Insurance Company Can't Avoid Liability If Offending Vehicle Is Stolen & Unauthorisedly Driven By Someone Else: Delhi High Court

The Delhi High Court has observed that the insurance company cannot avoid it's liability of compensating the deceased's family, even if the offending vehicle was stolen and was being unauthorisedly driven by someone else.

Justice Sanjeev Sachdeva added that in order to avoid the liability, the insurer must establish that there was a willful breach on the part of the insured. 

Accordingly, the Court upheld the order passed by the Tribunal which had directed the insurance company pay the compensation amount and recover the same from the driver who had stolen the vehicle.

An appeal was filed challenging the award passed by the Tribunal to the limited extent that it granted recovery rights against the driver of the vehicle.

It was the case of the appellant that since the vehicle was stolen and driver was a professional thief, there was no liability on the insurance company to pay the amount.

The case was that one Eeco Car was being driven in a rash and negligent manner by the driver which hit a scooty of the decease with great force, as a result of the forceful impact deceased fell down and sustained fatal injuries.

The tribunal had found that the offending vehicle was stolen by the driver and a complaint was already lodged with Police Station with regards to the theft of the offending vehicle. The vehicle was insured with the appellant.

The Court therefore dealt with the question as to whether the insurance company is absolved of the liability to pay the amount in a case where the vehicle is stolen and unauthorisedly being driven by somebody else?

The Court relied on the Supreme Court judgment in United India Insurance Company vs. Lehru and Ors, 2003(3) SCC 338 which held that in order to avoid the liability, the insurer must establish that there was a willful breach on the part of the insured.

"Admittedly in the present case the insurance company has not been able to show any breach on the part of the insured to avoid its liability," the Court said.

The Court disagreed with the judgment delivered by the Madras High Court in New India Assurance Co Ltd vs. Selvarajamani & Ors relied on by the appellant.

"Said judgment does not consider the proposition as laid down by the Supreme Court in Lehru (supra) as to whether there is a willful breach on the part of the insured or not so as to entitle the insurer to avoid the liability," the Court opined.

It further said:

"Furthermore, if the proposition of the insurance company was accepted, it would militate against the very concept of a beneficial legislation for the victims of an accident. If such a finding were to be returned then the effect would be that even though a vehicle is insured but is stolen, not only would the insurance company be entitled to avoid its liability but the owner of the vehicle who has insured his vehicle against theft and accident would be saddled with a liability for no fault of his. Alternatively, the claimants would be left without any remedy to seek compensation."

"In view of the judgment of the Supreme Court in Lehru (supra), which lays down that unless the insurance company is able to show that there is a willful breach of the policy on the part of the insured, insurance company cannot avoid its liability."

The Court took note of the fact that the Tribunal had found that the vehicle was stolen and that there was no willful breach of the terms and conditions of the insurance policy by the insured.

"Accordingly, I find no infirmity in impugned award whereby the Tribunal has directed the insurance company to make the payment of the compensation amount and thereafter recover the same from the driver Niraj @ Mika who had stolen the vehicle," the Court said while upholding the impugned order.

Case Title: UNITED INDIA INSURANCE CO. LTD v. SMT ANITA DEVI AND ORS

Citation: 2022 LiveLaw (Del) 24

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