When owner of the vehicle is at no fault, the insurance company cannot deny claim
December 9, 2017
A Bench of Justice Madan B Lokur and Justice Deepak Gupta pronounced a judgment in an appeal filed by the owner of a vehicle against denial of insurance claim by the insurance company on the ground of violation of terms of agreement.
Facts of the case are that the appellant Manjeet Singh purchased a second-hand Tata open truck under a Hire Purchase agreement dated 13.10.2003 for a sum of Rs. 8,57,000/- from Respondent No.2. The vehicle was hypothecated in favour of Respondent No.2. It was insured for a value of Rs.7,28,000/- and the insurance policy was valid from 25.09.2004 to 24.09.2005. On 12.12.2004, the vehicle was being driven by Sanjay Kumar on the National Highway near Karnal. Some persons gave a signal to the driver to stop the vehicle. After he stopped, they requested the driver to give them lift up to Yamuna Nagar since no other mode of transport was available. Since it was a cold wintery night, the driver gave a lift to these persons. After a little while, one of the passengers requested the driver to stop the truck on the pretext that he had to answer the call of nature. When the truck driver stopped the truck, the three passengers assaulted the driver, tied his hands and legs with a rope and threw him in a nearby field and fled away with the vehicle.
An FIR was lodged at Police Station, Ladwa on 13.12.2004 and the respondent no.
2, finance company was intimated about the theft. The complainant had also given
a letter of authority to the finance company to negotiate and settle the claim
with the insurance company. However, no settlement was arrived at and the claim
was not settled and repudiated vide letter dated 11.11.2005 on the ground of
breach of terms of the policy. The owner-complainant filed a claim petition
before the District Consumer Disputes Redressal Forum alleging that the insurance company was liable to compensate him for the
loss caused to him by the theft of the truck. The main defence taken by the
respondent no. 2, insurance company was that the driver of the vehicle, by
giving a lift to the passengers, had violated the terms of the policy and, as
such, there was breach of policy and the insurance company was not liable. This
ground found favour with the District Forum. The appeal filed by the claimant
before the State Consumer Disputes Redressal Commissionwas rejected and so was the revision filed before the National
Consumer Disputes Redressal Commission.
The District Forum also rejected the claim on the ground that the arbitration
proceedings had been initiated by the Respondent No. 2, finance company against
the complainant and they were at the final stage.
The Bench said that "As far as the first ground is concerned, we are of the
considered opinion, that the District Forum had not properly appreciated the
scope and ambit of the policy. The violation of the condition should be such a
fundamental breach so that the claimant cannot claim any amount whatsoever. As
far as the violation in carrying passengers is concerned, this has consistently
been held not to be a fundamental breach and, in this behalf, we may make
reference to the judgments of this Court in the case of National Insurance Co.
Ltd. v. Swaran Singh, (2004) 3 SCC 297, National Insurance Co. Ltd. v. Nitin
Khandelwal, (2008) 11 SCC 259, Lakhmi Chand v. Reliance General Insurance,
(2016) 3 SCC 100 and B.V. Nagaraju v. Oriental Insurance Co. Ltd., (1996) 4 SCC
647."
"In the present case, the appellant who is the owner, was not at fault. His
driver gave a lift to some passengers. Carrying such passengers may be a breach
of the policy, but it cannot be said to be such a fundamental breach as to bring
the insurance policy to an end and to terminate the insurance policy."
"As far as the second ground is concerned, we fail to understand how the
arbitration proceedings between the financer and the insurer, relating to
recovery of the loan amount, can in any way, negate the rights of the insured
against the insurance company".
The court allowed appeal with the following observation and direction:
"we allow the appeal, set aside the orders of the courts below and direct the
respondent no.1-insurance company to pay 75% of the insured amount of
Rs.7,28,000/- along with interest at the rate of 9% per annum from the date of
filing the claim petition till the deposit of the amount. In addition, the
insurance company shall also pay another sum of Rs.1,00,000/- as compensation.
Since the financer is also a party to the petition, the amount shall be
deposited before the District Forum, and in case the claim of the financer has
not been settled in terms of the arbitration award, then the deposited amount
shall first be used to pay the awarded amount and the balance, if any, shall be
paid to the appellant. The appeal is disposed of in the aforesaid terms. Pending
application(s), if any, also stand(s) disposed of".
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Read the Judgment of Supreme Court dated 08.12.2017