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Insurance Company Not Absolved Of Liability If It Fails To Prove That Vehicle Owner Was "Aware" That Licence Of Driver Is Fake: Punjab & Haryana HC

Drishti Yadav
11 April 2022 8:00 AM GMT
Insurance Company Not Absolved Of Liability If It Fails To Prove That Vehicle Owner Was Aware That Licence Of Driver Is Fake: Punjab & Haryana HC
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The Punjab and Haryana High Court has held that an insurance company cannot be absolved from its liability from compensating the third party merely by claiming that the terms of insurance contract were breached as the vehicle insured was being driven by a person not holding a valid licence.The bench comprising Justice Alka Sarin held that the insurer must show that the owner/insured was aware...

The Punjab and Haryana High Court has held that an insurance company cannot be absolved from its liability from compensating the third party merely by claiming that the terms of insurance contract were breached as the vehicle insured was being driven by a person not holding a valid licence.

The bench comprising Justice Alka Sarin held that the insurer must show that the owner/insured was aware or had noticed that the licence was fake and still permitted that person to drive. It observed,

"The appellant-insurance company has failed to prove that the insured (owner) 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 a duly licensed driver or one who was not disqualified to drive at the relevant time. In this scenario, the appellant-insurance company cannot absolve itself from it's liability of paying the compensation."
The Court noted that owner of the vehicle had stepped into the witness box and was cross-examined by the counsel for the insurance company. However, no suggestion was put to the owner that he was aware that the licence was fake and he was aware of the same.

It thus dismissed the appeal filed by the insurance company challenging the award passed by the Motor Accident Claims Tribunal, Gurgaon. Further, it allowed the cross-objections filed by the claimant-respondent seeking enhancement of compensation.

The case came up as a result of an accident resulting in the death of one Jalaluddin due to rash and negligent driving of the driver of a Maruti van. On the basis of the pleadings and the evidence on the record, the Tribunal held that the accident took place due to the rash and negligent driving of respondent No.6, and the claimants were awarded compensation of Rs.1,54,000/- along with interest of 12%. from the driver, owner of the vehicle, and the insurance company, who were held to be liable jointly and severally.

It is the case of the appellant-Insurance Company that the Tribunal while awarding the compensation ought to have given recovery rights to the appellant-insurance company against the driver who did not hold a valid driving license which is not given to the appellant-Insurance Company. On the other hand, the claimant-respondent has filed cross-objections seeking further enhancement of the amount of compensation awarded by the Tribunal because according to them, the Tribunal did not award future prospects and also did not award amounts under the conventional heads as per the law laid down by the Supreme Court in various cases.

After hearing the rival submissions by the parties, the court held that the insurance company needs to establish the breach on the part of the insured to escape from the liability of indemnifying the insured.

"It must be established by the insurance company that the breach was on the part of the insured and that it was the insured who was guilty of violating the promise or infringement of the contract. Unless the insured is at fault and is guilty of a breach the insurer cannot escape from the obligation to indemnify the insured and successfully contend that he is exonerated having regard to the fact that the promisor (the insured) committed a breach of his promise."

As far as the contention of the appellant-Insurance Company regarding the fake driving license is concerned, the Tribunal earlier held that the appellant has been unable to prove that the owner of the offending vehicle was aware of the fake license of the driver and still permitted him to drive. The appellant-insurance company has also failed to prove negligence or failure to exercise reasonable care on the part of the insured (owner). Accordingly, the Court dismissed their appeal for it being sans merit and held that the appellant-Insurance Company cannot absolve itself from its liability of paying the compensation.

Coming on to the cross-objections filed by the claimant-respondent, the court took into notice the amount of compensation awarded which included loss of estate, funeral expenses, etc but nothing was awarded towards future prospects which have been contended by the claimant-respondent along with 10% increase on the amounts under the conventional heads.

Counsel for the claimant-respondent Nos.1 to 5 would contend that no amount has been awarded towards future prospects and further no spousal and parental consortium has been awarded as per the law laid down by the Supreme Court in National Insurance Co. Ltd. Vs. Pranay Sethi and Ors. [2017(16) SCC 680] and Magma General Insurance Co. Ltd Vs. Nanu Ram alias Chuhru Ram & Ors., [2018(18) SCC 130.

Court held that no amount has been granted towards the future prospects and the amount awarded under the conventional heads is also not in consonance with the law laid down by the Supreme Court.

From a perusal of the award, the Court noted that no amount was granted towards the future prospects and the amount awarded under the conventional heads was also not in consonance as per the law laid down by the Supreme Court in the cases of Pranay Sethi (supra) and Magma General Insurance (supra). The multiplier applied is also incorrect.

"The deceased in the present case was aged 37 years and is survived by his wife, three minor children and one major child. The minor children have their entire life ahead of them. Their education has to be taken care of as well as the living expenses of all the claimants," it remarked.

For the reason mentioned above, the court dismissed the appeal by the insurance company and allowed the cross-objections filed by the claimant-respondent by modifying the award passed by the Tribunal.

The enhanced amount of compensation shall attract interest @ 9% per annum from the date of the claim petition till the date of payment. Since all the claimant-respondent Nos.1 to 5 would be major now, they would all be entitled to equal shares in the enhanced amount of compensation without it being kept in a FDR.

Case Title: National India Insurance Co. Ltd. versus Smt. Fajari & Others 

Citation: 2022 LiveLaw (PH) 68

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