[Motor Accident] Insurer Liable To Meet Contractual Liability If It Undertakes To Compensate Insured Vehicle’s Owner: Delhi High Court

The Delhi High Court has observed that an insurance company is liable to meet the contractual liability where it undertakes to pay compensation on the death or injury suffered by the owner of the insured vehicle.

Justice Navin Chawla said that as a general rule, the Insurance Company cannot be made liable to pay compensation under Section 163A or Section 166 of the Motor Vehicles Act, 1988, for the death or the bodily injury suffered by the owner or borrower or the driver of the insured vehicle.

“However, at the same time, if the vehicle is covered under the "Comprehensive Policy‟ or the insurance company undertakes by contract to meet any liability to pay compensation on account of the death or the bodily injury suffered by the owner or the borrower or the driver of the insured vehicle, the Insurance Company shall be liable to meet such a contractual liability,” the court added.

Justice Chawla made the observation while dealing with an appeal moved by National Insurance Company Limited challenging an award passed by Motor Accident Claims Tribunal in favour of the claimant.

It was the claimant’s case that in 2006, he met with an accident while he was driving a motorcycle for some office work and hit a divider due to heavy fog and less visibility. In the said accident, he lost both his eyes and there was a loss of jaw and facial deformity. The Disability Certificate issued by the hospital stated that the claimant suffered 100% permanent disability.

It was the insurance company’s case that the claimant was himself driving the motorcycle which was owned by the company he was working with and therefore, he had stepped into the shoes of the owner. It was also submitted that the claimant cannot be considered as a “third party” and thus, the insurance company was not liable to pay the compensation under the “Act Policy.”

The insurance company also contended that the driver cannot be said to be a third party with respect to the insured or borrowed vehicle, as he was in actual possession and control of the vehicle in the capacity of the owner when he was specifically employed for the purpose of driving the insured vehicle.

On the other hand, the claimant said that if the premium for insurance policy as duly paid by the owner of the vehicle for the driver, even when the vehicle was borrowed by a person employed to drive it or where the vehicle was being driven by the employee, the insurer was liable to pay the compensation. The Insurance Policy in the case covered liability of only Rs. 1 lakh.

Perusing Section 147(1) of the Motor Vehicles Act, 1988, Justice Chawla said that it is not mandatory for the insurance policy to cover the liability in respect of the death or bodily injury arising out of and in course of employment of the employee of a person insured, other than a liability arising under the Workmen’s Compensation Act, 1923, in respect of death or bodily injury to an employee engaged in driving the vehicle.

“In the present case, the motorcycle was being driven by the employee of its owner, that is, the respondent no. 2. The „Act Policy‟ would cover only the liability arising under the Workmen‟s Compensation Act, 1923. Therefore, unless covered by the contractual liability under the insurance policy, the appellant was not liable to pay compensation for the injuries suffered by the respondent no. 1 beyond the liability arising under the Workmen‟s Compensation Act,” the court said.

It added that the insurance company’s liability to pay compensation to the claimant was restricted only to Rs. 1 lakh.

“ of the above, the Impugned Award is modified to the limited extent that the appellant shall pay to the respondent no. 1 an amount of Rs. 1 lakh along with interest at the rate of 9% per annum from the date of filing of the Claim petition, that is, 15.03.2010, till the date of deposit of the compensation by the appellant with the learned Tribunal in compliance with the order dated 03.07.2018 of this Court,” the court ordered.

In 2018, an interim order was passed directing the insurance company to deposit the entire awarded amount with interest accrued with the Tribunal.

On this, the court said that out of the amount so deposited, the compensation amount awarded as per the final judgment shall be released in favour of the claimant, alongwith interest accrued, and the excess amount shall be released in favour of the insurance company alongwith interest accrued.

Advocate Sanjay Rawat appeared for the insurance company. Advocate Gaurav Gupta appeared for the claimant.

Title: NATIONAL INSURANCE CO. LTD. v. RAVI PRAKASH MISHRA & ANR.

Citation: 2023 LiveLaw (Del) 1067

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