Motor Accident Claims | Fake License By Driver Doesn't Absolve Insurer Unless Vehicle Owner Knowingly Allowed Breach : Supreme Court

In a relief to a vehicle owner, the Supreme Court on Wednesday (October 8) observed that the insurance company cannot recover the compensation amount from the vehicle owner merely because the driver was found to be using a fake license. A bench of Justices K Vinod Chandran and NV Anjaria said that a vehicle owner is not expected to verify the credentials of the driver's license from the issuing authority whether it is fake or not. Only when the insurance company proves that there was an absence of due diligence in the employment of the driver or the entrustment of the vehicle, the liability would shift to the insured-vehicle owner. “As has been rightly held by the precedents above noticed, the owner of a vehicle employing a driver can only look at the licence produced by the person seeking employment and is not expected to verify from the licence issuing authority whether the licence is fake or not.”, the court said. “The trite law was noticed that even if the licence is fake, the insurance company is liable to pay compensation, if they fail to prove that the insured had deliberately committed breach in entrusting the vehicle to a driver who had a fake licence.”, the court added. The case stemmed from a tragic accident, when a truck collided with a Matador van, killing nine persons and injuring two. The Motor Accidents Claims Tribunal (MACT) found both drivers composite negligent, apportioning 75% fault to the truck driver and 25% to the van driver. While the insurance companies initially paid the compensation, National Insurance, the truck's insurer, contested its ultimate liability. The insurance company argued that the truck driver possessed a fake driving license and that the owner, Hind Samachar, had colluded with him. The Punjab & Haryana High Court allowed the insurer's plea, granting it a "pay and recover" right from the vehicle owner, leading to an appeal before the Supreme Court by the vehicle owner. Setting aside the High Court's decision, the judgment authored by Justice Chandran rejected the Respondent-Insurer's argument that the Appellant-insured need to conduct a due diligence while employing a driver, stating that there's no requirement under the law for the insurer-vehicle owner to verify the credentials of the driving license of the driver. [See IFFCO Tokio General Insurance Co. Ltd. v. Geeta Devi, 2023 LiveLaw (SC) 938] After finding that the insurance company had failed to lead any evidence to show that the Appellant did not exercise due diligence when it employed the driver, the Court held that the High Court committed an error in granting a right to recover the compensation amount from the insurance company. “The insurance company from the totality of the circumstances has to bring out the absence of due diligence in the employment of the driver or the entrustment of the vehicle, to prove breach by the insured, which is totally absent in the present case”, the court said. “We set aside the order of the High Court, insofar as the rights of recovery of the award amounts granted to the insurer. The other directions, as issued by the Tribunal and modified by the High Court, including determination of the award amounts would stand undisturbed.”, the court held. The appeal was allowed. Cause Title: Hind Samachar Ltd. (Delhi Unit) Versus National Insurance Company Ltd. & Ors.Citation : 2025 LiveLaw (SC) 987Click here to read/download the judgmentAppearance: Mr.Gopal Shankaranarayan, Sr. Adv. For the Appellant Dr. Manish Singhvi, Sr. Adv. For the Respondent

Motor Accident Claims | Fake License By Driver Doesn't Absolve Insurer Unless Vehicle Owner Knowingly Allowed Breach : Supreme Court

Yash Mittal

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