Insurer cannot avoid third-party liability for licence-category mismatch absent proof of wilful policy breach.

On 24 June 2006, the 15-year-old claimant was travelling as a pillion rider on a motorcycle when a Piaggio goods auto allegedly driven rashly and negligently collided with it near Igalur, Bengaluru.

He sustained severe compound and comminuted fractures of the right femur and tibia, underwent multiple surgeries and prolonged hospitalisation, and was left with shortening of the right leg, restricted knee movement, painful limp and permanent disability.

The claimant initially received an award of Rs.5,74,000 on 19 December 2009.

That award was set aside by the High Court on 2 January 2015 and the matter was remanded for fresh consideration.

On remand, the Tribunal awarded Rs.19,25,124 with 6% interest, but absolved the insurer on the ground that the offending vehicle’s driver lacked an effective licence to drive a transport three-wheeler.

The claimant appealed seeking enhancement of compensation, fastening of liability on the insurer and enhancement of interest.

Whether the insurer could be absolved of liability merely because the driver held a licence for a three-wheeler non-transport vehicle but not for a goods transport vehicle?

Whether the rate of interest awarded by the Tribunal was liable to be enhanced in view of the prolonged pendency of the claim and the claimant’s serious permanent disability?

Whether the compensation awarded by the Tribunal required enhancement, particularly towards loss of future earnings, pain and suffering, amenities, attendant charges, conveyance, nourishment and future medical expenses?

The Court applied Sections 166, 149(2) and 171 of the Motor Vehicles Act, 1988.

Under Mukund Dewangan v. Oriental Insurance Co. Ltd., a driving licence is required with respect to the class of vehicle and not its particular type; a licence to drive a light motor vehicle ordinarily covers a transport vehicle within that class, without a separate endorsement.

Under National Insurance Co. Ltd. v. Swaran Singh, the insurer must prove not only the alleged invalidity or absence of licence but also a wilful or fundamental breach by the insured; a mere licence defect does not automatically defeat third-party liability, particularly where it did not contribute to the accident.

The same principle was reaffirmed in Pappu v. Vinod Kumar Lamba and Prakashsingh Holal v. Thimmesha Thimappa.

Under Section 171, interest is discretionary and must be just, fair and reasonable, having regard to factors including delay, inflation, prevailing economic conditions, permanent injury and loss of future income.

Compensation for permanent disability is to reflect functional disability and its impact on future earning capacity.

The insurer established that the driver’s licence covered a three-wheeler non-transport category, but it did not prove that the owner had committed a wilful breach or failed to exercise reasonable care, nor that the licensing defect contributed to the accident.

Applying Mukund Dewangan and Swaran Singh, the Court held that the insurer could not avoid its statutory third-party liability merely on that basis.

On quantum, the Court found that the Tribunal had failed to award anything for loss of future earning capacity despite the claimant’s 22.33% whole-body medical disability, permanent shortening of the limb, painful limp and continuing functional restrictions.

Considering the claimant’s age of 15 years, notional monthly income of Rs.4,000, 40% future prospects, functional disability assessed at 30% and multiplier of 18, the Court awarded Rs.3,62,880 towards loss of future earnings.

It also enhanced compensation under pain and suffering, future medical expenses, attendant charges, conveyance, and food, nourishment and diet charges, resulting in total compensation of Rs.27,97,124.

Given the nearly 20-year delay and the fact that no compensation had been paid, the Court enhanced interest from 6% to 7.5% per annum, while excluding future medical expenses from interest computation as stated in the judgment.

The insurer was held liable, jointly and severally with the owner, to satisfy the award; the Tribunal’s finding absolving the insurer was set aside.

The claimant’s total compensation was enhanced from Rs.19,25,124 to Rs.27,97,124, comprising an enhancement of Rs.8,72,000, with interest at 7.5% per annum from the date of the claim petition until realisation, subject to the stated exclusion concerning future medical expenses.

The insurer was directed to deposit the compensation and applicable interest within eight weeks, after which the amount was to be released to the claimant upon application.