Not Having Valid Fitness Certificate For Vehicle Is Ground For Insurance Claim Repudiation: NCDRC

Brief Facts of the Case

The Complainant got a taxi insured with United India Insurance/insurer. The taxi met with an accident when hit by an unknown vehicle. The complainant informed the insurer, and the authorized repairer assessed it as a total loss claim. The insurer approved the claim but did not pay it as the financer (Kotak Mahindra) demanded full payment upfront to issue the NOC for cancellation of registration. Despite legal notice, the insurer did not pay the claim, so the complainant filed a complaint before the District Forum. The District Forum allowed the Complaint. Aggrieved by the District Forum's order, the insurer appealed to the State Commission of Chandigarh, but the appeal was dismissed. Consequently, the insurer filed a revision petition before the National Commission.

Contentions of the Insurer

The insurer stated that the insured vehicle met with an accident, and the surveyor's report mentioned 'NA' for the fitness certificate number, confirming the complainant did not have a valid fitness certificate at the accident time. An investigator's report also concluded that the vehicle's fitness certificate had expired before the accident. Based on these findings, the insurer repudiated the complainant's claim through a letter.

Observations by the National Commission

The Commission highlighted the Supreme Court's ruling in United India Insurance Co. vs. Sushii Kumar Godara that there should be no fundamental breach of the insurance contract conditions when an insurable incident occurs. The Court applied the ratio from Narinder Singh vs. New India Assurance Co. Ltd., where it held that the insurer was not liable if the temporary registration of the vehicle had expired at the time of the accident. The Commission emphasized the NCDRC's reference in Naveen Kumar vs. National Insurance Co. Ltd., which held that if a vehicle without a valid registration is used/driven in a public place, it would constitute a fundamental breach of the insurance policy terms, even if the vehicle was not being driven when stolen or damaged. The Commission observed that in the present case, the claim was repudiated by the Insurance Company on the ground that the vehicle did not have a valid fitness certificate as required under Section 56 of the Motor Vehicle Act, 1988. The Commission highlighted that under Section 56, if a transport vehicle does not have a certificate of fitness, it shall not be deemed validly registered. Hence, this alone becomes valid grounds for the Insurance Company to repudiate the claim. The Commission emphasized that plying a transport vehicle on the road without a valid fitness certificate violates the Motor Vehicle Act provisions, entitling the Insurance Company to repudiate the claim as it constitutes a fundamental breach of the policy conditions. The Commission set aside the order by the District and State Commission. It was ruled that the insurer was not deficient in service, and the revision petition was dismissed accordingly.

Case Title: United India Insurance Co. Ltd. Vs. Amandeep Singh

Case Number: R.P. No. 303/2022