Insurance Claims and Admissions of Liability: The Importance of Reserving Rights

Introduction

The phrase “liability being otherwise admitted” has been used in insurance policies for decades across the global industry. It may appear in the context of an arbitration clause where parties agree to submit issues of quantum to arbitration, “liability being otherwise admitted”.

However, does this phrase require all liability to have been admitted, or will a partial admission of liability suffice?

In Far Ocean Sea Products Pte Ltd v United Overseas Insurance Ltd [2026] SGHC 182, the Singapore High Court (“Court“) found that all liability had to have been admitted. In doing so, it considered the language of the phrase, the commercial purpose of the phrase, and how the phrase had been interpreted by foreign courts. On the facts, the insurer had not admitted full liability, and therefore the arbitration agreement had not become operative.

The Court emphasised that this was not an “anti-arbitration” stance. Rather, its approach was to interpret the arbitration agreement in context and purposively. Having done so, it was clear that the Applicant could not bring its claims within the scope of the arbitration agreement.

The Respondent was successfully represented by Simon Goh (Head), Alvin Ee (Partner), and Alicia Lim (Senior Associate) of Rajah & Tann Singapore’s Insurance and Reinsurance Practice Group.

Below, we delve into the Court’s reasoning and highlight the practical lessons for insurers and loss adjusters with regard to admission of liability.

Background to the Dispute

The Applicant was a supplier of frozen seafood products. It leased an industrial property (“Premises“), comprising several processing rooms and cold rooms (“Cold Rooms“). The Respondent was its insurer.

On 31 March 2024, the parties renewed a fire insurance policy (“Policy“) covering the Premises for one year for a sum insured of S$12.58 million. The Policy contained two key clauses:

1. A time bar clause, under which the Respondent would not be liable for any loss or damage after 12 months from its occurrence unless the claim was the subject of pending action or arbitration; and
2. An arbitration clause, which provided that if any difference shall arise as to the amount to be paid under the Policy “(liability being otherwise admitted)”, such difference would be referred to an arbitrator.

On 28 June 2024, a fire caused by an electrical fault damaged the Premises. The following events took place thereafter:

1. July 2024: The parties began extensive negotiations over the scope and cost of the reinstatement works.
2. April to May 2025: The Applicant granted, and the purchaser exercised, an option to purchase the Premises on an “as is, where is” basis. The Respondent was not aware that the Applicant had done so.
3. May 2025: The Respondent allowed reinstatement works on only two of seven claim items. It contended that the Cold Rooms and temporary works items were not covered and maintained that the scope of coverage was subject to the Respondent’s approval pending the Applicant’s commencement and completion of its reinstatement works.
4. 28 June 2025: The 12-month contractual time bar took effect, but discussions continued.
5. Mid-December 2025: After learning that the Applicant had issued an option to purchase the Premises on an “as is, where is” basis in April 2025, which was exercised in May 2025, the Respondent invoked the time bar to disclaim liability entirely. The Respondent took the view that the sale of the Premises removed any basis for a reinstatement claim, since reinstatement works were not done and were no longer required on the Premises.
6. January 2026: The Applicant appointed new solicitors, issued a notice of arbitration, and applied under section 10(1) of the Arbitration Act 2001 (“AA“) for an extension of time.

The threshold question of whether the Court had the power to extend time under section 10(1) of the AA turned on whether the dispute fell within the scope of the arbitration clause. This depended on whether liability had to have been fully admitted by the Respondent, or whether the admission of some liability would suffice.

The Court had to determine:

1. The applicable standard of review for determining whether a dispute falls within an arbitration agreement under section 10(1) of the AA, being either (i) a prima facie standard of review where the Court looks only at whether, on its face, there appears to be a valid and operative arbitration agreement that is applicable to the dispute; or (ii) a “full merits” standard of review requiring the Court to actually be satisfied on the point;
2. The proper interpretation of “liability being otherwise admitted”, namely whether partial or full admission of liability was required; and
3. Whether liability had in fact been admitted in this case.

Decision of the Court

“Full Merits” Standard of Review

The Court held that the “full merits” standard applied. A party invoking section 10(1) of the AA is asking the Court to exercise a statutory power (in this case, to extend time). The Court may only exercise this statutory power when the dispute is one to which the arbitration agreement applies, making it a condition precedent to the exercise of such power.

This differs from stay applications under section 6 of the AA, where the question concerns the regulation of proceedings before the Court. Whether and on what terms proceedings are to be stayed is a matter for the court, and there is no difficulty of principle in a court giving effect to party autonomy and the doctrine of kompetenz-kompetenz by adopting only a prima facie standard of review before exercising the power to stay the proceedings before it.

Full Admission of Liability Required 

The arbitration agreement in the Policy stated that “If any difference shall arise as to the amount to be paid under this Policy (liability being otherwise admitted) such difference shall be referred to an arbitrator …”.

The question was whether this required the insurer to have admitted liability in full, leaving only the amount payable to be determined, or whether an admission of some liability was enough. The Court held that the phrase requires all questions or aspects of liability to have been admitted, leaving only questions of quantum for the arbitrator.

1. Language of the phrase: The word “otherwise” conveys that liability as a whole has been admitted. The word “all” is unnecessary to produce that meaning. On the contrary, a word such as “some” or “partial” would have been needed to qualify “liability” and produce the opposite effect.
2. Commercial purpose: This interpretation of the phrase fits with a reasonable commercial purpose, namely that legal questions of liability would be decided by judges, while technical questions of quantum could be determined more efficiently and cost-effectively by an arbitrator qualified in a technical discipline.
3. Consistency of interpretation: The phrase is in widespread use in insurance contracts, with English courts construing it in the same way for decades. Certainty of meaning is particularly important for persons engaged in commerce. Accordingly, a court should be slow to depart from an established definition.

Liability Had Not Been Otherwise Admitted 

It was common ground between the parties that at least one claim – regarding whether the Cold Rooms fell within the Policy – remained in clear dispute. Following the sale of the Premises, the parties were also in dispute as to whether the Applicant’s reinstatement claims could be converted to claims for a loss in value under the Policy. 

As such, liability had not been admitted, and the arbitration agreement had not become operative. The Court found that it therefore had no power to extend time for the Applicant to commence arbitration.

Key Takeaways

The decision highlights the importance of clear and consistent communications during the claims-handling process. Insurers and loss adjusters should expressly reserve their rights and state that their investigation, assessment or engagement with a claim does not constitute an admission of liability. This is particularly important where discussions remain ongoing or certain aspects of the claim are disputed, as ambiguity in correspondence may give rise to arguments that liability has been admitted.

If you have any queries on the above, please reach out to our team set out on this page.

For regional Insurance & Reinsurance matters, please see Rajah & Tann Asia’s Insurance and Reinsurance Practice Group for more information.