Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2009 Supreme(Del) 1424

IN THE HIGH COURT OF DELHI
J.R. Midha, J.
Yashpal Luthra And Another – Appellants
Vs.
United India Insur. Co. Ltd. And Another – Respondents
Mac. App. No. 176 of 2009
Decided On : 09-12-2009

Advocates Appeared:
For the Appellants : M.K. Sinha and N. Prabhakar
For the Respondents: L.K. Tyagi, D.K. Nag, Reshmi Rea Sinha, for IRDA, Pankaj Seth, for Royal Sundaram Alliance Insurance Co. Ltd. and Universal Sompo General Insurance Co. Ltd., Pradeep Gaur, for National Insurance Co. Ltd., Manjusha Wadhwa, for Oriental Insurance Co. Ltd. and Suman Bagga, for Choldamandalam. Arun Mohan, as Amicus Curie

The main legal point established in the judgment is the binding nature of the directives issued by the Tariff Advisory Committee (TAC) and the Insurance Regulatory and Development Authority (IRDA) on insurance companies, mandating their liability for occupants of a private car and pillion rider on a two-wheeler under comprehensive/package policies.

Headnote:
Insurance - Liability of Insurance Companies in respect of Occupants of a Private Car and Pillion Rider on a Two-Wheeler - Insurance Act, 1938, Insurance Regulatory and Development Authority Act, 1999 - The judgment discusses the liability of insurance companies in respect of occupants of a private car and pillion rider on a two-wheeler under comprehensive/package policies. It highlights the directives of the Tariff Advisory Committee (TAC) and the Insurance Regulatory and Development Authority (IRDA) and emphasizes the binding nature of their instructions on insurance companies. The judgment also underscores the consensus reached by all insurance companies to comply with the IRDA circulars and withdraw any contrary pleas in pending cases.
Fact of the Case:

The deceased was riding as a pillion on a motorcycle covered by a package insurance policy. The insurance company denied liability for the accident, leading to a claim petition. The Motor Accident Claims Tribunal awarded compensation against the motorcycle owner but exonerated the insurance company. The claimants appealed, questioning the coverage of a pillion rider under a package policy.
Finding of the Court:

The court found that the insurance company was liable for the pillion rider's death under the comprehensive/package policy, as per the directives of TAC and IRDA. It emphasized the binding nature of these directives and the unanimous agreement of all insurance companies to comply with the IRDA circulars and withdraw any contrary pleas in pending cases.
Issues: The main issue was whether the insurance company was liable for the death of a pillion rider under a comprehensive/package policy, based on the directives of TAC and IRDA.
Ratio Decidendi: The court's decision was influenced by the binding nature of the TAC and IRDA directives, which mandated the liability of insurance companies for occupants of a private car and pillion rider on a two-wheeler under comprehensive/package policies. The unanimous agreement of all insurance companies to comply with the IRDA circulars further reinforced the court's finding.
Final Decision: The court held that the insurance company was liable for the death of the pillion rider under the comprehensive/package policy, in line with the directives of TAC and IRDA. It directed all Motor Accident Claims Tribunals to ensure that no such plea is allowed to be put forward by any insurance company.

Judgement Key Points

Key Points: - (!) TAC directives cover occupants in a private car under comprehensive policy w.e.f. 25th March 1977 and pillion riders on two-wheelers under comprehensive policy w.e.f. 2nd June 1986; these directives are binding on insurers. - (!) The court appointed amicus curiae to assist in evaluating whether the issue of pillion rider/car occupant liability is non-existent or requires ongoing dispute. - (!) TAC circulars (18 March 1978 and 2 June 1986) remain valid; insurers are liable under comprehensive/package policy irrespective of policy wording. - (!) TAC instructions continue to apply; comprehensive policy (Package) covers pillion riders and car occupants. - (!) IRDA, via statements, reiterates insurer liability for occupants and pillion riders under respective policies; TAC/IRDA directives are binding. - (!) Insurance company acknowledged erroneous statements; admission of liability for the case. - (!) - (!) IRDA circulars reiterate liability position and reference TAC circulars; general counsel guidance to insurers to comply. - (!) - (!) IRDA Circulars and executive directives emphasize adherence and compliance by insurers. - (!) - (!) IRDA circulars dated 16.11.2009 and 3.12.2009 direct insurers to withdraw pleas and comply; data collection and withdrawal timelines are set. - (!) Court concludes no need for MACT to decide liability questions where comprehensive/package policy exists; compliance with TAC/IRDA directives is required; future/pending claims to be withdrawn as per IRDA circulars.

Question 1?

How to determine the liability of insurance companies for occupants of a private car and pillion riders on two-wheelers under comprehensive/package policies in light of TAC/IRDA directives?

Question 2?

What is the binding effect of TAC and IRDA circulars on insurance companies regarding coverage under package/comprehensive policies for pillion riders and car occupants?

Question 3?

What steps should insurance companies and tribunals take to withdraw contrary pleas and align with IRDA circulars in pending MACT/High Court/Supreme Court cases?

JUDGMENT :

J.R. Midha, J.

The Court time and resources can be usefully deployed, or they can be unnecessarily consumed or even simply wasted. In the latter case, delays result and there is, apart from injustice by reason thereof, popular dissatisfaction.

2. One of the issues that arose in this appeal gave an indication that the 'issue' was perhaps non-existent. Nevertheless, as an issue, it was consuming extensive Court time. It is in this backdrop that this Court decided to go deeper in an attempt to see if such waste of Court time and resources could be prevented.

3. The issue, and one that appears to be routinely raised by the Insurance Companies in motor accident claims, is:

Whether under a comprehensive/package policy, the insurance company is liable to compensate for the death or injury of a pillion rider on a two-wheeler or the occupants in a private car?

4. The terms and conditions of the insurance policy explicitly covers death of or injury to the pillion rider. The relevant clause of the insurance policy is reproduced hereunder:

1. Subject to the limits of liability as laid down in the Schedule thereto, the Company will indemnify the insured in the event of accident caused by or arising out of the use of the insured vehicles against all sums which the insured shall become legally liable to pay in respect:

(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 employment of such person by the insured.

5. The tariff as well as the terms and conditions of the Insurance Policy were regulated by Tariff Advisory Committee (hereinafter referred to as TAC) under the Insurance Act, 1938 till 31st December, 2006 and thereafter by Insurance Regulatory and Development Authority (hereinafter referred to as IRDA) under the Insurance Regulatory and Development Authority Act, 1999. TAC issued a circular dated 18th March, 1978 to all the Insurance companies to cover the occupants in a private car under comprehensive policy w.e.f. 25th March, 1977. On 2nd June, 1986, TAC directed all the Insurance companies to cover a pillion rider on a two-wheeler under the comprehensive policy. The aforesaid directions of TAC are binding on all the Insurance companies who incorporated the specific Clause (reproduced above) in all their insurance policies after the aforesaid directions.

6. Despite clear clause in the Insurance Policy (reproduced above) and binding directions of TAC and IRDA, the Insurance Company has denied the liability in respect of a pillion rider in this case. Same plea is raised by Insurance Companies in every case of pillion rider and occupants in a car under comprehensive/package policies and large number of such cases are reported to be pending in different Courts all over the country.

7. This Court sought to examine whether this really is an issue that calls for determination in every case; or, is it something which, keeping in view the TAC's directives and that of the IRDA, need not arise, and, more importantly, ought not to be raised by any Insurance Company? There can be no dispute about the larger principle that a non- existent issue cannot be allowed to consume Court time and resources.

8. To assist the Court in this endeavour, this Court, by order dated September 9, 2009 appointed Mr. Arun Mohan, Senior Advocate1 as amicus curiae.

The Facts In This Case

9. On 24th February, 2006, the deceased Vinod Luthra (24 years of age) was returning home riding on the pillion of motorcycle bearing No. DL-75AU-2074 being driven by his friend. At Ahuja Park traffic light near Lodhi Road Complex, the motorcycle was hit by an unknown vehicle, due to which the deceased fell down and suffered fatal injuries.

10. The parents and the widow of the deceased preferred a claim before the Mot

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