The Motor Insurers’ Bureau of Hong Kong (“MIB”) is a non-profit-making company incorporated in Hong Kong limited by guarantee. All insurance companies who are authorized to carry on motor vehicle insurance business in Hong Kong are required to be members of MIB and are required to make contribution to MIB to meet its objectives. This article aims to provide a general view of the role of MIB in road traffic accident claim. Introduction Under the Motor Vehicles Insurance (Third Party Risk) Ordinance, Cap. 272 (“the Ordinance”), all vehicles must be insured against claims made by third parties who suffered bodily injuries or death arising out of an accident involving the use of the vehicle on a road in Hong Kong. When road traffic accident occurs, the victim will claim against the owner and driver of the vehicle. The motor vehicle insurer will pay the damages to the victim if the claim is valid. Victims of road traffic accident may not be able to recover the damages from the motor vehicle insurer in the following circumstances: (a) the vehicle is uninsured; (b) the vehicle is untraceable; (c) there has been some material breach of insurance policy conditions by the driver or policyholder which would allow the motor vehicle insurer to repudiate its liability; (d) the motor vehicle insurer is insolvent; (e) the damages awarded exceed the policy limit. The principal objective of MIB is to ensure that all valid road traffic accident claims are satisfied. The role of MIB MIB’s liability to satisfy the claims only arises when victims of road traffic accident have successfully established liability against the owner and/or driver of vehicle, i.e. judgment has been given in the victims’ favour in court. When judgments is obtained in court and damages are awarded for bodily injury or death arising out of an accident involving the use of a motor vehicle on the road, and the damages are not paid within 28 days after the judgment becomes enforceable, MIB will pay the unrecovered amount (including interest and costs awarded by the court) to the victims. It should be noted that MIB does not accept liability for any road traffic accident claims relating to property damage. The role of MIB is further illustrated in the following scenarios: 1. Where the vehicle is uninsured Victims of road traffic accident will not be able to recover damages awarded to them from the motor vehicle insurer where the vehicle involved in the accident is uninsured.  In the circumstances, they can only try to recover the damages from the owner and driver of the vehicle.  If the owner and driver of the vehicle are unable to pay within 28 days after the judgment against them becomes enforceable, MIB will satisfy the claim. In order to secure that MIB is liable to satisfy the claim, MIB should be notified at once in case the identity of the motor vehicle insurer is unknown.  Besides, MIB must be given written notice of the proceedings together with a copy of the Writ of Summons by registered post before or within 7 days after the proceedings against the driver and/or owner of the vehicle are commenced.  MIB is entitled to apply to be added as a party to the proceedings brought by the victims against the driver and/or owner of the vehicle. 2. Where the vehicle is untraceable Victims of road traffic accident, who suffer bodily injury or death as a result of the driving of a motor vehicle the owner or driver of which cannot be traced, are unable to sue the owner and driver of the vehicle.  MIB is not liable to satisfy such claim but will consider making ex-gratia payment to the victims if: (1) the victims have sustained serious injury or serious and permanent disablement or have died as a result of the accident; (2) MIB is satisfied that there is reasonable certainty that the injury, disablement or death  was caused by the negligent driving of the vehicle the owner or driver of which cannot be traced; (3) MIB is satisfied that there is reasonable certainty that if the owner or driver of the vehicle had been traced, he would be found liable by court; (4) the owner or driver of the vehicle would be the only person liable for the injury of the victims; and (5) the failure to obtain judgment against the owner or driver of the vehicle was only due to the victims’ inability to find him and serve him with legal process. Therefore, victims of road traffic accident involving an untraceable vehicle can apply to MIB for ex-gratia payment. 3. Where the motor vehicle insurer is entitled to repudiate its liability By an agreement made between MIB and all insurers who are authorized to carry on motor vehicle insurance business in Hong Kong, all motor vehicle insurers have agreed to abide by the “Insurer Concerned Principle”. The “Insurer Concerned Principle” provides that the motor vehicle insurers will satisfy claims for damages for bodily injury or death arising out of an accident involving the use of a motor vehicle on the road out of the insurers’ own funds, even though the insurers may be in a position to repudiate liability under the policy because there has been breach of insurance policy conditions, or the policy was obtained by improper methods, or the use of the vehicle was outside the scope of the insurance cover. Therefore, where there is in existence a motor insurance policy issued in compliance with the Ordinance, victims can make the claim against the owner and/or driver of the vehicle and the motor vehicle insurer will have to satisfy the claim even if it is entitled to repudiate its liability under the policy because, for example, the owner and/or driver had failed to give due notice of the accident to the insurers as required by the policy.  In this scenario, it is not necessary for the victim to notify MIB. It should be noted that the contractual obligations of the driver and policyholder to the insurer are not affected by the “Insurer Concerned Principle”.  For example, if the driver and policyholder had failed to give due notice of the accident to the insurer as required by the policy, they will be liable to indemnify the insurer even though the insurer has to satisfy the victim’s claim under the “Insurer Concerned Principle”. 4. Where the motor vehicle insurer is insolvent By an agreement made between MIB and all insurers who are authorized to carry on motor vehicle insurance business in Hong Kong, MIB is required to satisfy judgments left outstanding by motor vehicle insurers which went into insolvency. An insurer is regarded as insolvent if, for example, it has been wound up by order of the court or the Insurance Authority has notified MIB that the insurer is unable or unlikely to be able to pay claims as they fall due. In order to secure that MIB is liable to satisfy the satisfy judgments left outstanding by motor vehicle insurers which went into insolvency, MIB should be notified in writing of the claim by registered post after the insurers becomes insolvent.  If proceedings were issued before the insurer became insolvent, written notice of the proceedings together with a copy of the Writ of Summons must be given to the insurer or MIB by registered post before or within 7 days after the proceedings are commenced.   5. Where the damages awarded exceed the policy limit The Ordinance allows the motor vehicle insurer to place a limit of HK$100 million in its policy in relation to any one event giving rise to liabilities to third parties who suffered bodily injuries or death arising out of an accident involving the use of the vehicle on a road in Hong Kong. Therefore, in theory, if the policy limit is HK$100 million and the damages awarded exceeds HK$100 million, the motor vehicle insurer is not liable to pay the amount exceeding HK$100 million. MIB will pay the victims the damages exceeding the policy limit including interest and costs awarded by the Court if the same is not satisfied within 28 days after the judgment becomes enforceable. Conclusion MIB is established in order to ensure that victims of road traffic accident with legally enforceable claims should obtain the damages due to them. It should be noted that the victims have to make every effort to obtain the damages from the owner, the driver and the motor vehicle insurer before MIB is liable to satisfy the claims.

IMPORTANT: Without knowledge of the background/facts of the individual matter, we do not intend for the above summary to deal with every important topic or to cover every aspect of the topics with which it deals.  Such summary is for general information purposes only and is not intended to provide legal advice.

For enquiries: Please contact members of our Personal & Work Injury Claims Practice Group:

Francis Chan Partner, Co-Head of Personal Injury Practice Group +(852) 2521 3969 francis.chan@onc.hk

Ray Lee Partner, Co-Head of Personal Injury Practice Group +(852) 2107 0355 ray.lee@onc.hk

Published by ONC Lawyers © 2010