Pacific MMI Insurance Limited v Salamo Elema, Insurance Commissioner (2010) N4032

• Jurisdiction: Papua New Guinea
• Judge: Injia CJ
• Judgment Date: 06 April 2010
• Court: National Court
• Citation: (2010) N4032
• Docket Number: OS NO. 336 of 2002 (JR)
• Year: 2010
• Judgement Number: N4032

Full Title: OS NO. 336 of 2002 (JR); Pacific MMI Insurance Limited v Salamo Elema, Insurance Commissioner (2010) N4032

National Court: Injia, CJ

Judgment Delivered: 6 April 2010

N4032

PAPUA NEW GUINEA

[IN THE NATIONAL COURT OF JUSTICE]

OS NO. 336 of 2002 (JR)

BETWEEN:

PACIFIC MMI INSURANCE LIMITED

-Plaintiff-

AND:

SALAMO ELEMA, INSURANCE COMMISSIONER

- Defendant-

Waigani: Injia CJ

2010: 6th April

JUDICIAL REVIEW - Administrative decision – Statutory authority - Insurance Commissioner’s decision to issue direction to licensed insurer to give access to records on disputed insurance claim – Direction issued under s 33 & s 34 of Insurance Act 1995 – Whether Commissioner acted ultra vires.

STATUTORY INTERPRETATION – Meaning of ss 33, 34, 35 and Part IX of Insurance Act 1995.

Held:

1. Section 33 and s34 of the Insurance Act 1995 do not empower the

Insurance Commissioner to direct a licensed insurer to give access to records

in respect of a disputed insurance claim.

2. Upon receiving a complaint from a policy holder over a disputed insurance claim, the Insurance Commissioner must refer the dispute to the Insurance

Complaints Tribunal established under Part IX of the Insurance Act for

determination of the dispute.

3. The Commissioner acted ultra vires in issuing directions to the licensed insurer under these provisions requiring the licensed insurer to provide access to documents and other records in respect of a claim by a policyholder which was rejected by the licensed insurer. Application for judicial review is granted .

Cases cited:

Francis Damem v Mark Maipakai (2004) N2730

Counsel:

J Aisa (Jnr), for the Appellant

C Raurela, for the respondent

6th April, 2010

1. INJIA, CJ: This is an application for judicial review under O 16 of the National Court Rules made by the Plaintiff (PMMI). It seeks review of a decision made by the defendant (the Commissioner) under s 33 and s 34 of the Insurance Act 1995 (the Act) to direct PMMI to give access to in respect of certain documents held by PMMI in relation to an insurance claim made by Hanjung Power Company Ltd (Hanjung). The application is contested by the Commissioner.

2. Both parties filed affidavits which they relied upon at the hearing. Counsel representing both parties made submissions and I reserved my decision which I now deliver.

GROUNDS OF REVIEW & RELIEF SOUGHT.

3. PMMI seeks the following relief:

(1) A declaration that pursuant to sections 33 and 34 of the Insurance Act 1995 (the Act), the Defendant, its servants or agents do not have the power to access, inspect or obtain possession of the Plaintiff’s documents which relate to its police holders, based on complaints made by the Plaintiff’s Policy Holders to the Defendant.

(2) An injunction restraining the Defendant its servants or agents from accessing, inspecting or obtaining possession of the Plaintiff’s documents.

4. The grounds relied upon are as follows:

(1) In a number of letters received by the Plaintiff from the Defendant, the Defendant asserts rights and threatens actions purporting to act under powers provided to him by the Insurance Act 1995.

(2) The two specific matters in which the Defendant has sought to involve himself relate to:

(a) a claim by Hanjung Power Ltd which the Plaintiff denied; and

(b) a policy of medical cover for Susan Turner which the Plaintiff had declined to renew, but have now offered to renew but only on modified terms and conditions.

(3) In both cases the Defendant in response to complaints by Policy Holders has written to the Plaintiff asserting rights and powers under the Insurance Act, demanding in the Hanjung case access to commercially sensitive documents and in the Turner case demanding that the Plaintiff renew the policy or face an Actuarial Investigation.

(4) In relation to both matters the Defendant has threatened the Plaintiff with sanctions arising under the Act for failure to comply with his requests.

(5) The question raised by the Plaintiff is whether the Insurance Commissioner is acting within his powers under the Act?

(6) The Defendant here purports to act under Section 33 and Section 34 of the Insurance Act 1995. Both sections have fines as the penalty for breach or non-compliance. Accordingly they are to be read narrowly and in favour of the Plaintiff.

(7) The Plaintiff contends that the Insurance Act 1995, Part V – Audits, Returns, Inspection etc, which includes Sections 33 and 34, is clearly intended to enable the Government to regulate the Insurance industry in respect of matters such as prudential probity, financial stability, confidence in the financial solvency of the PNG insurance industry and so that the commercial sector can be assured of its dealings with PNG Insurers.

(8) The Insurance Act 1995, Part IX – Complaints Procedures & Disputes Resolution, makes quite separate and detailed provision for the manner by which disputes and complaints by policy holders and Third parties are to be dealt with. It establishes an Insurance Complaints Tribunal made up of the Defendant or his nominee, two industry representatives and two consumer or public representatives. It sets out specific functions for that body, including the handling of complaints. Notably it does not leave this matter for the Defendant’s sole discretion.

(9) The Plaintiff contends that the type of complaints raised in the Hanjung Power and Mrs Turner matters are intended by the Act to be dealt with under Part IX and not Part V.

(10) Accordingly, the Plaintiff contends that the Defendant is acting well beyond the powers granted by the Act.

(11) The Defendant has commenced proceedings OS No. 618 in the National Court against the Plaintiff and its Managing Director seeking leave of the Court to commence criminal proceedings against them arising out their failure to provide him with documents or information relating to Hanjung Insurance claim. At the hearing of this review the Plaintiff will seek to refer to and rely upon the Defendant’s conduct in commencing the said proceedings and in particular the Defendant’s Affidavit filed in support thereof.

(12) The Plaintiff further contends that in the Hanjung matter and the Turner matter the comments made by the Defendant in his correspondence give rise to a clear apprehension of bias and impartiality.

5. At the hearing counsel for PMMI did not pursue the Turner case. I assume that that part of the claim is abandoned.

6. PMMI’s counsel also did not pursue ground 12 relating to bias. I also assume that this ground is abandoned.

FACTS

7. PMMI relies on the affidavit of PMMI’s Managing Director Mr. Phil Stace, sworn on 18th October 2002 and filed herein. The Commissioner relies on his affidavit sworn on 4th October 2008 and filed herein.

8. The background facts which are relevant for purposes of determining the application before this Court are not in dispute. PMMI is a registered insurance company operating in Papua New Guinea. PMMI is subject to the regulatory provisions of the Act. It is licensed under the Act for that purpose. PMMI enters into Insurance contracts with clients. The terms of the contract are contained in the Insurance Policy issued to the insured.

9. The Commissioner is appointed under the Act. His powers and functions are set out in the Act.

10. PMMI entered into an insurance contract with Hanjung. Hanjung is involved in the maintenance of the Kanudi Power Plant which supplies power to the city of Port Moresby. The insurance contract was described as “Industrial Special Risk” Insurance Policy (the Policy). On 27th December 2000 Hanjung suffered a major breakdown in one of its generators. On 28th December 2000, Hajung gave notice of its claim to PMMI. In 2001 Hanjung lodged an insurance claim for K20 million for “Machinery Breakdown and Business Interruption” (the claim). On 9th November 2001, PMMI rejected the claim. A dispute arose between them. On 19th July 2002, Hanjung lodged a complaint with the Commissioner over PMMI’s rejection of its insurance claim. On 1st August 2002 the Commissioner wrote to PMMI informing it of Hajungs’s complaint. The letter stated, in part:

“Before we proceed further on this matter we ask you to provide:

(a) your explanation as to why you have rejected the claim;

(b) supporting information and documents on your decision; and the

(c) entire file since inception of the cover.

Please be advised that we make this request under Sections 34 of the Insurance Act 1995, which gives the Commissioner exclusive powers to inspect and investigate. Therefore we expect your fullest cooperation and expect to receive the requested items within 14 days of the date of this letter.”

11. On 9th August 2002, PMMI wrote to the Commissioner and stated the information sought was given to Hanjung in their letter of 9th November 2001. PMMI claimed privilege in relation to information sough under item Nos. (b) & (c). PMMI’s letter stated:

“We are quite happy to meet you to discuss matters in general terms. We would however feel it may prejudice PMMI’s position to release information in these circumstances as we may wish to be given the opportunity to question witnesses of the insured should PMMI’s decision be contested in Court.”

12. The dispute remain unresolved despite further correspondences exchanged between the parties. Consequently, the Commissioner directed PMMI to allow access...