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Home / Latest News / HC: Insurance Company not liable for claims by unauthorized passengers in transport vehicles.

HC: Insurance Company not liable for claims by unauthorized passengers in transport vehicles.

November 10, 2018:

Madras High Court
Madras High Court

The Madras High Court recently enunciated that insurance companies are not liable to compensate for deaths or injury of unauthorized passengers in goods/transport vehicles such as lorries or transport vans.

While it is not uncommon for groups of people to choose such vehicles for transport to political rallies, labour sites or even functions such as weddings, the Court ruling warns that no relief may be claimed from insurance companies if an accident occurs en route.

The Court was dealing with a case involving 18 compensation claims that rised after an Eicher transport van carrying people from a wedding function got into an accident.

Bench comprising of Justice KK Sasidharan & Justice R Subramanian noted that following a 1994 amendment to the Motor Vehicles Act, 1988 (Act), Section 147 of the Act limits an insurer’s liability to the following classes of persons when it comes to motor vehicle accidents, i.e.

  • a third party.
  • the owner of the goods or his authorized representative carried in a goods vehicle.
  • the passenger of a public service vehicle.

Also relevant is Section 149 (2) of the Act, which also prescribes the statutory defenses which can be invoked by an insurance company against insurance claims made.

Particularly, as per Section 149 (2) (a) (i) (c), the insurance company would be exempted from liability if the vehicle in question, being a transport vehicle, was used for a purpose not allowed by its permit.

In other words, when it comes to goods vehicles, the insurer’s liability, as regards the persons travelling in such vehicles, is confined to the owner of the goods or his authorized agent alone.

No liability lies as far as any other unauthorized passenger is concerned. Judgment notifies:

“A reading of the above provision [Section 147] makes it clear that an insurance policy which is a mandatory statutory requirement is required to cover only certain classes of persons and not every person who chooses to travel in any type of vehicle. Therefore, there is no mandatory requirement for the Insurance company to cover persons who are travelling as passengers in a non-passenger vehicle/ goods vehicle….

…Therefore, it is clear that an Insurance Company which faces the claim petition can raise a statutory defence to the effect that the vehicle in question was used for a purpose other than the purpose for which the permit had been issued, in order to avoid the liability. Both these provisions [Sections 147 and 149 (2)] have to be necessarily read together.”

To arrive at its conclusion, the Court relied on the prevailing Supreme Court judgements in New India Assurance company Ltd., v Asha Rani and National Insurance Company Ltd, v Baljit Kaur, which were also reaffirmed in United India Insurance company v Nagammal. As such, the High Court noted,

“No doubt true that in many cases the claimants may not be able to realize the award amount from the owners of the vehicles involved in the accident. But, the said factual situation alone cannot impel us to do something against the provisions of the statute and the decisions of the larger benches of the Hon’ble Supreme Court of India.”

In result, the Court, in this case, allowed the appeal filed by the Bharathi Axa General Insurance Company against an order of a Motor Accidents Claims Tribunal (MACT), which had directed the company to compensate claimants who were injured in an accident on the way back from a wedding in a transport van. The Court found that no statutory liability lay upon the insurance company to compensate for the death/injury which arose as a result.

The MACT had also permitted the insurance company to recover the paid amount from the owner of the vehicle, following the “pay and recover” doctrine. However, as also noted in the Nagammal case, no trial court is permitted to issue such pay and recover directions after the ruling in the Baljit Kaur case.

Therefore it set aside the MACT’s order as far as the liability of the insurance company was concerned. The compensation ordered by the MACT was directed to be recovered directly from the owner of the vehicle.

Before parting with the case, the Court also recorded its gratitude for the assistance offered on the issue by Amicus Curiae N Vijayaraghavan. Arguments on behalf of the Bharathi AXA Insurance company was made by advocate S Arunkumar.

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