Failure To Transfer Insurance Policy After Vehicle Purchase, No Privity Of Contract; Bihar State Commission Rejects Policy Benefits To New Owner

Brief Facts:

Mr Saroj Kumar Suman (“Complainant”) purchased a Passion Pro motorcycle from its original owner, Nagendra Kumar (“Original Owner”) for Rs. 30,000/-. The motorcycle was duly transferred in the name of the Complainant. Before transferring the motorcycle, the Original Owner bought an insurance policy for it from National Insurance Co. Ltd. (“Insurance Company”). Even after the transfer in the name of the Complainant was finished, the insurance policy continued in the name of the Original Owner.

Before the conclusion of the policy's time, the motorcycle was stolen from the Complainant's house. An investigation by the police was conducted which concluded that the said theft was true, but the motorcycle couldn't be recovered. The Complainant informed the Insurance Company about it and submitted a claim. However, it was repudiated on the grounds of non-transfer of the insurance policy in his name. Feeling aggrieved, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Commission, Vaishali, Bihar (“District Commission”). The District Commission held that the Complainant failed to transfer the insurance policy in his name after buying the motorcycle. Therefore, he had no insurable interest in the motorcycle. Subsequently, the complaint was dismissed.

Dissatisfied with the order of the District Commission, the Complainant filed an appeal to the State Consumer Disputes Redressal Commission, Bihar (“State Commission”). The Insurance Company contended that there was no privity of contract between the Complainant and the Insurance Company. The policy contract existed with the Original Owner.

Observations of the Commission:

The State Commission referred to the judgement in Complete Insulation (P) Ltd. vs New India Assurance Co. Ltd. [(1996) SCC 221], wherein it was held that until the name of the transferee is entered in the insurance certificate, the Insurance Company is not liable to indemnify the transferee as the transferee has no insurable interest, given lack of privity of contract. Similar findings were reached in the case of Iffco Tokio General Insurance Co. Ltd. vs Ashok Laxman Mane [(2020 CPJ NC (4) 248].

In light of these precedents, the State Commission observed that the Complainant failed to transfer his name in the insurance certificate and mere modification of his name in the ownership book of the motorcycle did not make him a valid beneficiary of the policy. Consequently, the State Commission dismissed the complaint.

Case Title: Saroj Kumar Suman vs National Insurance Co. Ltd. and Anr.

Case No.: First Appeal No. A/345/2017

Advocate for the Complainant: N.A.

Advocate for the Respondent: N.A.