M J Antony: Vehicle insurance on humane lane

OUT OF COURT

The courts are not only considerate to the victims, but are also strict on insurance companies.

It is a sign of the times that the Supreme Court has to decide appeals of insurance companies involving fake driving licences almost every fortnight, as it did in the recent past. One can only imagine the number of such cases dealt with by the motor accident claims tribunals and the high courts without their reaching the Supreme Court. Forgery of driving licences, PAN and ration cards is a big business and a large proportion of the people behind the wheels do get their licences before they learn safe and honest driving.

The insurance companies have reason to be agitated not only about the rise in the number of such cases but also the recent trend in the courts. The Motor Vehicles Act provides for compulsory insurance to cover death or injury to third parties, who are those apart from the insurance company and the owner. It is a social welfare measure and the courts are very sympathetic to third parties who suffer on account of the negligence of drivers and owners. But this benign attitude of the courts hurts the business of the insurance companies. Earlier, a fake licence would absolve the insurer of its liability. Now it is not so. The courts are not only considerate to the victims, but are strict in interpreting the law when it comes to insurance companies. Recent pronouncements of the Supreme Court indicate the onus put on them by the court.

In the latest case, New India Insurance Co vs Darshana Devi, the owner of a tractor was driving his vehicle without a licence when a labourer, sitting on the mudguard, fell down and was crushed by the wheels. The tribunal awarded Rs 2 lakh to the dependants. The Punjab & Haryana high court upheld it. The Supreme Court dismissed the appeal of the insurance company but allowed it to recover the amount from the owner.

According to Section 149 of the Motor Vehicles Act, the insurance company is absolved from liability to pay compensation awarded by the tribunal if the vehicle is driven by a person who has no licence or is otherwise disqualified. However, the Supreme Court has recently diluted this rule to benefit third parties. There can be several situations in which this rule comes into play. If the driver had no licence at all, the insurer is free from the burden to pay. This was the scenario in Sardari vs Sushil Kumar, when an unlicensed tractor driver fatally hit a tongawalla. However, it is not easy for an insurance company to get away in other situations. According to the new interpretation, if the licence was forged, the insurance company can deny liability only if it can prove that the owner knew that the driver had no licence or had a counterfeit one and still handed over the vehicle to him (Premkumari vs Prahlad Dev). This onus on the insurer to prove these against the owner is rather heavy, especially since the duplicate licences would look as good as the original. If knowledge or connivance is not proved, the company cannot shake off its liability.

There could be another situation when the driver originally had a forged licence but later he renewed it. The court has ruled that the insurance company is not liable to pay if it can prove the negligence or connivance of the owner. In the case of Oriental Insurance Co vs Prithvi Raj, the driver claimed that originally he had a phoney licence but later it was renewed through legal procedure. The National Consumer Commission accepted this excuse, but on appeal, the Supreme Court absolved the insurance company from liability stating that renewal would not cure the original sin. Yet another circumstance would arise when the valid licence had expired at the time of the accident. There is no recent judgment dealing with this situation but the observations of the court go against laying the burden on the insurer. If the driver had a learner's licence, the insurer would be liable to recompense the claim.

There is another class of cases in which the driver had licence for one class of vehicles but at the time of the accident, he was not driving the authorised vehicle. In National Insurance Co vs Annappa Irappa, the Matador van was driven by a person who did not have a licence for light transport vehicle but had a licence for light motor vehicle. The Supreme Court did not find the difference very material and found against the insurance company. However, in National Insurance vs Kusum Rai, the court found that there was a breach of the conditions when a person holding LMV licence was driving a taxi and therefore the insurance company was released from liability.