Supreme Court: What is the duty of insured if Insurance company requires him to have the licence duly verified from the licensing authority?

In a claim for compensation, it is certainly open to the insurer Under Section 149(2)(a)(ii) to take a defence that the driver of the vehicle involved in the accident was not duly licensed. Once such a defence is taken, the onus is on the insurer. But even after it is proved that the licence possessed by the driver was a fake one, whether there is liability on the insurer is the moot question. As far as the owner of the vehicle is concerned, when he hires a driver, he has to check whether the driver has a valid driving licence. Thereafter he has to satisfy himself as to the competence of the driver. If satisfied in that regard also, it can be said that the owner had taken reasonable care in employing a person who is qualified and competent to drive the vehicle. The owner cannot be expected to go beyond that, to the extent of verifying the genuineness of the driving licence with the licensing authority before hiring the services of the driver. However, the situation would be different if at the time of insurance of the vehicle or thereafter the insurance company requires the owner of the vehicle to have the licence duly verified from the licensing authority or if the attention of the owner of the vehicle is otherwise invited to the allegation that the licence issued to the driver employed by him is a fake one and yet the owner does not take appropriate action for verification of the matter regarding the genuineness of the licence from the licensing authority. That is what is explained in Swaran Singh's case (supra). If despite such information with the owner that the licence possessed by his driver is fake, no action is taken by the insured for appropriate verification, then the insured will be at fault and, in such circumstances, the insurance company is not liable for the compensation.

 IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 1999-2000 of 2020

Decided On: 04.03.2020

Nirmala Kothari Vs. United India Insurance Co. Ltd.

Hon'ble Judges/Coram:

Navin Sinha and Krishna Murari, JJ.

Author: Krishna Murari, J.

Citation: 2020 INSC 263,MANU/SC/0267/2020,AIR 2020 SC 1193,AIR Online 2020 SC 285.

Print Page

Karnataka HC: How Insurance Company should prove breach of policy conditions?

 In catena of cases, the Hon'ble Supreme Court has clearly held that the Insurance Company must not only take a defence that there was a violation of the condition of the policy, but must also prove the defence that there has been a substantive violation of the said policy condition. Moreover, the burden of proving a defence is always on the party which pleads it. In order to discharge this burden, the Insurance Company can either summon the driver as a witness, or adduce the documents from the Regional Transport Authority as documentary evidence to prove and establish its plea that the driver of the offending vehicle, indeed, did not have a valid driving licence. In the case of Rukmini (supra), the Hon'ble Supreme Court has clearly opined that until and unless the Insurance Company were to be discharge its burden, it cannot be absolved of its liability to pay the compensation amount. {Para 12}

13. The issue whether the Insurance Company is liable to pay the compensation in the absence of a valid driving licence has been laid to rest in the case of Swaran Singh (supra). In paragraph No. 69 of the judgment, the Hon'ble Supreme Court has observed as under:

"69. The proposition of law is no longer res integra that the person who alleges breach must prove the same. The insurance company is, thus, required to establish the said breach by cogent evidence. In the event the insurance company fails to prove that there has been breach of conditions of policy on the part of the insured, the insurance company cannot be absolved of its liability."

 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

Miscellaneous First Appeal No. 6206 of 2009 (MV)

Decided On: 22.03.2016

C. Balakrishna Vs. C. Muniraju and Ors.

Hon'ble Judges/Coram:

R.S. Chauhan, J.

Citation: 2016:KHC:10286,MANU/KA/0769/2016

Print Page

Supreme Court: Insurance company must prove fundamental breach of policy condition if it takes defence of breach of policy conditions

SUMMARY OF FINDINGS :

106. The summary of our findings to the various issues as raised in these petitions are as follows:

(i) Chapter XI of the Motor Vehicles Act, 1988 providing compulsory insurance of vehicles against third party risks is a social welfare legislation to extend relief by compensation to victims of accidents caused by use of motor vehicles. The provisions of compulsory insurance coverage of all vehicles are with this paramount object and the provisions of the Act have to be so interpreted as to effectuate the said object.

(ii) Insurer is entitled to raise a defence in a claim petition filed under Section 163A or Section 166 of the Motor Vehicles Act, 1988 inter alia in terms of Section 149(2)(a)(ii) of the said Act.

(iii) The breach of policy condition, e.g. disqualification of driver or invalid driving licence of the driver, as contained in Sub-section (2)(a)(ii) of Section 149, have to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by duly licensed driver or one who was not disqualified to drive at the relevant time,

(iv) The insurance companies are, however, with a view to avoid their liability must not only establish the available defence(s) raised in the said proceedings but must also establish 'breach' on the part of the owner of the vehicle; the burden of proof where for would be on them.

(v) The court cannot lay down any criteria as to how said burden would be discharged, inasmuch as the same would depend upon the facts and circumstance of each case.

(vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to avoid its liability towards insured unless the said breach or breaches on the condition of driving licence is/ are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions would apply "the rule of main purpose" and the concept of "fundamental breach" to allow defences available to the insured under Section 149(2) of the Act.

(vii) The question as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, (a fake one or otherwise), does not fulfil the requirements of law or not will have to be determined in each case.

(viii) If a vehicle at the time of accident was driven by a person having a learner's licence, the insurance companies would be liable to satisfy the decree.

(ix) The claims tribunal constituted under Section 165 read with Section 168 is empowered to adjudicate all claims in respect of the accidents involving death or of bodily injury or damage to property of third party arising in use of motor vehicle. The said power of the tribunal is not restricted to decide the claims inter se between claimant or claimants on one side and insured, insurer and driver on the other. In the course of adjudicating the claim for compensation and to decide the availability of defence or defences to the insurer, the Tribunal has necessarily the power and jurisdiction to decide disputes inter se between insurer and the insured. The decision rendered on the claims and disputes inter se between the insurer and insured in the course of adjudication of claim for compensation by the claimants and Se award made thereon is enforceable and executable in the same manner as provided in Section 174 of the Act for enforcement and execution of the award in favour of the claimants.

(x) Where on adjudication of the claim under the Act the tribunal arrives at a conclusion that the insurer has satisfactorily proved its defence in accordance with the provisions of Section 149(2) read with Sub-section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party under the award of the tribunal Such determination of claim by the Tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the tribunal to the Collector in the same manner under Section 174 of the Act as arrears of land revenue. The certificate will be issued for the recovery as arrears of land revenue only if, as required by Sub-section (3) of Section 168 of the Act the insured fails to deposit the amount awarded in favour of the insurer within thirty days from the date of announcement of the award by the tribunal.

(xi) The provisions contained in Sub-section (4) with proviso thereunder and Sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover amount paid under the contract of insurance on behalf of the insured can be taken recourse of by the Tribunal and be extended to claims and defences of insurer against insured by, relegating them to the remedy before, regular court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims.

 IN THE SUPREME COURT OF INDIA

SLP (C) Nos. 15528 and 15772 of 2002, 

Decided On: 05.01.2004

National Insurance Co. Ltd. Vs. Swaran Singh and Ors.

Hon'ble Judges/Coram:

V.N. Khare, C.J., D.M. Dharmadhikari and S.B. Sinha, JJ.

Authored By : V.N. Khare, D.M. Dharmadhikari, S.B. Sinha

Citations: AIR 2004 SUPREME COURT 1531, 2004 (3) SCC 297, MANU/SC/0021/2004

Print Page

Bombay HC: Under which circumstance the motor accident claim tribunal should not pass the order of pay and recover against Insurance Company?

 In the case at hand, on the date of accident, the driver of the offending vehicle did not hold valid and effective driving license to driving offending vehicle. Opponent No. 2, being driver as well as the owner of the offending vehicle, was fully aware that on the date of accident, he did not hold valid and effective driving license to drive offending vehicle. Even, then, Opponent No. 2 drove offending vehicle and gave dash to the motorcycle of the claimant. These facts on record clearly indicate that the owner of the offending vehicle was guilty of negligence and failed to exercise reasonable care, in the matter of fulfilling the condition of the policy of insurance, regarding use of vehicle by duly licensed driver. Therefore, this breach of condition of policy of insurance being "fundamental breach", the insurer of the offending vehicle, cannot be compelled to indemnify the Opponent No. 2. Therefore, "to pay and recover" order cannot be passed against the insurer of the offending vehicle. I have no hesitation to hold that the learned Tribunal has rightly exonerated the insurer of the offending vehicle from any liability to pay compensation to the claimant. {Para 16}

17. Before parting with the judgment, I must make it clear that the ratio in "Pappu and Others v. Vinod Kumar Lamba and Another"[supra], relied on by the learned counsel for the insurer is distinguishable on facts, for the reason that in the case at hand, Opponent No. 2 has duly pleaded that the offending vehicle was being driven by the driver holding valid and effective driving license. Accordingly, I hold that the insurer has duly proved "fundamental breach" of condition of policy of the insurance of offending vehicle and therefore, no liability can be fastened against the insurer of the offending vehicle. I hold that the Tribunal has rightly fastened entire liability to pay the compensation on Opponent No. 2, who is owner and driver of the offending vehicle. 

IN THE HIGH COURT OF BOMBAY (AURANGABAD BENCH)

First Appeal Nos. 567 and 568 of 2019

Decided On: 30.04.2019

Swapnil Vs. The Branch Manager, The New India Insurance Co. Ltd. and Ors.

Hon'ble Judges/Coram:

Sunil K. Kotwal, J.

Citation: MANU/MH/1716/2019.

Print Page

Whether burden of proof is on insurance company to prove breach of policy clearly?

Mr. Chapalgaonkar relied on the judgment in the case of Premlata Shukla (supra). Though the proceedings before the Tribunal are summary in nature and strict rules of evidence are not applicable, it is well settled that once it is established that the vehicle involved in the accident was duly insured with the Insurance Company, the burden is on the Insurance Company to show that they are not liable to indemnify the insured on account of breach of policy. The breach of policy must be clearly made out.

IN THE HIGH COURT OF BOMBAY (AURANGABAD BENCH)

First Appeal No. 1397 of 2015

Decided On: 16.08.2018

 Shriram General Insurance Company Limited  Vs.  Rekha and Ors.

Hon'ble Judges/Coram:

A.M. Dhavale, J.

Citation: 2018(6) MHLJ 527

Print Page

Whether driver of truck giving lift to some persons amounts to fundamental breach of insurance policy?

In Lakhmi Chand case (supra), this Court held that to avoid its liability, the insurance company must not only establish the defence that the policy has been breached, but must also show that the breach of the policy is so fundamental in nature that it brings the contract to an end.

7. 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. The driver, on a cold wintery night, gave lift to some persons standing on the road. It was a humanitarian gesture. It cannot be said to be such a breach that it nullifies the policy. No doubt, these passengers turned against the driver and stole the truck, but this, the driver could not have foreseen. In the cases cited above, such claims where there is breach of policy, have been treated to be non-standard claims and have been directed to be settled at 75%.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 21552 of 2017 (Arising out of Special Leave Petition (C) No. 34605 of 2015)

Decided On: 08.12.2017

 Manjeet Singh Vs National Insurance Company Ltd. and Ors.

Hon'ble Judges/Coram:

Madan B. Lokur and Deepak Gupta, JJ.

Citation: (2018) 2 SCC108

Print Page

Whether overloading of vehicle by passengers amounts to fundamental breach of policy?

  The Apex Court in the case titled as National
Insurance Company Limited versus Anjana Shyam &
others, reported in 2007 AIR SCW 5237 has laid down
the same principles of law. It is also apt to reproduce
para 15 of the judgment of, herein:
“15. In spite of the relevant provisions of the
statute, insurance still remains a contract between
the owner and the insurer and the parties are
governed by the terms of their contract. The statute
has made insurance obligatory in public interest
and by way of social security and it has also
provided that the insurer would be obliged to fulfil
his obligations as imposed by the contract and as
overseen by the statute notwithstanding any claim
he may have against the other contracting party,
the owner, and meet the claims of third parties
subject to the exceptions provided in Section
149(2) of the Act. But that does not mean that an
insurer is bound to pay amounts outside the
contract of insurance itself or in respect of persons
not covered by the contract at all. In other words,
the insured is covered only to the extent of the
passengers permitted to be insured or directed to
be insured by the statute and actually covered by
the contract. The High Court has considered only
the aspect whether by overloading the vehicle, the
owner had put the vehicle to a use not allowed by
the permit under which the vehicle is used. This
aspect is different from the aspect of determining
the extent of the liability of the insurance company
in respect of the passengers of a stage carriage

insured in terms of Section 147(1)(b)(ii) of the Act.
We are of the view that the insurance company can
be made liable only in respect of the number of
passengers for whom insurance can be taken
under the Act and for whom insurance has been
taken as a fact and not in respect of the other
passengers involved in the accident in a case of
overloading.”
 11. This Court in batches of appeals, FAO No.
257 of 2006, titled as National Insurance Company
Ltd. versus Smt. Sumna @ Sharda & others, being the
lead case, decided on 10.04.2015, FAO No. 224 of 2008,
titled as Hem Ram & another versus Krishan Chand &
another, being the lead case, decided on 29.05.2015,
and FAO No. 256 of 2010 titled Oriental Insurance
Company versus Smt. Indiro and others, being the
lead case, decided on 19.6.2015, has laid down the same
principle, which is not disputed by the learned counsel for
the insurer.
 12. The apex Court in case titled Lakhmi Chand
versus Reliance General Insurance Co. Ltd. reported
in (2016) 3 SCC 100, held that the mere factum of
carrying more passengers than the permitted seating
capacity in the goods carrying vehicle by the insured
does not amount to a fundamental breach of the terms
and conditions of the policy so as to allow the insurer to
eschew its liability towards the damage caused to the

vehicle. 
IN THE HIGH COURT OF HIMACHAL PRADESH
SHIMLA
FAO (MVA) No. 72 of 2011

 Date of decision: 12th August, 2016
 FAO No. 72/2011.
Oriental Insurance Co. Ltd. V Shri Hitender Singh 
Coram:
The Hon’ble Mr. Justice Mansoor Ahmad Mir, Chief Justice.

Citation: 2017(1) ALLMR(JOURNAL) 102

Print Page