Despite a licence breach, the insurer must satisfy the third-party award first, then recover from the owner and driver.

The appellant, the driver of the offending vehicle, challenged the Motor Accident Claims Tribunal’s award dated 31 October 2011, which held the owner and driver liable to satisfy the compensation award after finding that the driver lacked a valid and effective driving licence at the time of the accident.

He sought an order requiring the insurer to pay the third-party claimants first, with liberty to recover the payment from the owner and driver. The insurer opposed the appeal, relying on the established policy breach.

Whether the absence of a valid and effective driving licence, though a breach of the insurance policy, required the insurer to be completely exonerated from satisfying the third-party award.

Whether the insurer should be directed to pay the compensation to the claimants in the first instance, with liberty to recover the amount from the owner and driver.

Section 173(1) of the Motor Vehicles Act, 1988, provides for an appeal against an award of the Claims Tribunal.

The Court applied the principle that proof of a breach of an insurance-policy condition does not invariably warrant denying third-party claimants the insurer’s protection; the nature and effect of the breach and the circumstances of the case must be considered.

It further applied the “pay and recover” principle, under which an insurer may be directed to satisfy a third-party award first while retaining liberty to recover the amount from the owner and driver in accordance with law.

The Court accepted the Tribunal’s finding that the driver lacked a valid and effective licence and that the policy condition had therefore been breached.

It nevertheless distinguished the insurer’s contractual liability to the insured from its obligation toward third-party claimants. Given that the claimants were third parties, the Court held that the breach did not require the insurer to be wholly relieved of the obligation to satisfy the award. The appropriate course was to require payment first, preserving the insurer’s right to recover from the owner and driver.

The remaining findings and directions of the Tribunal were left intact, and there was no order as to costs.