An insurance company cannot repudiate a claim on the ground of violation of policy conditions unless it can prove that the violation increased the risk involved or contributed to the cause of the accident.

Headnote:
MOTOR VEHICLE INSURANCE - REPUDIATION OF CLAIM - UNAUTHORIZED PASSENGERS - LIMITATION AS TO USE - INSURANCE COMPANY'S LIABILITY - MARKET VALUE OF VEHICLE - INTEREST ON CLAIM AMOUNT.
Fact of the Case:

The complainant's insured vehicle met with an accident during the policy period. The insurance company repudiated the claim on the ground that the complainant violated the policy condition by carrying unauthorized passengers. The complainant denied the allegation and claimed that the persons in the vehicle were coolies engaged for loading and unloading goods.
Finding of the Court:

The court found that the complainant did not violate the policy condition by carrying coolies in the vehicle. The court also found that the insurance company failed to prove that the market value of the vehicle was less than the estimated value shown in the policy.
Issues: 1. Whether the complainant violated the policy condition by carrying unauthorized passengers? 2. What is the market value of the vehicle as on the date of the accident? 3. What is the claim to which the complainant is entitled to?
Ratio Decidendi: 1. The court held that the complainant did not violate the policy condition by carrying coolies in the vehicle because the policy allowed for the carriage of employees (other than the driver) not exceeding six in number. The court also found that the persons in the vehicle were not in any way connected with the cause of the accident or contributed to the risk involved. 2. The court held that the market value of the vehicle as on the date of the accident was Rs. 1,63,000/- as shown in the policy, since the insurance company failed to prove that the value was excessive or that the market value was less than Rs. 1,63,000/-. 3. The court held that the complainant was entitled to Rs. 1,08,000/-, which was the difference between the estimated value of the vehicle and the salvage value, as shown in the survey report of the insurance company's surveyor.
Final Decision: The court allowed the complaint and directed the insurance company to pay the complainant Rs. 1,08,000/- along with interest at 18% per annum from the date of the accident till the date of payment, and costs of Rs. 2,000/-.

ORDER

Mr. D.R. Vithal Rao, President — The complainant is the registered owner of Allwyn Nissan medium goods vehicle bearing registration No. CAN-2408. He had insured the said vehicle with the opposite party, that is, the Oriental Insurance Co. Ltd., Divisional Office, Gandhinagar, Bangalore, under Policy No. M-2-121/MV/12570/91, as per Ex. C-l, under comprehensive policy, covering the risk upto the limit of Rs. 1,63,000/-. This policy was valid for the period between 3.9.1990 upto 2.9.1991. The complainant had paid the full premium of Rs. 3,816/- and the estimated value of the vehicle as shown in the policy issued by the Insurer is Rs. 1,63,000/-. The policy also states in terms that the vehicle is of 1988 make.

2. The said vehicle so insured with the opposite party, met with an accident on 24.6.1991, within the limits of Hoskote Police Station, Bangalore District. The Police at Hoskote Police Station, registered a case in crime No. 203 of 1991, under Sections 279, 337 and 338 I.P.C., issued F.I.R. as per Ex.. C-2, recorded the mahazar as per Ex. C-4. The motor vehicle Inspector report is at Ex. C-3. The Police after completing the investigation placed charge-sheet as per Ex. C-5.

3. The complainant immediately thereafter made a report of the occurrence to the opposite party and submitted a proposal form to the opposite party as per Ex.R-1.

4. The complainant got the damage to the vehicle estimated by M/s. Sundaram Motors, Bangalore, the report of which is as per Ex. C-7 and submitted the same to the opposite party. The opposite party further directed to get the damages estimated by one more expert garage. The complainant got it surveyed and estimated from M/s. Friend's Auto Garage, Bangalore, who gave the report as per Ex. C-9. The opposite party further got surveyed and assessed the damage to the vehicle by its own surveyor who made the report as per Ex. R- 2. The opposite party did not settle the claim made by the complainant but on the other hand by its letter on 3.12.1991, as per Ex. C-11, repudiated the claim of the complainant on an untenable ground.

5. The complainant on the basis of the averments so made claimed a sum of Rs. 1,60,000/- from the opposite party.

6. The opposite party filed its statement of objections. The opposite party admitted that the vehicle was insured with them; it was a comprehensive policy as per Ex. C-1. It also admitted that it met with an accident as averred by the complainant on 24.6.1990 during the currency of the policy period Ex. C-1. It also admitted the fact of the said damaged vehicle being surveyed, inspected and assessed by its official Surveyor as per Ex. R-2. It did not deny the fact that the complainant got the vehicle surveyed and estimated by M/s. Sundaram Motors and M/s. Friend's Auto Garage. The opposite party denied the claim of the complainant on the sole ground that some unauthorised passengers were carried in the vehicle at the time of the accident in violation of the policy condition as regards "Limitations as to use".

7. At the enquiry, complainant examined himself as C.W.I and a Mechanic of M/s. Friend's Auto Garage, as C.W. 2 and got Ex. C-l to C-28 marked in evidence. The opposite party did not lead any evidence, documents filed by it were marked as Exs. R-1 and R-2 with the consent of the complainant.

8. Having regard to the pleadings of the parties as also the evidence adduced before us, the points that arise for consideration are:

(1) Whether the complainant acted in violation of the policy condition as regards "Limitations as to use" by carrying unauthorised persons in the vehicle at the time of the accident?

(2) What is the market value of the vehicle as on the date of the accident?

(3) What is the claim to which the complainant is entitled to?

9. Regarding point No. 1:—The opposite party repudiated the claim of the complainant only on the ground that the complainant acted in violation of the policy condition. The repudiation letter Ex. C-11, read thus:

"This has reference

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Judicial Analysis

An insurance company cannot repudiate a claim on the ground of violation of policy conditions unless it can prove that the violation increased the risk involved or contributed to the cause of the accident.

Cases Referred (1)

Judicial Analysis