Oriental Insurance Company Ltd. vs Devassia

A.K. Basheer, J.—The short question that arises for consideration in this appeal is whether the Appellant-Insurance Company would be

liable to pay compensation to the insured-victim for the injuries sustained by him while he was travelling in his own vehicle insured with the

Appellant.

Relevant facts may be briefly noticed.

The insured-victim was travelling in his jeep that was being driven by his driver on the ill-fated day. The jeep hit against a tree resulting in

grievous injuries to him. He claimed compensation from the driver and insurer of the vehicle before the Motor Accident Claims Tribunal u/s 166 of

the Motor Vehicles Act.

The driver remained absent and he was set ex-parte. The Appellant/ Insurance Company resisted the claim and contented that it had no liability

to pay any compensation to the victim in as much as the policy issued in respect of the vehicle did not cover the risk of the owner of the vehicle.

The Tribunal repelled the above contention and awarded a sum of Rs. 4,02,000/- as compensation and directed the Appellant/Insurance

Company to pay the same with 9% interest from the date of petition till realisation. The above award passed by the Tribunal is impugned in this

appeal.

Sri. Mathews Jacob, learned senior Counsel submits that the Tribunal has committed serious illegality in mulcting the Appellant with the liability

to pay compensation to the victim without any justification. He points out that the policy issued by the Appellant would cover only a ""third party"" as

provided u/s 147 of the Act. Admittedly, the victim who himself is the insured, he being the owner of the vehicle, the policy did not cover the

insured in this particular case, especially for the reason that he had not paid any additional premium to cover his any personal accident. It is further

contended by him, the law on the point has been well settled in a catena of decisions rendered by the Apex Court in 2004 (3) KLT 813 (S.C.)

Dhanraj v. New India Assurance Company Ltd., and in 2008 (4) KLT 145 (S.C.) Oriental Insurance Company Ltd. v. Rajni Devi.

Before we refer to the above two decisions, it will be profitable to take take a look at the policy issued by the Appellant in this case. The type of

the policy is described thus:

Private Car (Zone A) Policy B Comprehensive

The relevant entries in the policy are extracted hereunder:

(A) OWN DAMAGE- 878.00 (B) LIABILITY TO PUBLIC- 240.00

BASIC BASIC

ADD: OWN DAMAGE- ADD:PATSI= Rs. 0.00 300.00

SURCHARGE

NCB/MALUS: 5,267.50 CSI= Rs. 100,000.00 For 6

ADD: ADD:Liability For

Paid Driver/Workmen No. 1 15.00

ADD:TPPD Cover For Unlimited

Amount 50.00

ADD: Rs.

6,750.50

Special Discount -337.53

Rs. 6,145.50 Rs.

6,413.00

Rs. 321.00

Rs.

6,734.00

A perusal of the entries will show that premium has been collected under the head of ""own damage"" which is dealt with in Section 1 of the

conditions of policy annexed to the certificate. A sum of Rs. 240/- has been collected under the head of ""liability to public"". A further sum of Rs.

300/ - has been collected for personal accident, fixing Rs. 1,00,000/- as the Capital Sum Insured (CSI) for six passengers. In addition to the

above, Rs. 15/- has been collected towards the liability of the paid ""driver/workmen No. 1"". Further, premium of Rs. 50/- has been collected

towards Third Party Property Damage (TDDP) for an unlimited amount. It can be seen that the insured had paid a total sum of Rs. 6,734/-

towards premium under various heads indicated above.

As has been mentioned already, Section I of the conditions of policy deals with ''loss of or damage to the vehicle insured'', with which we are

not concerned in this appeal. Section II deals with ''liability to 3rd parties'' and Section III to personal accident cover for owner-driver. Learned

senior Counsel submits that the victim in this case will not come under any of the three Sections referred to above, and therefore, the Appellant

cannot be held liable to pay any compensation to him for the injuries sustained in the accident.

In this context, certain clauses in Section II of the policy are, in our view, relevant. They are extracted hereunder:

Section II- LIABILITY TO THIRD PARTIES

Subject to the limits of liability as laid down in the Schedule hereto the Company will indemnify the insured in the event of an accident caused by

or arising out of the use of the vehicle against all sums which the insured shall become legally liable to pay in respect of:

(i) death of or bodily injury to any person including occupants carried in the vehicle (provided such occupants are not carried for hire or reward)

but except so far as it is necessary to meet the requirements of Motor Vehicles Act, the Company shall not be liable where such death or injury

arises out of and in the course of the employment of such person by the insured.

The above clause clearly stipulates that the insurer will indemni the insured against all sums which the insured becomes legally liable to pay in

respect of death of or bodily injury ""to any person including occupants carried in the vehicle"".

But according to the learned Senior Counsel, the insurer will not be liable to pay any compensation to the insured if he happens to be the

victim- passenger. To put it differently the contention of the learned Senior Counsel is that all passengers (maximum of six in number) who get

involved in the accident will be entitled to get compensation from the insurer since the policy covers those passengers in view of the additional

premium paid.

The above argument is based on the provisions contained in Section 147 of the Act. According to the learned senior Counsel policy of

insurance must be a policy which is issued, among others, against any liability which may be incurred by the insured in respect of the death of or

bodily injury to any person other than the insured himself. The sum and substance of the argument of the learned Senior Counsel is that the insured-

victim cannot step into the shoes of a third party and claim compensation from the insurer as though he is a third party if he gets involved in an

accident arising out of the user of his own vehicle.

The above argument, as first flush, is quite attractive and may appear to be in tune with the provisions contained in Section 147 of the Act. But

a perusal of the relevant entries in the policy which we have extracted above will show that:

(i) the policy is comprehensive,

(ii) the insured had paid additional premium for personal accident reckoning the capital sum insured as rupees one lakh for six passengers,

Therefore, in our view, the Appellant cannot be heard to say that the insured-victim will not be liable to be compensated even if he happens to

be a ""passenger"" in his own vehicle.

In this context it may be noticed that the specific case of the victim is that the vehicle happened to hit against a tree because of the rash and

negligent driving of his own driver. The paradox will be that if the sole passenger happens to be any one other than the insured himself, he would

have been entitled to get compensation from the insurer. But, according to the Appellant Company, going by the terms of the policy and also the

provisions contained in Section 147 the insurer cannot be mulcted with the liability to pay compensation to the insured himself since he is not a third

party.

It is in the above context that the learned Senior Counsel has invited our attention to two decisions in Dhanraj and Rajni Devi (supra). It is true

that in Dhanraj also the policy issued by the Insurance Company was a ""comprehensive"" one. After analysing the clauses contained in Section 147,

their Lordships held that ''Section 147 does not require an Insurance Company to assume risk for death or bodily injury to the owner of the

vehicle.'' Their Lordships also referred to the judgment in Oriental Insurance Co. Ltd. Vs. Sunita Rathi and Others, , and noticed that ''it had been

held in that case that the liability of an Insurance Company is only for the purpose of indemnifying the insured against liabilities incurred towards

third person or in respect of damages to property''. But significantly in Dhanraj it was observed by their Lordships that, ''an owner of a vehicle can

only claim provided a personal accident insurance has been taken out.'' We have already noticed that in the case on hand the victim-owner had

paid additional premium of Rs. 300/- to cover personal accident.

There is yet another aspect of the matter. In Section III of the conditions of policy which deals with personal accident cover for owner-driver,

the Company undertakes ""to pay compensation for bodily injury/ death sustained by the owner-driver of the vehicle in direct connection with the

vehicle insured or whilst driving or mounting into/dismounting from the vehicle insured or whilst travelling in it as a co-driver, caused by violent,

accidental external and visible means which independent of any other cause shall within six calendar months of such injury"".

We have referred to the above clause in the policy only to indicate that the situation might be different if the insured/owner happens to drive his

own vehicle and meets with an accident. Undoubtedly a policy of insurance is a matter of mutual contract to be entered into between the parties.

Terms of the policy, of course, will govern the nature and extent of the liability of the insurer. The insured will also necessarily have to abide by

certain obligations that are undertaken by him in the policy document. It is also true that as far as statutory policy (Act only policy) envisaged under

the Motor Vehicles Act is concerned, the limits of statutory liabilities cast upon the Insurance Company are circumscribed by the provisions

contained in the relevant provisions of the Act. It will, of course, be open to the owners of the vehicle to pay additional premium and get

themselves covered against certain additional risks/liabilities.

But, still there are several grey areas in the matter of insurance coverage in respect of motor vehicles as noticed by the Apex Court recently in

Jai Prakash v. National Insurance Company Ltd. 2010 (1) KLT 774: 2010 (2) T.A.C. 385 (S.C.). While inviting our attention to the above

decision, learned Senior Counsel has laid heavy emphasis on the observations made by their Lordships, emphasising the need for more alternatives

to continue with the present system of third party insurance with two more changes. He submits that the Apex Court in that decision had also

noticed that the owner is not covered under the definition of third party. We have no doubt that stricto sensu the owner may not fall within the

ambit of third party. But, we have only referred to the ambiguity in the clause contained in the policy which has fallen for our consideration in this

case. As referred to by us in the earlier part of this judgment, the anomaly or paradox is that the owner will not be covered under the policy while

all other passengers in his vehicle will be entitled to get the benefit of the policy.

In this context, we may also refer to the other decision in Rajni Devi (supra). It was a case u/s 163-A of the Act. The deceased sustained fatal

injuries while riding on a motor cycle alongwith another. The parties could not adduce any satisfactory evidence to show who was the pillion rider.

However, the Tribunal held that the Insurance Company would be liable to pay compensation to the legal heirs of the owner of the two wheeler

since it failed to establish who was driving the offending vehicle. The Apex Court ultimately allowed the appeal filed by the Insurance Company

holding that the liability u/s 163-A of the Act is on the owner of the vehicle and a person cannot be both a claimant and also a recipient. But the

company was directed to pay a sum of rupees one lakh as compensation, since apparently the Company had issued a personal accident policy

limiting its liability to the said amount.

But, in Bhagyalakshmi and Others Vs. United Insurance Co. Ltd. and Another etc., , the question that cropped up for consideration was

whether or not a comprehensive policy would cover the risk of a passenger travelling in a private car. Legal heirs of one Lingappa who succumbed

to the injuries sustained by him while he was travelling in a private car owned by one Narayanajoshy had claimed compensation u/s 166 of the Act.

The Tribunal held that the Insurance Company would be liable to indemnify the owner of the vehicle. But the above decision was reversed by the

High Court. Thus, the matter reached the Supreme Court.

Their Lordships while considering the appeal preferred by the claimants was initially of the view that the issue required further consideration by

a larger Bench. However since learned Senior Counsel fairly conceded that the Insurance Regulatory Authority had thereafter clarified that in a

package policy the passenger in a private car or a pillion rider on a two wheeler would be covered in a package/comprehensive policy, the matter

was closed.

But it may be noticed that in Amrit Lal Sood and Another Vs. Smt. Kaushalya Devi Thapar and Others, , the Apex Court has observed thus:

Thus u/s II(I)(a) of the policy the insurer has agreed to indemnify the insured against all sums which the insured shall become legally liable to pay

in respect of death of or bodily injury to ''any person''. The expression ''any person'' would undoubtedly include an occupant of the car who is

gratuitously travelling in the car. The remaining part of Clause (a) relates to cases of death or injury arising out of and in the course of employment

of such person by the insured.

We have already noticed that the Appellant had paid additional premium to cover personal accident as well. More importantly six passengers

in the car also covered under the policy. In that view of the matter, the contention raised by the Appellant that the victim being the insured would

not be entitled to seek compensation from the Insurance Company cannot be sustained. Therefore, it is held that the Appellant-Insurance

Company is liable to pay compensation to Respondent No. 1.

The appeal fails and it is accordingly dismissed.