HANWHA NON-LIFE INSURANCE CO LTD V ALBA PTE LTD

[2011] SGHC 271, High Court of Singapore, Justice Tan Lee Meng, 30 December 2011

Reinsurance - Declaration policy - Whether cover facultative or obligatory - Whether declaration to reinsurance valid - Whether reinsurers accepting declaration - Incorporation of terms into reinsurance

DH successfully bid to carry out the renovation of the Daewoo Kangnam Model House (DMH) in Seoul. Design work commenced soon afterwards, and on 7 September 2007 DH entered into a construction contract to carry out the work in eight months for the sum of KRW2.34 billion. In the meantime, in May 2007, DH approached the claimant insurer to insure its liability, and the claimant approached the defendant reinsurers to obtain reinsurance cover. The defendants agreed to reinsure 45 per cent of the direct risk on facultative terms. On 11 June 2007 insurance cover incepted under a contractors all risks policy under which declarations could be made to the insurer, and the KMH project was declared on 22 August 2007 for the period until 31 October 2007. The reinsurance agreement also incepted on 11 June 2007 and specified that: projects would be declared on a monthly basis; the duration of each model house project would not exceed nine months; that the terms and conditions were as per "Munich Re's Standard CAR Policy Form"; declarations would be made monthly; and the premium was 13 per cent. The limit of indemnity was KRW70 billion in the annual aggregate, and KRW5 billion any one occurrence. It was the practice to make declarations a month in arrears. The DMH project was not completed by its due date of 31 October 2007. DH was given an extended period until 31 January 2008 to complete the work, and the price was raised from KRW2.34 billion to KRW5.63 billion. On 19 November 2007, by a policy endorsement, the insurer granted DH a retrospective extension of the insurance period to 31 January 2008 and an increase in the insured sum. A declaration was made to the insurers on 14 December 2007. Unknown to the parties, some hours earlier, there was a serious fire at the works. The reinsurers appointed their own loss adjusters on 28 January 2008, and on 1 February 2008 accepted the reinsurance premium for the extended cover. The reinsurers then denied liability.