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SUPREME COURT OF INDIA
K. S. RADHAKRISHNAN AND DIPAK MISRA JJ.
NATIONAL INSURANCE COMPANY LTD. - Appellants
VERSUS
BALAKRISHNAN & ANOTHER - Respondents
Civil Appeal No. 8163 of 2012 (Arising out of S.L.P. (Civil) No. 1232 of 2012)
Decided on : 20-11-2012
(b) Motor Vehicles Act, 1988 - Section 166 - Gratuitous passenger - Insurance Company does not owe any liability towards gratuitous passengers. (Para 8)
(c) Motor Vehicles Act, 1988 - Section 166 - Act Policy - Insurer is not liable for anybody, including the owner, other than third party. (Paras 15 and 16)
(2006) 4 SCC 404; (2003) 2 SCC 223; (2007) 9 SCC 263; (2004) 8 SCC 553; (2007) 3 SCC 700; (2007) 5 SCC 428; (2004) 3 SCC 297; (2008) 7 SCC 428; (2009) 2 SCC 417; (2007) 8 SCC 698; (2009) 7 SCC 148 - Relied upon
(d) Motor Vehicles Act, 1988 - Section 166 - Comprehensive/Package Policy - Insurance Company may be liable to pay compensation to gratuitous passenger or the owner depending upon nature and terms of the policy. (Para 21)
2011 ACJ 1415 - Cited with approval
Facts of the case:
The Managing Director of the Insurance Company made an accident claim against the Company which was denied on the ground that the claimant being Managing Director was not entitled to such claim.
High Court, treating the Company as owner of the vehicle granted the relief.
Finding of the Court:
Insurer is not liable to any other party other than third party in case of Act only Policy. Position is different under Comprehensive/Package Policy.
Result : Appeal partly allowed.
The legal principles established in this case are as follows:
Insurance policies must comply with the conditions specified under the relevant statutory provisions, particularly Section 147 of the Motor Vehicles Act, which mandates that policies should cover liabilities for third-party injuries or damages caused by the use of the vehicle in a public place (!) .
An insurance policy issued under the Act, often referred to as an "Act Policy," typically does not cover injuries sustained by the owner or occupants unless the policy explicitly includes such coverage. In such cases, the insurer's liability is limited to third-party risks only, and it does not extend to gratuitous passengers or the owner unless additional coverage or premium is paid (!) (!) (!) (!) (!) (!) .
A comprehensive or package policy, which is distinct from an Act Policy, can include coverage for injuries to occupants and gratuitous passengers, provided that the policy's terms and conditions, along with circular directives issued by regulatory authorities, support such coverage. The liability of the insurer under a comprehensive policy extends beyond third-party risks to include injuries to persons traveling in the insured vehicle, including owners and passengers, if the policy covers such risks (!) (!) (!) (!) (!) (!) (!) (!) .
The distinction between an Act Policy and a comprehensive/package policy is crucial. While Act Policies generally do not cover the risk of injury to the owner or occupants without specific inclusion, comprehensive policies are designed to cover such risks, and the insurer's liability can be extended accordingly based on the policy terms and regulatory circulars (!) (!) (!) (!) (!) (!) .
Circulars issued by the regulatory authority clarify that policies labeled as comprehensive or package policies are intended to include coverage for occupants and pillion riders, and insurers are bound to honor such coverage unless explicitly excluded by the policy terms. The authorities have emphasized adherence to these circulars, and the courts have recognized their authority in defining the scope of coverage (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) (!) .
The legal position is that the insurer's liability to pay compensation for injuries to occupants or gratuitous passengers depends on whether the policy in question is a comprehensive/package policy with the necessary coverage, as supported by the policy terms and regulatory directives. If the policy is found to be a comprehensive or package policy, the insurer is liable to indemnify the insured for injuries sustained by occupants, including owners and passengers (!) .
In summary, the case underscores the importance of the nature of the insurance policy—whether it is an Act Policy or a comprehensive/package policy—in determining the extent of the insurer's liability for injuries to vehicle occupants. The regulatory circulars and statutory provisions guide the interpretation, emphasizing that comprehensive policies are designed to cover such risks, whereas Act Policies generally are limited to third-party liabilities.
JUDGMENT
Dipak Misra, J.-Leave granted.
2. The singular issue that arises for consideration in this appeal is whether the first respondent, the Managing Director of the respondent No. 2, a company registered under the Companies Act, 1956, is entitled to sustain a claim against the appellant-insurer for having sustained bodily injuries. Succinctly stated, the facts are that the respondent No. 1 met with an accident about 8.30 p.m. on 23.3.2001 while travelling in the Lancer car bearing registration No. TN 49 K 2750 belonging to the respondent No. 2, as it dashed against a bullock cart near Muthandipatti Pirivu Road-I. He knocked at the doors of the Motor Accident Claim Tribunal (for short “the tribunal”) in MACOP No. 357 of 2004 under Sections 140, 147 and 166 of the Motor Vehicles Act, 1988 (for brevity “the Act”) claiming compensation of Rs.20,00,000/- jointly and severally from the appellant as well as the company on the foundation that the vehicle in question was insured with the appellant-company. Be it noted, the amount was calculated on the basis of pecuniary and nonpecuniary damages.
3. The insurer resisted the claim on the grounds that the claimant had suppressed the fact that he was the Managing Director of the company and hence, the application deserved to be thrown overboard; that even if the petition was entertained the insurance company could not be held liable to indemnify the respondent as the appellant was himself the owner being the Managing Director and under no circumstances he could be treated as a third party; that the policy taken by the company did not cover an occupant in the vehicle but only covered the owner for a limited quantum and hence, the claim was not allowable as sought for.
4. The tribunal, in its award dated 19.4.2007, addressed to the issues of rash and negligent driving of the driver, injuries sustained by the insured and the liability of the insurance company. On the basis of the material brought on record, it came to hold that the accident had occurred due to rash and negligent driving of the driver of the 1st respondent; that the claimant was injured in the accident; that regard being had to the injuries sustained he was entitled to get Rs.8,63,200/- as compensation with interest @ 7.5% per annum from the date of the petition till the date of deposit; and that the insurance company was liable to indemnify as the owner of the vehicle was the company, and the injured was travelling in the car as a third party.
5. Being dissatisfied with the award passed by the tribunal, the insurer preferred C.M.A. (M.D.) No. 1624 of 2008 before the Madurai Bench of Madras High Court and in appeal it was urged that the victim, the Managing Director, who was running the hospital in the name of his deceased father, was the legal owner of the car though the vehicle was insured in the name of the company and, therefore, the liability was to the limited extent as stipulated in the policy. It was also canvassed, in any case, he was a non- fare paying passenger in the car for which no extra premium was paid and hence, the liability could not be fastened on the insurer. The High Court treated the company to be the owner of the vehicle and repelled the stand that the Managing Director was the owner, and further held that as he was only an occupant of the car the insurance company was liable to indemnify the owner for the claim put forth by the victim. It is worthy to note that the High Court opined that if no premium is paid to cover the owner, the insurer is not liable to make good the loss but if another person travels with the owner and suffers injuries the insurer is liable to pay the compensation. Being of this view, the High Court dismissed the appeal. Hence, the present appeal by the insurer.
6. We have heard the learned counsel for the parties and perused the record. As has been indicated at the beginning, the seminal issue is whether the appellant-company is liable to make good the compensation determi
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