Carrying fare-paying passengers in a privately insured jeep constitutes fundamental breach, absolving the insurer from indemnity.

The three appeals arose from the same motor accident dated 15 December 2001 involving jeep No. HR-08-3278, owned by Kulbir Singh and insured with The New India Insurance Company Limited.

The jeep, which was insured for private use, was carrying several passengers when it went out of control, struck roadside trees and overturned, causing the death of Sompal and injuries to Chameli Devi, Kamlesh and Naman, as well as the death of the driver.

The Motor Accident Claims Tribunal, Kaithal, awarded ₹2,73,000 to the legal representatives of Sompal and ₹40,000 to Chameli Devi. In separate proceedings, ₹40,000 was awarded to Kamlesh and Naman.

The Tribunal held that the jeep was being used for carrying passengers for hire or reward in breach of the insurance policy. It consequently exonerated the insurer in two matters and, in the third, directed the insurer to pay the compensation with the right to recover it from the owner.

Kulbir Singh challenged the findings relating to the insurer’s liability. Chameli Devi filed cross-objections seeking enhancement of her compensation from ₹40,000, contending that she had suffered multiple fractures and 17% permanent disability.

Whether the accident occurred due to the rash and negligent driving of the driver of jeep No. HR-08-3278?

Whether carrying passengers for hire or reward in a jeep insured for private use constituted a breach of the insurance-policy conditions, thereby exonerating the insurer from indemnifying the owner?

Whether the insurer could be directed to satisfy the award first and recover the amount from the insured despite the established policy breach?

Whether Chameli Devi was entitled to enhancement of compensation for her injuries, treatment, loss of income, permanent disability and loss of amenities?

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

It applied the principle of res ipsa loquitur, under which the circumstances of an accident may themselves establish negligence where a vehicle goes out of control and overturns.

On insurance liability, the Court relied on Amudhavalli v. HDFC Ergo General Insurance Co. Ltd., 2025 INSC 1219, holding that carrying fare-paying or gratuitous passengers in a vehicle contrary to its permitted use may constitute a fundamental breach of the policy, in which case the insurer is not liable to indemnify the insured; the “pay and recover” direction is generally intended to prevent hardship to claimants and is not automatic in cases of fundamental breach.

For assessment of personal-injury compensation, the Court relied on G. Ravindranath v. E. Srinivas, 2013 (3) RCR (Civil) 934, identifying medical expenses, loss of earnings, future loss of earning capacity, pain and suffering, loss of amenities and related heads as relevant considerations.

It further applied Sanjay Verma, Sarla Verma and Pranay Sethi for future prospects and multiplier methodology, and Yadava Kumar v. Divisional Manager, National Insurance Co. Ltd., 2010 (4) PLR 242, for assessing loss of future earning capacity based on functional disability.

The Court affirmed the finding of negligence because the jeep had struck roadside trees and overturned while being driven at high speed, and the eyewitness evidence supported the Tribunal’s conclusion that the accident resulted from rash and negligent driving.

On liability, the evidence showed that the driver stopped at different locations, picked up passengers waiting for transport and carried approximately 14–15 passengers.

Although no witness expressly stated that fare had been paid, the Court held that the circumstances established that passengers were being carried for hire or reward, rather than being given a gratuitous lift.

This use violated the private-use insurance policy and constituted a fundamental breach; therefore, the insurer was rightly exonerated in the relevant cases.

In the matter where the insurer had already paid the award pursuant to a pay-and-recover direction, it was held entitled to recover the amount from Kulbir Singh.

Regarding Chameli Devi, the Court found that the Tribunal’s award of ₹40,000 was inadequate in view of her multiple fractures, month-long hospitalisation and certified 17% permanent disability.

Assessing her notional monthly income at ₹3,000, adding 25% for future prospects and applying 17% functional disability with a multiplier of 15, the Court awarded ₹1,14,840 for loss of future income.

It additionally awarded amounts for pain and suffering, treatment and future treatment, loss of income during treatment, attendant charges, special diet, transportation and loss of amenities.

It partly allowed Chameli Devi’s cross-objections and enhanced her total compensation from ₹40,000 to ₹2,42,000, resulting in an enhancement of ₹2,02,000.

The enhanced amount was made payable by the owner, Kulbir Singh, with interest at 9% per annum from 2 January 2003, the date of filing of the claim petition, until realisation.

The insurer was permitted to recover any amount already paid under the earlier pay-and-recover direction from the insured.