Insurer Liable for Compensation Absent Documentary Proof of Material Fact Misrepresentation by the Insured

On March 13, 2011, a six-year-old boy, Sahil, died in a road accident involving a pickup vehicle (MP-18-GA-0458) driven by Appellant No. 1 and owned by Appellant No. 2.

The claimants filed a petition under Section 166 of the Motor Vehicles Act, 1988.

The Motor Accident Claims Tribunal awarded Rs. 2,60,000 with 7% interest but fastened liability solely on the owner and driver, exonerating Respondent No. 2 (Bajaj Allianz General Insurance Co. Ltd.).

The insurer argued that the owner had misrepresented the expiry date of his previous insurance policy to obtain coverage.

The appellants appealed the award, asserting that a valid insurance policy (Ex. D3C) was in effect at 07:30 AM on the date of the accident.

1. Whether the Claims Tribunal was justified in fastening liability upon the owner and driver of the offending vehicle while exonerating the insurance company.

The Court primarily exercised its appellate jurisdiction under Section 173 of the Motor Vehicles Act, 1988.

The court held that the insurer carries the evidentiary burden to prove, through signed documentation or declarations, that the insured intentionally provided false information to obtain the policy.

The Court observed that the insurer’s Law Officer (NAW-3) admitted that the policy (Ex. NA3(3)) was valid from March 13, 2011, to March 12, 2012, and that the premium had been duly received.

Regarding the insurer's defense of misrepresentation, the Court noted a discrepancy: the previous policy with Oriental Insurance expired in October 2010, whereas the new policy with Bajaj Allianz erroneously listed the previous expiry as March 12, 2011.

However, the Court found that the insurance company failed to produce any signed declaration or application form from the owner that would prove the owner was the source of this incorrect information.

Since the insurer failed to establish that the insured suppressed material facts, the Court determined the insurer could not be exonerated from its contractual obligation to indemnify the owner.

The High Court allowed the appeal and modified the award to fasten liability upon Respondent No. 2 (Insurance Company) to indemnify the owner and pay the compensation to the claimants.

The owner and driver were officially exonerated from liability, while all other conditions of the original award remained intact.