Insurance Company Must Prove Policy Breach To Avoid Liability To Indemnify In Motor Accident Claims: Gauhati High Court
The Court dismissed the Insurance Company's appeal and allowed the claimants' cross-objections, enhancing compensation to ₹ 39,87,730.
The Gauhati High Court has held that an insurance company must prove facts of breach of any policy conditions through cogent and admissible evidence, to avoid its liability of indemnifying the insured for payment of any compensation in motor accident claims.
By upholding the Motor Accident Claims Tribunal's (MACT) refusal to accept an investigator's report as conclusive proof of an expired license, the Court reinforced that the burden of proving a breach remains squarely with the insurer, necessitating the examination of official authorities such as the District Transport Officer.
Justice Mridul Kumar Kalita observed, “To put it simply, it is for the insurance company to prove the facts of breach of any policy condition by the insured in order to avoid its liability of indemnifying the insured for payment of any compensation to any claimant in the motor accident claims case...This Court is of considered opinion that the insurance company has failed to establish the breach of policy condition by the insured by adducing admissible and cogent evidence.”.
Advocate S.K. Goswami appeared for the appellants-insurer and for the respondents in cross appeals, while Advocate D. Mondal appeared for the respondents and also for the cross objectors.
On April 26, 2013, the victim was knocked down by a mini city bus (bearing registration No. AS-25-A-6593) while walking on the left side of MRD Road in Guwahati. He succumbed to grievous injuries at the Guwahati Medical College and Hospital.
Thereafter, his widow and six children subsequently filed a claim for compensation under Section 166 of the Motor Vehicles Act, 1988, against the Oriental Insurance Company Limited, the owner, and the driver.
The MACT, Kamrup (M), Guwahati, originally awarded Rs. 24,48,576 with 6% interest to the widow, while excluding the children from dependency benefits. The Insurance Company appealed on the grounds of a policy breach, alleging the driver’s license had expired in 2009. Conversely, the claimants filed cross-objections (CO/17/2019) seeking an enhancement of the award and challenging the 50% deduction for personal expenses.
The Court rejected the insurer’s defense regarding the invalidity of the driving license, noting that while the insurer produced an investigator's report, it failed to examine the District Transport Officer (DTO) to authenticate the expiration.
Following the precedent in National Insurance Co. Ltd. v. Swaran Singh and Others (2004) 3 SCC 297, the Court held that mere absence of a valid license does not provide an automatic defense; the insurer must prove the owner’s negligence in failing to exercise reasonable care.
“…The insurance company with a view to avoid the liability must not only establish the available defenses in the said proceeding, but must also establish breach on the part of the owner of the vehicle. It is also a settled law that the breach which has been pleaded by the insurance company for avoiding its liability towards the insured must be the breach so fundamental as found to have contributed to the cause of the accident”, the Bench observed.
Furthermore, the Court found the Tribunal’s computation of compensation flawed. It noted that the deceased left seven dependents, including six children who were minors at the time of the accident. Consequently, according to the Pranay Sethi guidelines, the deduction for personal expenses should have been one-fifth rather than 50%.
The Court also recognised the right of the children to "parental consortium", expanding the scope of the award beyond the widow.
“This Court finds no infirmity or error in the aforesaid reasoning of the Motor Accident Claims Tribunal for discarding the testimony of DW-1 and DW-2 as regards the fact of proving the lapse of validity of the driving license of the driver of the offending vehicle. Merely because by its order dated 14.07.2016, the Motor Accident Claims Tribunal disallowed the prayer of the insurance company to examine to summon the DTO, Nalbari as a witness cannot be a reason to find fault with the reasoning of the Motor Accident Claims Tribunal given in paragraph No. 38 of the impugned judgment”, the Bench noted.
The Court dismissed the Insurance Company's appeal and allowed the claimants' cross-objections. The total compensation was enhanced to Rs. 39,87,730, carrying an interest rate of 7.5% per annum, from the date of filing.
It directed that the amount be apportioned equally among the seven claimants, with shares for minor dependents to be kept in fixed deposits until they reach maturity.
Cause Title: The Oriental Insurance Co. Ltd. v. Mrs. Sushila Devi and 8 Ors. (Neutral Citation: 2026:GAU-AS:5379)
Appearances:
Appellant: S.K. Goswami, Advocate.
Respondents: D. Mondal, N. Deka and J. Baishya, Advocates.