SC rebuff to insurance firms

OUT OF COURT

It is probable that the prevalence of fake driving licences surpasses that of counterfeit stamp papers. The number of road accidents tells its own story.

However, when it is used as a staple defence by insurance companies to deny claims by survivors for compensation, it is suspect. This month, the Supreme Court again rejected this defence by the nationalised insurance companies in a new batch of appeals in National Insurance Company vs Swaran Singh.

Only last year, the Supreme Court had criticised the insurance companies for raising this defence in the judgement United India Insurance Company vs Lehru.

"We find that in spite of the point being fully covered in a large number of cases, the insurers are still seeking to get out of their liability in a large number of cases on the ground that the licence was fake. In this case, the insurance company has not been able to prove that the licence was fake. Yet, they have deprived the claimants of use of money for all these years by filing unnecessary appeals," the judgement said.

The rule was laid down clearly in that judgement. When an owner is hiring a driver, he will have to check whether he has a licence. If the driver produces one that on the face of it looks genuine, the owner is not expected to find out whether the licence has, in fact, been issued by the competent authority or not.

If the owner finds the driver competent after the test, he will hire him. The insurance companies cannot expect the owner to make enquiries with the road transport authorities that are spread all over the country to verify the genuineness of the licence.

The insurers will be liable unless they can show that the owner or the insured person was aware the licence was fake and still permitted the driver to take the vehicle out. Even then the insurance company is liable to third parties. The compensation can be recovered from the insured owner.

In Jitendra Kumar vs Oriental Insurance Company, decided a few months ago by the Supreme Court, the vehicle caught fire due to a mechanical fault. The company again raised the argument that the driver at that time did not hold a valid licence. The National Consumer Commission accepted the contention.

However, the Supreme Court allowed the claimant's appeal and asserted that the company could not have repudiated the claim because of a technical failure.

Not content with all these definitive pronouncements, the insurance companies again approached the Supreme Court with appeals against several judgements with almost the same argument. As if to put a stop to this sort of polemic involving Section 149 of the Motor Vehicles Act, the latest judgement delivered by the Chief Justice laid down 11 principles to be followed in such cases.

It stressed that the provision for compulsory licence of vehicles is a social welfare measure. Therefore, the law must be read liberally. "Mere absence, fake or invalid driving licence or disqualification of the driver are not in themselves defences available to the insurer against either the insured or third parties.

To avoid its liability towards the insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in fulfilling the condition of the policy regarding the use of vehicles by a duly licensed driver," the court said.

The court went further and said that minor breaches of licence conditions, such as want of a medical fitness certificate, requirement about the age of the driver and the like not directly linked to the accident would be treated as "minor breaches of inconsequential deviation in the use of vehicles".

The insurance companies approached the court to lighten their liability, but they came away holding higher accountability in compensation claims. The motor accident claims tribunals and consumer forums "" where the claims are agitated first "" should now be bold enough to enforce the ruling of the Supreme Court in favour of the claimants.