A package policy’s owner-driver cover binds the insurer despite the deceased owner not being a third party.

On 28 February 2010, Ratnesh Sati was travelling in vehicle No. UK11C/A-0162, which met with an accident near Dulinda, Jwalpa Devi, District Pauri Garhwal, allegedly due to rash and negligent driving, resulting in his death.

His parents, Indramani Sati and Deveshwari Devi, instituted a claim petition under Section 166 of the Motor Vehicles Act, 1988.

The vehicle was insured with The New India Assurance Co. Ltd. under a Standard Commercial Vehicle Package Policy valid from 17 August 2009 to 16 August 2010.

The Motor Accident Claims Tribunal, Chamoli, found that the accident was caused by rash and negligent driving, that the relevant vehicle documents were valid, and that the claimants were entitled to compensation.

It awarded Rs. 2,73,500 with interest at 6% per annum from the date of filing of the claim petition until realization.

Whether the claimants could maintain a claim under Section 166 of the Motor Vehicles Act where the deceased was the owner of the insured vehicle and therefore allegedly not a “third party”?

Whether the Standard Commercial Vehicle Package Policy, including the “Compulsory PA Cover for Owner Driver,” covered the deceased and fastened liability upon the Insurance Company?

Whether the alleged breach of policy conditions, including invalidity of the driving licence and other vehicle documents, was established so as to exonerate the Insurance Company?

Whether the compensation of Rs. 2,73,500 awarded by the Tribunal required interference?

The Court applied Section 166 of the Motor Vehicles Act, 1988, governing claims for compensation arising from motor-vehicle accidents caused by negligence.

It distinguished an Act Policy from a Comprehensive/Package Policy, holding that the liability of the insurer must be determined according to the contractual coverage under the policy.

Relying on Oriental Insurance Co. Ltd. v. Surendra Nath Loomba & Ors., (2012) 13 SCC 792, and the principle stated in National Insurance Co. Ltd. v. Balakrishnan & Anr., (2013) 1 SCC 731, the Court held that a comprehensive/package policy covers the liability of the insurer in respect of occupants where such coverage is provided.

The Court further applied the contractual terms of the policy, which specifically contained “Compulsory PA Cover for Owner Driver,” and held that the insurer could not claim complete exoneration merely because the deceased was the vehicle owner.

An alleged breach of policy conditions must be established by cogent evidence.

The High Court found that the policy was a Standard Commercial Vehicle Package Policy covering the date of the accident and specifically included compulsory personal-accident coverage for the owner-driver.

Consequently, the Insurance Company’s argument that the deceased was not a third party did not, by itself, defeat the claim.

The Court gave effect to the contractual coverage under the package policy and applied the principle that package policies stand on a different footing from Act-only policies.

It also upheld the Tribunal’s factual finding that the registration certificate, tax receipt, insurance cover note and driving licence were valid on the date of the accident, noting that no cogent evidence established any breach of policy conditions.

Since the findings on negligence, death, entitlement and computation of compensation were supported by the record and disclosed no perversity or material illegality, the Court declined to interfere with the award.

The Court held that the package policy and the specific “Compulsory PA Cover for Owner Driver” prevented the Insurance Company from obtaining complete exoneration merely because the deceased was the owner of the vehicle.

The Tribunal was directed to release the awarded amount forthwith in favour of respondent no. 2 in an FDR, with the entire accrued interest, in accordance with the High Court’s order dated 6 June 2012, after adjusting any amount already released.