Insurer accepting additional premium to cover a driver cannot avoid liability for the driver’s self-negligence.

On 24 May 2012, the appellant was driving a Tata Magic when it collided with a Bolero allegedly driven rashly and negligently from the wrong side of the road.

The appellant sustained multiple grievous injuries and filed Motor Accident Claim Petition No. 680 of 2012 before the Motor Accident Claims Tribunal, Kheda at Nadiad.

The Tribunal assessed compensation at Rs.88,400 with 9% interest, holding the appellant contributorily negligent to the extent of 70% and exonerating respondent No.4–insurer from liability.

The appellant challenged the award solely on the grounds of quantum and the insurer’s liability.

Whether the compensation awarded by the Tribunal required enhancement by reassessing the appellant’s income, future prospects, functional disability, actual loss of income, and non-pecuniary expenses.

Whether respondent No.4–Insurance Company could be exonerated from satisfying the award where an additional premium of Rs.25 had been paid to cover the risk of the driver, notwithstanding the appellant’s contributory negligence.

In the absence of cogent proof of actual income, compensation must be assessed with reference to the applicable minimum wages, as recognised in Govind Yadav v. New India Insurance Co. Ltd., (2011) 10 SCC 683.

Under National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680, and Sidram v. Divisional Manager, United India Insurance Co. Ltd., (2023) 3 SCC 439, future prospects may be added to the income of an injured claimant; for a claimant aged 33 years, the applicable addition was 40%.

Compensation for permanent functional disability is calculated by applying the appropriate age-based multiplier to the loss of earning capacity.

Under Section 147 of the Motor Vehicles Act, 1988, read with the principle stated by the Full Bench in Valiben Laxmanbhai Thakore (Koli) v. Kandla Dock Labour Board, 2021 ACJ 2262, acceptance of an additional premium to cover a paid driver extends the insurer’s contractual liability, and the insurer cannot avoid liability on the ground of the driver’s self-negligence.

The Court held that the appellant’s income had not been proved through cogent evidence, but the Tribunal’s assessment of Rs.3,000 per month was below the applicable minimum wage for a skilled worker in Gujarat. It therefore reassessed monthly income at Rs.4,980.

Since the appellant was 33 years old, 40% was added for future prospects, producing an income of Rs.6,972 per month; applying 35% functional disability, a multiplier of 16, and the annualisation formula, future loss of income was assessed at Rs.4,68,480.

The Court further enhanced pain, shock and suffering from Rs.15,000 to Rs.25,000, special diet, attendant charges and transportation from Rs.7,000 to Rs.20,000, and actual loss of income to three months’ wages, or Rs.14,940.

Medical expenses of Rs.65,134 were maintained, resulting in total compensation of Rs.5,93,554.

Although the finding of 70% contributory negligence was not challenged, the Court held that respondent No.4 could not be exonerated because the policy expressly recorded payment of an additional Rs.25 premium covering the driver’s risk.

Applying Valiben Laxmanbhai Thakore, the Court concluded that the insurer’s liability under the policy was enlarged and could not be avoided on the basis of self-negligence.

The appellant was held entitled to total compensation of Rs.5,93,554, less the Rs.88,400 already awarded, resulting in additional compensation of Rs.5,05,154 with interest at 9% per annum from the date of filing of the claim petition until realization.

Respondent No.2–IFFCO Tokio General Insurance Co. Ltd. was directed to deposit Rs.89,666, while respondent No.4–Oriental Insurance Co. Ltd. was directed to deposit Rs.4,15,488, both with applicable interest, within six weeks.

The Tribunal was directed to disburse the amount after verification and deduction of any deficit court fee.