The Himachal Pradesh High Court has held that the presence of one additional passenger in a private vehicle does not amount to a fundamental breach of an insurance policy unless it is directly linked to the cause of the accident. The judgment reaffirms the principle laid down by the Supreme Court in National Insurance Co. Ltd. v. Swaran Singh (2004), which mandates that a breach of policy conditions by the insured must be shown to have a causal connection with the accident for the insurer to be absolved of liability.
Justice Vivek Singh Thakur, while deciding a batch of appeals arising out of a motor accident near Shimla, observed:
“So far as overloading of one extra person is concerned, it is not a violation or fundamental breach of the terms of the policy having consequences of absolving the Insurance Company from indemnifying the owner to pay the compensation in an accident, particularly when overloading of one person is not related to cause of the accident.”
The case pertained to a motor vehicle accident in which two occupants of a car lost their lives. Both deceased were employees of Himachal Auto Rohru. Their respective parents filed claim petitions before the Motor Accident Claims Tribunal (MACT), Shimla, which awarded compensation based on the salaries and overtime earnings of the deceased.
The Insurance Company challenged the Tribunal’s award before the High Court, primarily on two grounds:
- The car had a seating capacity of five, but six persons were travelling in it, thereby violating the insurance policy and the Motor Vehicles Act.
- The claimants failed to produce sufficient documentary evidence regarding the exact monthly income of the deceased, including the alleged overtime payments.
Rejecting the insurer’s argument on overloading, the Court held that mere presence of one extra passenger did not constitute a fundamental or wilful breach of the insurance policy, especially when there was no evidence linking the overloading to the cause of the accident. The Court reiterated that such a breach must be shown to have a causal nexus with the accident, as per the Swaran Singh principle.
On the issue of income assessment, the Court noted that although the claimants argued that the deceased were receiving overtime, no conclusive evidence was placed on record to prove that overtime was paid regularly. Accordingly, the Court revised the compensation amounts based on the notified minimum wages issued by the Government of Himachal Pradesh, in the absence of clear proof of higher earnings.
The High Court upheld the liability of the Insurance Company to compensate the claimants, rejecting the plea that overloading constituted a policy violation. However, it partially modified the compensation awarded by the Tribunal, aligning it with the available evidence on record regarding the deceased’s income.
