1. Motor accident occurred before the issuance of an insurance policy on the same day, where the policy explicitly specified a commencement time after the accident. (Para 2 )
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1997 Supreme(SC) 1589
1998(1) Supreme 52
Supreme Court of India
J.S. Verma, CJI., S.P. Bharucha, A.P. Misra, JJ.
Oriental Insurance Co. Ltd. -Appellant
versus
Sunita Rathi & Others -Respondents
Civil Appeal No. 8504 of 1997
Decided on 4-12-1997
Counsel for the Parties :
For the Appellant, Jitender Sharma, Sr. Advocate, B.K. Pal, Advocate.
For the Respondents, Ashok K. Mahajan, Advocate (NP).
Important Points
Important Point
Insurer cannot be held liable on basis of policy taken subsequent to accident where time of issuance of policy was mentioned in the policy /cover note.
Insurer cannot be held liable on basis of policy taken subsequent to accident where time of issuance of policy was mentioned in the policy /cover note.
Subject
Insurance Law - Motor Vehicle Insurance
Act Referred
Headnote
Insurance-Insurer’s liability -Accident occurred on 10th December 1991 at 2.20 PM-Insurance policy and cover note were obtained thereafter on same day at 2.55 PM-Insurer could not be held liable on basis of said policy-Liability will have to be of the owner of vehicle-Conclusion by High Court that owner was not liable was erroneous and suffered basic fallacy-In the circumstances however claimants were not required to refund the amount already by insurer to them. (Paras 2 to 4)
Legal Category Hierarchy
Table of Contents
2. Whether an insurer is liable for an accident occurring on the same day the policy was issued, specifically when the policy specifies a commencement time after the accident. (Para 1 , 2 )
3. Where a policy specifies a precise commencement time, the presumption that insurance begins at midnight does not apply, and liability only arises for events occurring after that time. (Para 2 , 3 )
4. An insurer is not liable for an accident occurring before the express commencement time specified in the insurance policy, regardless of whether the policy was issued on the same day. (Para 2 )
5. Appeal allowed and lower court judgments set aside, though claimants are not required to refund the amount already paid by the insurer. (Para 5 )
6. When does an insurance policy become effective if a specific time of commencement is mentioned?
If the policy expressly mentions the effective date and time of commencement, the insurance becomes effective from that specific time, and the insurer is not liable for accidents occurring prior to that time. (Para 2 )
7. How is the effectiveness of an insurance policy determined when only the date is mentioned without a specific time?
In the absence of a specific time, the logical inference is that the insurance became effective from the previous midnight, making the insurer liable for accidents occurring on that date. (Para 2 )
8. What is the relationship between the liability of the insured and the liability of the insurer?
The liability of the insurer arises only when the liability of the insured has been upheld, as the insurer's role is to indemnify the insured under the contract of insurance. (Para 3 )
Judgment
Verma, CJI.-This appeal by the insurer involves for decision only a short point relating to its liability under the policy of insurance issued subsequent to the accident even though it was issued some time later on the same day. The Tribunal as well as the High Court have held against the insurer placing reliance on a two-Judge Bench decision of this Court in New India Assurance Co. Ltd. v. Ram Dayal & Others1. The question is whether that decision has been correctly applied in the facts of the present case.
2. The motor accident occurred on 10th December, 1991 at 2.20 PM. It was only thereafter the same day at 2.55 PM that the insurance policy and the cover note were obtained by the insured, owner of the motor vehicle involved in the accident. There is express mention in the cover note that the effective date and time of commencement of the insurance for the purpose of the Act was 10th December, 1991 at 2.55 PM. The applicability of the decision in Ram Dayal’s case (supra) has to be considered on these facts. In our opinion the decision in Ram Dayal’s case (supra) is distinguishable and has no application to the facts of this case. The facts of that decision show that the time of issuance of the policy was not mentioned therein and the question, therefore, was of presumption when the date alone was mentioned and not the time at which the insurance was to become effective on that date. In such a situation, it was held in Ram Dayal’s case (supra) that in the absence of any specific time being mentioned, the logical inference to draw was that the insurance became effective from the previous midnight and, therefore, for an accident which took place on the date of the policy, the insurer became liable. There is no such difficulty in the present case in view of the clear finding based on undisputed facts that the accident occurred at 2.20 PM and the cover note was obtained only thereafter at 2.55 PM in which it was expressly mentioned that the effective date and time of commencement of the insurance for the purpose of the Act was 10.12.1991 at 2.55 PM. The reliance on Ram Dayal’s case (supra) by the Tribunal and the High Court was, therefore, mis-placed. We find that in a similar situation, the same view which we have taken, was also the view in M/s. National Insurance Co. Ltd. v. Smt. Jikubhai Nathuji Dabhi & Others2, wherein Ram Dayal’s case (supra) was distinguished on the same basis.
3. It follows that the insurer cannot be held liable on the basis of the above policy in the present case and, therefore, the liability has to be of the owner of the vehicle. However, we find that the High Court, without assigning any reason, has simply assumed that the owner of the vehicle was not liable and that the insurer alone was liable in the present case. This conclusion, reached by the High Court, is clearly erroneous. The liability of the insurer arises only when the liability of the insured has been upheld for the purpose of indemnifying the insured under the contract of insurance. There is, thus, a basic fallacy in the conclusion reached by the High Court on this point.
4. The question now is of the final order to make in the present case, we find that the insurer has made the payment to the claimants in the present case in satisfaction of the entire claim and it has been fairly stated by the insurer that this appeal was filed only for getting a decision on this point pertaining to its liability in such a situation. In the circumstances of the case, we deem it fit to say that the amount already paid by the insurer to the claimants is not required to be refunded by the claimants to the insurer.
5. For the aforesaid reasons, the appeal is allowed. The judgment of the High Court and Tribunal are set aside. However, as indicated earlier, the claimants are not required to refund the amount already paid to them by the insurer.
Appeal allowed.
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