Case Title – HDFC ERGO General Insurance Company Ltd. v. Nayajoddin Nijamuddin and Ors.
Summary
The Bombay High Court has ruled that an insurance company can retain liability under the ‘pay and recover’ principle even after canceling a policy, provided the vehicle proprietor was not duly informed of the cancellation prior to the accident. The ruling, based in Aurangabad, denied HDFC Ergo’s appeal against a Motor Accident Claims Tribunal, Jalgaon, which ordered the company to compensate the family of a fatality in a motor accident and seek reimbursement from the vehicle owner. The insurance company argued that the policy was void at the time of the accident due to the dishonored premium payment cheque. The court referred to the ruling in United India Insurance Co. Ltd. v. Laxmamma and Ors., which underscored the importance of the insurer canceling the policy and notifying the insured of the cancellation prior to the accident to absolve the insurer of liability. The court dismissed the appeal, concluding that there was insufficient evidence to interfere with the tribunal’s findings. The claimants were allowed to withdraw the entire amount, including accrued interest, that the appellant had deposited.
About the case
The Bombay High Court has rendered a decision stating that an insurance company retains liability under the ‘pay and recover’ principle even after canceling a policy, provided that the vehicle proprietor was not duly informed of the cancellation prior to the date of the accident. In his Aurangabad-based ruling, Justice Kishore C. Sant denied HDFC Ergo’s appeal against a Motor Accident Claims Tribunal, Jalgaon, judgment ordering the company to compensate the family of a fatality in a motor accident and subsequently seek reimbursement from the vehicle owner.
The judgment ordered HDFC Ergo to pay the agreed-upon amount. “The appellant was unable to provide evidence that the insured received the notice of policy cancellation prior to the date of the accident.” Sending the notification to the insured is a matter within the appellant’s control. The notification was not, however, delivered due to an incomplete address. “The fact remains that the insured did not receive the notification of policy cancellation,” the court noted. The legal matter at hand pertained to a fatal collision between an auto-rickshaw and a vehicle, which caused the demise of an individual riding in the auto-rickshaw. The deceased was en route from Jalgaon to Nashirabad in an auto-rickshaw. The reverse-bound auto-rickshaw collided with the truck after the vehicle abruptly applied its breaks while traveling in the same direction. The family of the deceased filed a claim with the rickshaw proprietor and the insurance company for compensation in the amount of Rs. 25 lakhs.
The insurance company lodged objections to the claim, citing a violation of the terms and conditions of the policy. It asserted that the policy had been canceled on the grounds that the policyholder’s premium payment cheque had been dishonored as a result of the account being closed. In part, the Motor Accident Claims Tribunal granted the claim and imposed a liability of Rs. 3,87,000 on the vehicle proprietor as compensation, including “No Fault Liability” to the plaintiffs. The tribunal ordered the insurance provider to recoup the cost from the vehicle proprietor after making the advance payment. Substantiating this decision, the insurance company lodged the current appeal. Mohit R. Deshmukh, the insurance company’s counsel, contended that the policy was void at the moment of the accident as a result of the premium cheque for renewal being dishonored and the policy having expired. The requirement for the issuance of a pay-and-recover order was that a genuine policy be in place. He emphasized that the insured was notified of the policy cancellation via envelope; however, the letter could not be delivered to the intended recipient due to the return of the envelope with the message “address incomplete.” Vishnu B. Madan Patil, representing the claimants, argued that proper notification of the policy cancellation was required and that stringent proof that the insured received such notification was required.
The insured’s prior insurance policy came to an expiration on February 22, 2015. On December 12, 2015, the insured submitted a cheque for policy renewal. The disaster transpired on March 28, 2015. The notice of policy revocation was attempted to be delivered on March 12, 2015; however, it was unsuccessful due to an incomplete address. The court made reference to the ruling in United India Insurance Co. Ltd. v. Laxmamma and Ors., in which the Supreme Court underscored the criticality of the insurer canceling the policy and notifying the insured of this cancellation prior to the occurrence of the disaster in order to absolve the insurer of liability. Furthermore, in reference to Section 64-VB of the Insurance Act, the court emphasized that prior payment of the premium is required before assuming any risk. The court made a distinction between the present case and National Insurance Co. Ltd. v. Seema Malhotra and Ors., elaborating that the latter case pertained to a third-party claim under beneficial legislation, and the claimants were passengers in the vehicle rather than the owners or drivers. As a result, the case was not directly pertinent.
The court reached the determination that the appellant neglected to present evidence that the insured was duly notified of the policy cancellation prior to the occurrence of the accident. The court rejected the appeal on the grounds that it was without merit, taking into account the rights of third-party claimants as stipulated in the Motor Vehicles Act, which is a statute of benefits. The court drew upon the ruling of the Apex Court in Oriental Insurance Co. Ltd. v. Inderjit Kaur & Ors., which established that in accordance with the beneficial legislation, the insurance company is obligated to provide compensation when the claim is brought by a third party. As a result, the court dismissed the appeal, concluding that there was insufficient evidence to necessitate interference with the tribunal’s findings. The court permitted the claimants to withdraw the entire amount, including accrued interest, that the appellant had deposited.
