Insurer Liable For Motor Accident Compensation Even If Policy Not Transferred To Vehicle's New Owner: AP High Court

The Andhra Pradesh High Court has held that an insurance company cannot avoid liability to pay compensation for a workman's death merely because the insurance policy was not updated in the name of the subsequent owner of the vehicle, when the policy was valid and in force at the time of the accident.

Section 157(1) of the Motor Vehicles Act, 1988 provides that upon transfer of ownership of a motor vehicle, the certificate of insurance is deemed to be transferred to the transferee, along with the rights and liabilities under the insurance policy.

Dismissing an appeal filed by Royal Sundaram Alliance Insurance Company Limited, Justice Balaji Medamalli dismissed the insurer's appeal, upholding the award directing the original policyholder, insurer and subsequent owner to jointly and severally pay Rs. 2,91,684 to the deceased's dependants.

The Court observed:

“The mere fact that the insurance policy was not transferred along with the vehicle would not, by itself, mean that the coverage under the policy ceased to operate in respect of the accident that occurred during the subsistence of the policy period. The non-mutation of the name of the subsequent owner in the insurance policy maintained with the appellant/OP- 2 cannot, by itself, disentitle the applicants from seeking compensation under the provisions of the Workmen's Compensation Act, particularly when the policy was valid and in force as on the date of the accident.

In the instant case, as stated above, it is an admitted fact that the vehicle had been transferred. The transferor and the transferee have both been impleaded as opposite parties in the present proceedings, along with the appellant-Insurance company. Therefore, the factum of transfer is not in dispute. By virtue of section 157(1) of the M.V.Act, the insurance policy covering the vehicle is deemed to have been transferred to the transferee. Consequently, the policy remained valid on the date of the accident, and the appellant-Insurance Company is liable to satisfy the award”

The case arose from an accident in which the deceased, who was employed as a tractor-trailer driver, died after the vehicle overturned while transporting sand for road work.

Following his death, his wife, sons and mother approached the Commissioner for Workmen's Compensation, seeking Rs. 5 lakh in compensation. They stated that the deceased earned Rs. 4,500 per month, besides Rs. 50 per day as batta, and that the family depended on his income.

The claim was filed against three parties: the original policyholder of the tractor-trailer, Royal Sundaram Alliance Insurance Company Limited, which had insured the vehicle, and the subsequent owner of the tractor-trailer, who had employed the deceased as a driver.

The insurer contested the claim, arguing that the policy remained in the original policyholder's name even after the vehicle was transferred to another owner. It contended that the absence of an updated policy meant there was no valid insurance coverage and also disputed the employer-employee relationship between the original policyholder and the deceased.

The insurer also denied liability, citing unauthorised passengers, the absence of a valid driving licence and failure to report the accident. It sought dismissal of the claim.

The owner of the tractor-trailer also disputed the claim in his initial counter but subsequently admitted the deceased's employment, the accident, his death and the wages paid to him.

The Commissioner allowed the claim and held all three parties jointly and severally liable for Rs. 2,91,684 in compensation. They were directed to deposit the amount within 30 days. Failure to do so would attract 8% annual interest from the date of the accident until payment, along with any penalty imposed under Section 4A(3) of the Workmen's Compensation Act.

Aggrieved by the order, the insurance company approached the High Court.

The insurer reiterated its earlier arguments, maintaining that it could not be held liable because the policy had not been transferred to the subsequent owner.

Rejecting the insurer's contention, the High Court held that the insurance policy was deemed to have been transferred to the subsequent owner under Section 157(1) of the Motor Vehicles Act.

The failure to update the owner's name in the policy did not extinguish coverage when the policy remained valid on the date of the accident.

“The provisions of the Act are beneficial in nature and are intended to protect the interest of workmen and their dependants. Therefore, a technical objection relating to non-mutation of the name of the transferee in the insurance policy, in the absence of any breach of policy conditions, cannot defeat the substantive rights of the applicants,” the Court said.

The Court also noted that the insurer had neither pleaded nor established any violation of the policy conditions that would absolve it of liability.

Finding no illegality or infirmity in the Commissioner's order, the High Court dismissed the appeal and upheld the compensation award.

Counsel for the Appellant: Sri Kota Subba Rao

Counsel for Respondents: Syed Khader Mastan