Introduction

In a recent Court of Final Appeal decision in Lo Siu Wa v Employees Compensation Assistance Fund Board & Anor FACV 12/2017 the Court is asked to consider whether an injured employee is covered by the employees’ compensation insurance policy if his employer had failed to provide correct information about him to the insurers.

Background

The Claimant, Mr Lo, was a carpenter employed by an interior design company (“the Company”) whose principal business was producing interior designs, but it also carried on the ancillary business activity of constructing its own designs.  The Company had taken out an insurance policy (“the Policy”) under the Employees’ Compensation Ordinance, Cap 282 (“ECO”).

Mr Lo was injured whilst using the Company’s saw to construct a design.  He sued the Company for compensation under the ECO and for damages under common law. The Company was unable to pay the sums awarded and went into liquidation.

As a result, Mr Lo made a claim against the Insurer pursuant to section 43 of the ECO.  Section 43 of ECO provides that:-

(1)  “… where in relation to an employee there is in force a policy of insurance issued for the purposes of this Part and the employer of the employee becomes liable to pay any sum under this Ordinance or independently of this Ordinance in respect of an injury to the employee arising out of and in the course of his employment, such sum shall forthwith become due and payable by the insurer, notwithstanding anything to the contrary in the policy of insurance.

…

(4) Where under this part an amount is paid by the insurer which would, but for this section, not be payable under the policy of insurance, the employer is liable to pay that amount to the insurer.”

The Insurer refused to pay on the ground that the Schedule to the Policy described the Company’s business as “Interior Design”.   It also contained a List of six clerical posts but did not include construction workers such as carpenters.  In other words, the Insurer argued that the Policy did not cover Mr Lo.

Mr Lo then turned to the Employees Compensation Assistance Fund Board (“the Board”) because if he was not covered by the Policy, the Board would have to pay under the Employee Compensation Assistance Ordinance, Cap 365.  The Board took the view that the Insurer was liable.   Mr Lo therefore sued both the Insurer and the Board.   Subsequently, Mr Lo was paid.  The Court was asked to determine the issue of whether Mr Lo was covered by the Policy. 

The Court of First Instance (“CFI”) held that the Policy did not cover Mr Lo and the Board was liable accordingly.  This decision was upheld by the Court of Appeal (“CA”).  The Board appealed to the Court of Final Appeal (“CFA”).

CFA’s decision

The CFA held that it was the Insurer and not the Board that was liable to Mr Lo because the Policy did cover Mr Lo for the following reasons:-

1.       Courts should not be too finicky or pedantic about the interpretation of a brief description of an employer’s business, otherwise, an employer may be found to have committed the criminal offence of failing to insure because it did not provide a sufficiently detailed description of business.

 

2.       Though the scope of cover was limited to clerical jobs listed in the Schedule, but it says “any employee”.  The Schedule also provided for the Company’s obligation to notify the Insurer of changes in the number of employees.  This indicates that the parties did not contemplate that cover would be confined to those in the List.

 

3.       The carpentry work for the construction of design was ancillary to the Company’s principal business.  Mr Lo was directly employed by the Company.  Therefore, the Policy covered not only those employees in the List but also Mr Lo.

 

The CFA held that the decision of Law Lai Ha v Zurich Insurance Co. [2011] 2 HKLRD 450, which has been relied upon by the CFI and CA judges, was wrong and lack of reasoning.  In Law Lai Ha, the employee was sent to Kenya to supervise the installation of a plant.  There he contracted a disease from which he died.  The Policy stated that it covered “any employee” but the Schedule specified only two employees at the office in Hong Kong.  On this basis the judge in Law Lai Ha concluded that the cover was confined to those two employees.  

The CFA disagreed and considered the reason why the insurer was anxious to receive full particulars of all employees engaged by the company, whether mentioned in the schedule or newly engaged, was that they would all be covered by the Policy, otherwise the insurer would have no interest in who else was employed.  Failure to provide the correct information about its employees would have been a breach of the insured’s obligations under the Policy and the insurer might have been entitled to repudiate its liability under the Policy and seek recourse against the Company.  Nevertheless, the insurer remains liable to Mr Lo under Section 43 of ECO.

 

For enquiries, please contact our Insurance & Personal Injury Department:

E: insurance_pi@onc.hk                                                    T: (852) 2810 1212 W: www.onc.hk                                                                    F: (852) 2804 6311 19th Floor, Three Exchange Square, 8 Connaught Place, Central, Hong Kong

Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2018