National Consumer Disputes Redressal
G. Kothainachiar vs The Branch Manager, United India ... on 29 October, 2007
Revision Petition No NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI Revision Petition No.1503 of 2004 (Against the order dated 24.3.2004 in Appeal No. 539/2000 of the State Commission, Tamil Nadu) G. Kothainachiar, W/o K. Govindan, 1-A, Agraharam Street, Madavarwalagam, Srivilliputtur, Tamil Naadu-626 125i Petitioner Vs. 1. The Branch Manager, United India Insurance Co. Ltd., C-52, 1st Mani Road, Anna Nagar, Chennai-600 102 2. Divisional Manager, United India Insurance Co. Ltd., 58, Puraswalkam High Road, Chennai-600 007. 3. Manager, Grievances Department, Head Office, United India Insurance Co. Ltd., 24, Whites Road, Chennai-600 014 4. Divisional Manager, United India Insurance Co. Ltd., Sivakasi Division, Sivakasi, Tamil Nadu Respondents BEFORE: HON'BLE MR. JUSTICE M.B. SHAH, PRESIDENT MRS. RAJYALAKSHMI RAO, MEMBER HONBLE MR. JUSTICE K.S. GUPTA, MEMBER For the Petitioner : Mr.P.S.Seetharaman, Advocate. For the Respondents : Mr. Kishore Rawat, Advocate. Dated the 29th October , 2007 . ORDER
M.B.SHAH, J. PRESIDENT:
In this case the contention of the Opposite Party Insurance Company is that the Complainant is not entitled to reimbursement of loss/damage caused to his vehicle, from the Insurance Company as the vehicle was plied without fitness certificate, which is in violation of the Motor Vehicles Act, 1988. In support of this contention, reliance is placed upon a decision of this Commission. Against that the Complainant has relied on some of the judgments of the Apex Court.
In order to avoid the confusion on the question involved in this case, by order dated 10.1.2007 it was directed that the matter be placed before the larger Bench.
FACTS:
This Revision Petition is filed against the order dated 24.3.2004 passed by the State Consumer Disputes Redressal Commission, Chennai, in A.P. No. 539 of 2000, allowing the appeal of the Insurance Company. The State Commission observed that on the date of the accident there was no fitness certificate relating to the vehicle and, therefore, there was a breach of Section 84(a) of the Motor Vehicles Act and set aside the order passed by the District Forum in O.P. No. 113 of 1997 decided by the District Forum on 20.6.2004.
The District Forum has allowed the complaint and directed the Insurance Company to reimburse the Complainant for a sum of Rs.50,508/- towards the damage caused to the car on the basis of the assessment made by the Insurance Company and also to pay a sum of Rs.10,000/- for mental agony and Rs.1,000/- for expenses.
In the present case the insured vehicle met with an accident on 20.6.1995. Admittedly, the insured was having fitness certificate till 30.5.1995. It is contended that as there was violation of the provision of the Motor Vehicle Act which requires that vehicle cannot be used without having fitness certificate, the insured is not entitled to have reimbursement from the Insurance Company.
In our view, this contention is required to be examined on the basis of the terms of the policy. The relevant terms of the policy with regard to the limitation as to use are as under:-
LIMITATION AS TO USE:-
Use only for carriage of passengers in accordance with the permits (contract carriage or stage carriage) issued within the meaning of the Motor Vehicles Act, 1988. The policy does not cover:
1. Use for organized racing, pace-making, reliability trial or speed testing.
2. Use whilst drawing a trailer except the towing (other than for reeard) of any one disabled mechanically propelled vehicle.
LIMITS OF LIABILITY:-
(a) Limit of the amount of the Companys liability under Section II-1(i) in respect of any one accident as per Motor Vehicles Act, 1958.
(b) Limit of the amount of the Companys liability under Section II-I(ii) in respect of any one claim or series of claims arising out of one event Rs.6,000/-.
Further, admittedly insured was having fitness certificate for more than 10 years. It expired only on 30.5.1995 i.e. before 20 days of the accident. The certificate could not be obtained because of physical ill-health of the insured as contended. Further, as per the RTO Inspectors report, the vehicle was in good condition for plying at the time of accident.
Findings:
At the outset, it is to be stated that that liability of the insurance Company is two-fold:
(i) statutory liability as provided under the Motor Vehicles Act, and
(ii) liability to the insured as per the terms of the contract.
From the facts stated above, it is apparent that there is no breach of policy condition, that is to say that there is no breach of the contract of insurance. Hence, on the ground of breach of condition of the policy, the claim cannot be repudiated.
The alleged breach is with regard to the provisions of Motor Vehicles Act. Therefore, the question would be whether the Insurance Company can repudiate the claim on the alleged ground of breach of some provisions of the Motor Vehicles Act or some other Act. It is not the case of the Insurance Company that the policy is a statutory policy.
In our view, the Insurance Company cannot repudiate the claim when there is no breach of terms of the policy, because insurance is a matter of contract between the parties.
.A. . Between the insured and the insurer parties are governed by the terms of the policy:
The insurance is a contract between the parties and the parties are governed by the terms of the contract. The law on the subject is settled and for this purpose, we would refer to some of the decisions of the Apex Court which were referred to at the time of hearing of the matter.
.(i). In the case of Oriental Insurance Co. Ltd. Vs. Sony Cheriyan, (1999) 6 SCC 451 (p.455), it was observed as under:
17. The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risks covered by the insurance policy, the terms of the agreement have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy. That being so, the insured has also to act strictly in accordance with the statutory limitations or terms of the policy expressly set out therein.
.(ii). In the case of New India Assurance Co. Ltd., Shimla vs. Kamla & Ors. (2001) 4 SCC 342 at page 350, the Supreme Court observed:
25. The insurer and the insured are bound by the conditions enumerated in the policy and the insurer is not liable to the insured if there is violation of any policy condition. But the insurer who is made statutorily liable to pay compensation to third parties on account of the certificate of insurance issued shall be entitled to recover from the insured the amount paid to the third parties, if there was any breach of policy conditions on account of the vehicle being driven without a valid driving licence .(iii). In the case of Jitendra Kumar v. Oriental Insurance Co. Ltd.,(2003) 6 SCC 420 (at P.422) the Apex Court observed as under:
9. We have heard the learned counsel for the respondents who has supported the orders of the State Commission as well as that of the National Commission. So far as the facts of this case are concerned, there is hardly any dispute, therefore, we can safely proceed on the basis that the vehicle in question was damaged due to a mechanical fault and no fault of the driver. For the purpose of argument, we may also proceed on the basis that the driver of the car did not have a valid driving licence. The question then is: can the Insurance Company repudiate a claim made by the owner of the vehicle which is duly insured with the Company, solely on the ground that the driver of the vehicle who had nothing to do with the accident did not hold a valid licence? The answer to this question, in our opinion, should be in the negative. Section 149 of the Motor Vehicles Act, 1988 on which reliance was placed by the State Commission, in our opinion, does not come to the aid of the Insurance Company in repudiating a claim where the driver of the vehicle had not contributed in any manner to the accident. Section 149(2)(a)(ii) of the Motor Vehicles Act empowers the Insurance Company to repudiate a claim wherein the vehicle in question is damaged due to an accident to which driver of the vehicle who does not hold a valid driving licence is responsible in any manner. It does not empower the Insurance Company to repudiate a claim for damages which has occurred due to acts to which the driver has not, in any manner, contributed i.e. damages incurred due to reasons other than the act of the driver.
.(iv).
Even a three Judge Bench of the Apex Court in the case of National Insurance Co. Ltd. Vs. Swaran Singh (2004) 3 SCC 297 at 327 observed as under:
55.
A contract of insurance also falls within the realm of contract. Thus, like any other contract, the intention of the parties must be gathered from the expression used therein.
.B. Statutory Liability: For
the third party, the liability is statutory and that has been clarified by the Apex Court in a number of cases. We would only refer to the case of National Insurance Company Ltd., Chandigarh vs. Nicolletta Rohtagi and Ors. (2002) 7 SCC 456, wherein it was held as under:
the mere fact that there was violation of the terms and conditions subject to which the insurance policy had been issued, cannot have the effect of exonerating the insurer from the statutory liability cast upon him in this regard to pay the amount to the third party victim.
Further, it is observed that . It will, therefore, be open to the insurer appellant to initiate an appropriate proceeding for the refund of the amount paid by it to the claimants and establish the breach of the terms and conditions subject to which the insurance policy had been issued.
.C. Repudiation in case of fundamental or material breach of policy conditions;
Further, Claim for reimbursement can be repudiated in case where the breach of condition of the policy is fundamental or material. This would be clear from the following pronouncements by the Apex Court:
(i) B.V. Nagaraju v. Oriental Insurance Co. Ltd., Divisional Officer, Hassan, (1996) 4 SCC 647 , at page 650 :
Merely by lifting a person or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of the owner, cannot be said to be such a fundamental breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat irregular though, but not so fundamental in nature so as to put an end to the contract, unless some factors existed which, by themselves, had gone to contribute to the causing of the accident. In the instant case, however, we find no such contributory factor.
.(ii). National Insurance Co. Ltd. Vs. Swaran Singh (2004) 3 SCC 297 (at page 337):
In each case, on evidence led before the Tribunal, a decision has to be taken whether the fact of the driver possessing licence for one type of vehicle but found driving another type of vehicle, was the main or contributory cause of accident. If on facts, it is found that the accident was caused solely because of some other unforeseen or intervening causes like mechanical failures and similar other causes having no nexus with the driver not possessing requisite type of licence, the insurer will not be allowed to avoid its liability merely for technical breach of conditions concerning driving licence.
Further, (in para 90) it is held as under:
90. We have construed and determined the scope of sub-clause (ii) of sub-section (2) of Section 149 of the Act. Minor breaches of licence conditions, such as want of medical fitness certificate, requirement about age of the driver and the like not found to have been the direct cause of the accident, would be treated as minor breaches of inconsequential deviation in the matter of use of vehicles.
Such minor and inconsequential deviations with regard to licensing conditions would not constitute sufficient ground to deny the benefit of coverage of insurance to the third parties.
In para 145(vi) one of the conclusion is :
(vi). Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to avoid its liability towards the insured unless the said breach or breaches on the condition of driving licence is/are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions would apply the rule of main purpose and the concept of fundamental breach to allow defences available to the insurer under Section 149(2) of the Act.
From the settled law quoted above, it is apparent that the Insurance Company can repudiate the claim of the insured in case where there is a breach of the policy condition/conditions; and, the breach is fundamental or material so as to vitiate the insurance contract.
Similar/same is the policy of the Insurance Companies. The policy is framed by the General Insurance Corporation of India with regard to settlement of non-standard claims in case where there is breach of policy terms/warranties.
D. The Guidelines for Settlement of Non-standard Claims and the Formula for the same are as under :
1) where a breach of warranty or policy condition (hereafter referred to as breach) arises and where such breach is of a technical nature or is evidently beyond the control or knowledge of the insured or is considered after rectifying the policy and collecting additional premium where due. In settling the claim, a deduction may be made from the assessed claim amount equivalent to the extra premium due for three years or three times the additional premium due for voyage which would have been charged had correct information been available originally.
2) Where the breach is material to the loss or where an act of the insured or his agent has contributed to such a breach in such cases if the insured has acted with the best of intentions and has not consciously committed the breach or where the legal question of liability is in doubt, payment may be considered on merits of each case, upto a maximum of 75% of the assessed amount of loss.
where the breach is material to the loss and the amount determined to be payable upto the maximum of 75% of the assessed amount of loss is found to be higher than what would be payable had the claim been dealt with as one where the breach is of a technical nature, the compromise settlement should be made only for the lower amount.
PROCEDURE
a) Additional premium for the unexpired period of the risk for rectifying the breach should be collected separately on pro-rata basis and credited to premium account.
b) The amount equivalent to 3 years difference in premium or three times the additional premium due for the voyage or 25% of the assessed loss as per guidelines be deducted from the claim amount as assessed by the surveyor and the net amount of the claim paid to the claimant be debited to the claim paid account. Please note that unless additional premium for rectification of the policy for the unexpired period as per (a) above is paid by the insured, the claim cheque need not be released..
It is further laid down that :
The three types of claims which can be settled as non-standard under the guidelines are set out hereunder :
Non-Standard Claims Following types of claims shall be considered as non-standard and shall be settled as indicated below after recording the reasons :
S.No. Description %age of settlement
i) Under declaration of Deduct 3 years difference in licensed carrying premium from the amount of capacity. claim or deduce 25% of the claim amount whichever is higher.
ii) Overloading of vehicles Pay claims not exceeding beyond licensed carrying 75% of admissible claim.
capacity.
iii) Any other breach of Pay upto 75% of warranty/condition of admissible claim.
policy including limitation as to use.
As stated above, in the present case, the insured was having fitness certificate with regard to the vehicle till 30th May, 1995. The accident took place on 20th June, 1995. Further, as per the RTO Inspection Report, the claimant was in good condition for its being plied at the time of accident. In this view of the matter, the impugned order passed by the State Commission cannot be sustained and is set aside. The order passed by the District Forum is restored.
In the result, the Revision Petition is allowed. The Insurance Company is directed to pay a sum of Rs.50,508/- towards the damage caused to the car and also to pay Rs.10,000/- as compensation for harassment and Rs.1,000/- as cost of litigation, as ordered by the District Forum, within a period of six weeks from today. There shall be no order as to costs.
Sd/-
.J. ( M.B. SHAH ) PRESIDENT Sd/-
( RAJYALAKSHMI RAO ) MEMBER Sd/-
..J. ( K.S. GUPTA ) MEMBER