Breach of Policy Condition Not Germane in Vehicle Theft Cases; Insurer Must Pay Claim: Rajasthan State Consumer Commission - 2025-01-09

Insurer Cannot Deny Theft Claim Based on Unlicensed Driver, Rules Rajasthan Consumer Commission

Jaipur, Rajasthan – The Rajasthan State Consumer Disputes Redressal Commission has delivered a significant ruling, holding that an insurance company cannot repudiate a vehicle theft claim on the grounds that an unlicensed person was driving the vehicle at the time it was stolen. The Commission, relying on a Supreme Court precedent, ordered United India Insurance Company Limited to pay ₹18 lakhs to the vehicle owner.

The bench, comprising Acting Chairman Atul Kumar Chatterjee and Members Ramphool Gurjar and Shobha Singh, found the insurer guilty of a "deficiency in service" for rejecting the claim.

Background of the Case

The complaint was filed by Smt. Rashmi Vijay, the registered owner of a trailer truck insured with United India Insurance for ₹24 lakhs. On May 12, 2018, the regular driver, Shankar Goswami, parked the truck at a toll plaza and gave the keys to the cleaner (khalasi), Siyaram Choubdar, instructing him to wait until the next morning.

However, Siyaram, against instructions, drove the truck away. Later, it was discovered that he was abducted, and the truck was stolen, dismantled, and sold as scrap by the culprits. The police investigation led to arrests and the recovery of some scrap material.

Smt. Vijay filed a claim with her insurer, but it was repudiated. The insurance company argued that there was a fundamental breach of the policy conditions because the vehicle was entrusted to and driven by the cleaner, Siyaram, who did not possess a valid driving license.

Arguments from Both Sides

Complainant's Arguments: - The primary cause of loss was theft, an insured peril. - The owner did not willfully allow an unlicensed person to drive the truck; the cleaner took the vehicle against the driver's explicit instructions. - The case was squarely covered by the Supreme Court's judgment in National Insurance company Limited vs Nitin Khandelwal (2008) , which held that in theft cases, a breach of policy conditions is not germane. - The insurer's own surveyor had assessed the net loss at ₹20.98 lakhs, and the repudiation was an afterthought.

Insurer's Arguments: - The complainant was aware that the cleaner, who lacked a license, had been allowed to drive the vehicle previously. - Entrusting the vehicle to an unlicensed individual constituted a fundamental breach of the insurance policy. - The company relied on witness statements recorded by the police during the criminal investigation, which suggested the driver had knowingly given the vehicle to the cleaner to drive. - Several precedents from the National Commission were cited where claims were denied due to policy violations, such as lack of permits or registration.

Legal Principles and Court's Reasoning

The Commission meticulously distinguished the facts of the present case from the precedents cited by the insurance company. It noted that the other cases involved breaches directly linked to the incident (e.g., lack of registration or permits for a vehicle being used on the road), whereas this case was fundamentally about theft.

The Commission placed heavy reliance on the Supreme Court's ruling in National Insurance company Limited vs Nitin Khandelwal . It quoted a pivotal excerpt from the judgment:

“In the case in hand, the vehicle has been snatched or stolen. In the case of theft of vehicle breach of condition is not germane. The appellant Insurance Company is liable to indemnify the owner of the vehicle when the insurer has obtained comprehensive policy for the loss caused to the insurer.”

The Commission found that the insurer's denial, based solely on police statements under Section 161 CrPC, was unjustifiable, especially when contradicted by affidavits filed before the Commission. It concluded that the insurer could not prove the owner had knowingly breached the policy conditions.

Final Decision and Order

Finding a clear deficiency in service, the Commission allowed the complaint on a non-standard basis. It ordered United India Insurance Company Limited to:

• Pay ₹18,00,000 (75% of the Insured Declared Value of ₹24 lakhs).
• Pay interest at 9% per annum on the above amount from the date of repudiation until the date of payment.
• Pay an additional ₹1,00,000 as compensation for mental agony and litigation costs.

The insurer was directed to comply with the order within one month, failing which the compensation amount would also attract 9% annual interest.