Vehicle Destroyed by Naxals While Stationary, Invalid Driver's License Not Grounds for Claim Repudiation: Chhattisgarh State Consumer Commission - 2025-08-05

Invalid Driver's License Not a Valid Reason to Deny Claim for Vehicle Destroyed by Naxals: Chhattisgarh State Consumer Commission

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Raipur, Chhattisgarh – In a significant ruling, the State Consumer Disputes Redressal Commission, Raipur, has held that an insurance company cannot repudiate a claim for a vehicle destroyed in an act of arson by Naxals on the grounds of the driver's license being invalid, especially when the vehicle was stationary and not being driven at the time of the incident.

The bench, comprising President Justice Gautam Chourdiya and Member Pramod Kumar Verma , modified the District Commission's order, upholding the insurer's liability but applying contractual deductions for salvage and compulsory excess. The Commission emphasized that for a claim to be denied, there must be a direct causal link (proximate cause) between the breach of policy condition and the loss incurred.

Case Background

The case involved an appeal filed by The Oriental Insurance Company Ltd. against an order by the District Consumer Disputes Redressal Commission, Kanker. The respondent, Vinod Sahu, had his JCB excavator (Reg. No. CG-19 BG-8945), insured with the appellant for an Insured Declared Value (IDV) of ₹18,80,000.

On February 18, 2023, while the JCB was deployed for road construction work under the Pradhan Mantri Gram Sadak Yojana, it was set ablaze by a group of 20-25 Naxals. At the time of the incident, the vehicle was stationary, and the driver, along with others, had been forced out of the vehicle before it was torched. Mr. Sahu filed a claim for the total loss, which the insurance company rejected on January 8, 2024.

Arguments of the Parties

The Oriental Insurance Company Ltd. (Appellant) argued that they were justified in repudiating the claim. Their primary contention was a breach of a fundamental policy condition: the driver, Revaram Padoti, did not possess a valid and effective license to operate a transport vehicle on the date of the incident. They presented evidence from the RTO showing a gap in the validity of the driver's transport license from May 12, 2022, to February 28, 2023. The insurer asserted that since the vehicle was engaged in commercial activity just before the incident, the invalid license constituted a clear policy violation, absolving them of liability. They also argued that the District Commission erred in awarding the full IDV without considering the compulsory deductible and the salvage value as assessed by their surveyor.

Vinod Sahu (Respondent) countered that the rejection was an arbitrary deficiency in service. He argued that the cause of the loss was a malicious act of arson by Naxals, an event completely unrelated to the driver's license. The FIR and other records clearly stated that the vehicle was stationary when it was destroyed. Therefore, the driver's license status had no bearing on the incident, and the principle of proximate cause did not apply. He supported the District Commission's order for full compensation.

Commission's Analysis and Ruling

The State Commission meticulously examined the facts and the central legal question: Was there a nexus between the invalid license and the loss?

The Commission observed from the FIR that the Naxals had specifically targeted the construction work, forcing the workers and drivers away from the machinery before setting it on fire. The judgment noted:

"The Naxals set the vehicle on fire while it was in a stationary state. There was no connection between the driver's license being valid or invalid and the incident... the driver was not riding or driving the said vehicle at the time of the incident causing the accident."

The Commission concluded that the loss was directly caused by a terrorist/malicious act, a peril covered by the policy. The breach of the license condition was not the proximate cause of the loss. Therefore, rejecting the claim on this basis amounted to a deficiency in service.

However, the Commission agreed with the insurer that the District Commission had erred by not applying the deductions stipulated in the insurance contract. It modified the award to align with the policy terms and the surveyor's report.

The Final Order

The State Commission partially allowed the appeal and modified the original order, directing The Oriental Insurance Company to:

1. Pay the complainant ₹15,06,597 . This amount was calculated by deducting the salvage value (₹3,64,003) and the compulsory excess (₹9,400) from the IDV of ₹18,80,000, assuming the complainant retains the salvage.
2. Alternatively, if the insurer takes possession of the salvage and registration, it must pay ₹18,70,600 (IDV minus compulsory excess).
3. The awarded amount is to be paid with 7% annual interest from the date of the complaint (February 13, 2024) until payment.
4. The compensation of ₹10,000 for mental agony and ₹3,000 for litigation costs was upheld.