Explained: Are passengers of private-hire cars covered by insurance?

Pachan Rabari along with his wife, two sons and daughter were travelling in a Bolero jeep owned by Arjan Rabari. Due to the driver’s negligence, the vehicle dashed into a bridge, killing Pachan who was only 39 years old. The rest of the family survived.

The vehicle was insured with Iffco Tokio. The policy provided for settlement of a claim within 45 days. Yet, when the claim was lodged, it was neither settled nor repudiated despite reminders.

Rabari’s parents and children filed a complaint before the District Forum for a direction to Iffco Tokio to pay up the insured amount of Rs100,000 together with compensation and costs. The company contested the case, denying its liability to make payment as the vehicle was being used as a transport vehicle without the driver having a valid licence.

The Forum considered the rival contentions and held the claim to be payable. The insurer challenged the order before the Gujarat State Commission which observed that the driver had a licence to drive a light motor vehicle (LMV) only, so he was not entitled to drive the jeep which was being used as a transport vehicle. Upholding the insurer’s stand, the State Commission set aside the Forum’s order and dismissed the complaint.

Rabari’s family questioned the order through a revision petition. It was pointed out that the vehicle was insured as a commercial vehicle. The jeep weighed only 2,750 kg, so it fell within the LMV category. As the driver held a licence to drive an LMV, he was eligible to drive the jeep without any additional requirement. The National Commission considered these arguments in the context of the provisions of the Motor Vehicle Act and Rules and in the light of the Supreme Court judgement dated July 3, 2017, passed in Civil Appeal No. 5826 of 2011 in the case of Mukund Dewangan v/s Oriental Insurance Company. After analysing the law and its interpretation, the National Commission accepted the argument and held that the jeep used as a transport vehicle could be driven by a holder of an LMV licence.

The Commission further observed that the insurance company had received an additional premium for personal accident coverage to the passengers travelling in the jeep, so the claim would be payable.

The insurer then argued that it was not liable to pay the claim as the family had received compensation by filing a case under the Motor Vehicles Act. This objection was overruled on the basis of a Supreme Court judgement in Helen C Rebello & Ors versus Maharashtra State Road Transport Corporation & Anr. [1999 ACJ 10 ], where the Apex Court had ruled that compensation payable under the Motor Vehicles Act is based on a statutory requirement, and it would have no bearing on the amount payable under the contractual requirement of an insurance policy.

Accordingly, by its order of September 12, 2018 delivered by the Bench of Justice R K Agrawal and M Shreesha, the National Commission directed Iffco Tokio to deposit with the District Forum the insured amount of Rs100,000 lakh, along with 9 per cent interest, together with Rs5,000 towards mental agony and Rs3,000 as litigation costs. The Forum was directed to disburse this amount equally between the five legal heirs.

The writer is a consumer activist