaning of the condition. The offences were of strict liability and the plea of guilty did not imply negligence on the part of the insured.

The comments regarding a guilty plea in criminal proceedings not being an admission are good South African law.

The case is Grace Electrical Engineering PTE Ltd v EQ Insurance Co Ltd.

First published by Financial Institutions Legal Snapshot.

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