Insurer Not Liable Where Goods Vehicle Carried Paying Passengers; SLP Dismissed
A bench of Justices K. Vinod Chandran and N. V. Anjaria heard a special leave petition arising from a motor-accident claim that questioned whether an insurer should be directed to "pay and recover" despite a breach of insurance policy conditions where a goods vehicle carried passengers for fare. The petition challenged a High Court order that confirmed compensation but set aside the Tribunal’s direction that the insurer should pay the award and recover it from the owner.
The Court dismissed the Special Leave Petition and held that where a goods vehicle carried passengers for fare, there was a fundamental breach of the insurance policy disentitling the insurer from indemnity. The Court observed that the claimant’s eyewitness (PW-2) had stated that the deceased and others travelled in the offending three-wheeler after paying fare, and that this deposition "clearly absolves the liability of the insurance company to indemnify the owner." The Court, in its reasoning, observed: The bench noted earlier authorities where the measure of "pay and recover" had been employed but held that those precedents did not assist the petitioner in the present factual matrix, particularly after the reversal of certain earlier views by this Court.
Background The dispute arose from a fatal accident in which the Tribunal computed compensation for the death of the husband of the first petitioner and imposed liability on the insurer. The insurer appealed to the High Court, challenging both the quantum and the insurer’s liability on the ground that the insured vehicle was a goods vehicle and the deceased had travelled as a paying passenger, in breach of policy conditions. The High Court confirmed the quantum awarded by the Tribunal but set aside the Tribunal’s direction for the insurer to pay and then recover the amount from the owner. The petitioners approached this Court by way of Special Leave Petition.
Counsel for the petitioners relied on prior decisions in Manager, National Insurance Co. Ltd. v. Saju P. Paul and Shamanna v. Divisional Manager, Oriental Insurance Co. Ltd., where pay-and-recover directions had been considered. Senior counsel for the insurer relied on New India Assurance Co. Ltd. v. Asha Rani, which this Court treated as having altered the law on third-party coverage where goods carriers carried gratuitous passengers, and submitted that the present case involved payment of fare, which plainly breached the policy condition.
The bench examined the testimonial evidence, including PW-2’s deposition that the deceased paid fare to travel in the three-wheeler. Relying on that factual finding and settled law that a goods vehicle was not permitted to carry passengers for hire unless the passenger was the owner of the goods or an authorised representative, the Court concluded that there was a fundamental breach disentitling the insurer to indemnity. The Court found no reason to interfere with the High Court’s order, particularly given that no amount had been deposited by the insurer and in light of subsequent developments in the Court’s jurisprudence. The Special Leave Petition was dismissed and any pending application stood disposed of.
Case Details: Case No.: Special Leave Petition (C) No.6117 of 2020 Case Title: Amudhavalli & Ors. v. HDFC Ergo General Insurance Company Ltd. & Ors. Appearances: For the Petitioner(s): Mr. Mohan Raj, Advocate For the Respondent(s): Mr. Joy Basu, Senior Counsel