The significance of fundamental breaches in insurance contracts and the impact of unauthorized use of insured vehicles on the liability of insurance companies.

Thiru Justice A. Raman, President—The complainant’s case is as follows : He is the registered owner of the vehicle bearing Registration No. TN-43-4663, Maruti Omni van. The vehicle is covered under a comprehensive insurance policy by the opposite party. The vehicle met with an accident resulting in its extensive damage, whereupon the complainant preferred a claim to the opposite party for the damages sustained. The same was erroneously repudiated by the opposite party. Therefore, the present complaint has been laid for a sum of Rs. 32,577/- with compensation of Rs. 10,000/- for mental agony and sufferings, and for costs of Rs. 1,000/-.

2. The opposite party Insurance Company repudiated the damage claim stating that there was a breach of condition by the complainant and that the complainant had used the car as a tourist taxi and this was not informed to the opposite party and since the vehicle was used as a tourist taxi for hire and reward, there was a fundamental breach of the contract and, therefore, they are not liable.

3. The lower Forum accepted the complaint on the ground that the policy being a comprehensive one, the accident is well covered and, therefore, it directed the opposite party to pay a sum of Rs. 32, 577/- together with interest at 12% p.a. from the date of accident till realization and Rs. 10,000/- as compensation for the pain and sufferings, with a cost of Rs. 1,000/-.

4. The one and the only contention of the Insurance Company is that the vehicle was used for hire and reward without notice to the opposite party and, therefore, the very purpose of the contract has been rendered void by the reason of such user and hence the Insurance Company is not liable to make good the loss sustained by the complainant as a result of the accident. It is not in controversy that the complainant had used the vehicle for hire. It is also not disputed that on the date when the vehicle was involved in accident, it was plied as a vehicle for hire and reward and in the course of such usage alone the accident had taken place. In the very proposal form produced and marked on the side of the complainant, we find that it is a “Proposal Form for Private Car Insurance”. The contention of the learned Counsel for the complainant that he purchased it as a private car and later made use of it as a vehicle for hire and, therefore, it does not alter the nature and character of the contract, cannot be accepted at all. The Insurance Policy makes it clear that it is a Private Car Insurance B-Policy IXI. It contains a condition regarding the limitation as to its use. The use shall be only for social, domestic and pleasure purposes and Insured’s own business. The policy does not cover use for the hire or reward or for organized racing, pacemaking, reliability trials, speed testing, carriage of goods (other than samples) in connection with any trade or business of use for any purpose in connection with Motor Trade. Thus we find that the vehicle has been used as a private car and has been insured with the Insurance Company and the policy prevents its use for hire or reward and it also makes it clear that it should be used only for social, domestic and pleasure purpose and Insured’s own business. It is not the complainant’s case that he has not any business and for that purpose he used the vehicle at the time of the accident. On the other hand, it is the accepted case that on the date of the accident and at the time of the accident, the vehicle was plied only as a taxi for hire or reward. Therefore, when the essential condition is breached, when there is a prohibition and limitation for the user of the vehicle for hire or reward, then it follows that it being a fundamental condition upon which the insurance of the vehicle has been accepted by the Company and there being a clear violation of such fundamental condition, it amounts to breach of the essential and important condition of the policy and, therefore, it follows that the repudiation of the s