The Madhya Pradesh High Court has held that a package or comprehensive insurance policy by itself does not cover unlimited liability, including unlimited risk to passengers in a vehicle, unless the policy provides for the same. [2026 LiveLaw (MP) 334]

Noting that the owner had not paid for a higher premium for covering unlimited risk, the bench of Justice Vinay Saraf observed:

"the legal position prevailing as on today is that the liability of the Insurance Company will depend upon the terms and conditions of the insurance policy and only by mentioning the policy as Comprehensive / Package Policy in itself will not cover the unlimited risk of the passenger in a vehicle. If the terms and conditions of the policy provides unlimited liability of the Insurance Company, then only the Insurance Company will be liable for payment of the entire compensation, otherwise the liability of the Insurance Company will be limited up to the terms of the policy".

The order was passed in a miscellaneous appeal filed by the MP State Mining Corporation, challenging the order of the Motor Accident Claims Tribunal. The Tribunal has partly allowed the claim of the claimants and granted ₹28 Lakh as compensation, with the direction that the liability of the Insurance Company was limited to ₹1 Lakh only.

Another miscellaneous appeal was filed by the claimants for declaring the unlimited liability of the insurance company and enhancement of the compensation amount.

Per the facts, on February 20, 2012, around 4 pm, the deceased Ravinder Shah was travelling in a car with the President Govind Malu of MP State Mining Corporation Limited from Indore to Bhopal. Due to rash and negligent driving at high speed, the car turned turtle, and the deceased Ravindra Shah sustained grievous injuries and succumbed to the same spot. The other passengers also sustained injuries.

The incident was reported at District Sehore, and an offence was registered against the driver Rishi, and a chargesheet was filed against him.

Thereafter, the family of the deceased filed a claim petition under Section 166 of the Motor Vehicles Act, seeking compensation of ₹ 1.25 lakh against the driver, owner and insurance company, wherein the insurance company claimed that the liability was limited to ₹1 Lakh as per policy terms.

The Tribunal held that the accident occurred due to the rash and negligent driving of the car by the Driver, resulting in the death of passenger Ravindra Shah. The Tribunal held that the claimants were entitled to 128 Lakh compensation, but the liability of the insurance company was limited to ₹1 Lakh.

The owner of the vehicle/appellant filed the miscellaneous appeal, contending that the liability of the insurance company was not limited, as it was under an obligation to indemnify the complete liability of the owner. Relying on the circular of November 16, 2009, by the Insurance Regulatory and Development Authority (IRDA), the owner contended that the circular mandates covering the whole liability of compensation towards the occupants of the private vehicle when issuing a Private Car Package Policy.

The counsel appearing for the owner contended that since the owner had purchased the Comprehensive Package, the Insurance Company was obligated and cannot aviod their liability.

The counsel for the claimants, supporting the owner's arguments, submitted that the liability of the Insurance Company was unlimited as a comprehensive insurance policy was purchased.

The counsel for the Insurance Company submitted that so far as the passenger is concerned, the liability of the insurer is limited per the provisions of Section 147 of the Act of 1988. However, the insured can pay an additional higher premium and get higher risk covered for the passenger also. But in the absence of such a clause in the insurance policy, the liability of the insurer cannot be held unlimited in respect of passengers, and it is limited to statutory liability towards a third-party risk.

Referring to the Supreme Court case of National Insurance Company Limited v Balakrishnan [2013 1 SCC 731], the counsel for the company reiterated that the Act Policy stands on a different footing from the Comprehensive/Package Policy.

The court noted that the Insurance Company collected the premium of ₹200 for the risk of four passengers in the vehicle, and the liability covered was upto ₹1Lakh per passenger only. The court held that if the owner had not paid the higher premium for covering unlimited risk, the Company could not be held liable for the entire compensation amount due to the death of a passenger.

Thus, the bench held that, "just and proper amount of compensation in the instant case should be Rs. 37,62,833/- as against the award of the Tribunal of Rs. 28,86,616/-. Accordingly, the claimants are entitled to get enhanced amount of Rs. 8,76,217/- over and above the amount which has been awarded by the Tribunal. Resultantly, the appeal filed by the owner M.A. no. 2467/2014 is dismissed and the appeal preferred by the claimants M.A. no. 151/2015 is partly allowed to the extent as indicated hereinabove".

Case Title: MP Mining Corporation v United India Insurance, MISC. APPEAL No. 2467 of 2014

Citation: 2026 LiveLaw (MP) 334

For Mining Corporation: Advocate Kantesh Kumar Gupta

For United Insurance Company: Advocate Pradip Kumar Gupta

For Claimants: Advocate Swapnil Sharma

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