Motor Accident: Rajasthan High Court Directs Insurer To First Pay Minor's Compensation Despite Policy Breach

While hearing a Motor Accident Claim case, considering that the claimant was a minor, Rajasthan High Court directed the insurance company of the offending vehicle to satisfy the award granted in favour of the claimant, despite the vehicle's owner being in breach of the insurance policy, with a liberty to recover it from the owner of the vehicle.

The bench of Justice Farjand Ali made a reference to Supreme Court cases, to hold that the principle of “pay and recover” was recognized in cases where despite a breach of the policy conditions by the insured, the insurer was directed to pay to the claimant at the first instance, without fastening the ultimate liability on the insurer, and then recover it from the defaulter.

At the same time, the Court observed that established breach relating to the use of the vehicle without a permit authorising carriage of passengers had a direct bearing on the contractual liability of the insurance company.

For context, the claimant was travelling in a vehicle when it got involved in an accident, allegedly owing to rash and negligence driving of the driver. The claimant suffered injuries and filed a claim against the vehicle's owner and the driver. This claim was contested by them on the ground that the vehicle was insured and hence, the insurance company was liable.

The insurance company contested the claim on the ground that the insurance policy was violated by the vehicle's owner since the vehicle was insured as a goods-vehicle and did not have a permit to be operated to carry passengers. Hence, no premium was charged for operating the vehicle as a passengers' vehicle.

In this background, the tribunal exonerated the insurance company and directed the vehicle's owner and the driver to pay to the claimant. This order was challenged before the Court.

After hearing the contentions, the Court highlighted that the concerned insurance policy contained a limitation as to the use of the vehicle to carriage of goods, thus passengers travelling in the same was in breach of permitted use as covered in the policy, that rendered the vehicle's owner in breach of the policy.

“The mere mention of the seating capacity of 4+1 cannot, in the facts of the present case, be treated as an independent contractual undertaking by the Insurance Company to cover every person travelling in the vehicle, irrespective of whether such carriage was authorised under the permit and the permitted use of the vehicle. The absence of a permit authorising carriage of passengers, as noticed hereinabove, remains an established circumstance against the appellant–owner.”

The Court held that the owner could not contend that mere existence of a valid insurance policy of the vehicle necessarily made the insurance company liable for risk of an unauthorised passenger travelling in the goods vehicle.

At the same time, the Court held that the distinction between ultimate liability of the insurer and its obligations to satisfy an award in the first instance was material.

Reference was made to the Supreme Court case in Anu Bhanvara & Ors. v. IFFCO Tokio General Insurance Co. Ltd.& Ors. in which in case of gratuitous passengers, who were young children travelling in goods vehicle, Supreme Court directed insurance company to satisfy the award in the first instance and granted liberty to recover the same from the vehicle's owner and driver.

In this light, the Court observed,

“The interest of the claimant, who was a minor at the time of the accident, can adequately be protected by directing respondent No.3–Insurance Company to satisfy the award in the first instance, while at the same time preserving its right to recover the amount so paid from the appellant–owner and respondent No.2–driver on account of the established breach.”

Accordingly, the appeal was allowed to the limited extent, while not holding the ultimate liability onto the insurance company, but directing it to make the payment in the first instance with a liberty to recover the same from the vehicle's owner and the driver.