The Supreme Court has held that insurance companies are bound to pay compensation to road accident victims or their families even if the owner of the offending vehicle has breached the insurance contract.
The insurer can recover the compensation amount from the vehicle owner by filing a separate suit, the top court ruled while setting aside a Telangana High Court judgment.
“Where the contract of insurance is not disputed, even on breach of insurance conditions, this court had allowed recovery of compensation from the insurer by giving the right to the insurer to recover the same from the vehicle owner,” the apex court said, citing its earlier judgments in different cases.
“We deem it appropriate to allow the appeal by directing that the first respondent (i.e., the insurer) shall satisfy the award, though, however, it
can recover the amount so paid from the insured (owner of the vehicle). The appeal stands allowed to the aforesaid extent,” the bench of Justices Sanjay Karol and Manoj
Misra said.
The top court passed the verdict while allowing the appeal by Akula Narayana, who had sustained injuries in a road accident. Narayana had challenged the high court order that had set aside a ruling by the Motor Accidents Claims Tribunal directing Oriental Insurance Company Limited and the vehicle owner to jointly compensate the victim.
The high court held that Narayana was travelling in a five-seater vehicle carrying nine passengers in violation of the insurance policy terms.
Aggrieved, Narayana had approached the Supreme Court.
Justice Misra said the only dispute to be examined was whether the insurer should have been absolved totally from its liability to pay the compensation or should have been directed to pay and recover the amount from the vehicle owner.
The insurance company submitted that the policy in question was a statutory policy and nobody other than the driver, conductor and cleaner was liable for compensation. In addition, the five-seater vehicle was carrying nine passengers in breach of the insurance condition, it said, adding that the insurer could not be held liable.
Rejecting the argument, the apex court said: “The ‘pay and recover principle’ has been consistently followed even though it was doubted in a reference which remained unanswered. Taking a conspectus of various pronouncements, this court recently in ‘Rama Bai v. Amit Minerals’ again applied the said principle and while allowing the appeal of the claimant directed that the insurance company shall satisfy the award and may recover from the insured. Following the aforesaid decisions, we deem it appropriate to allow the appeal....”