Insurer must satisfy third-party award before recovering from owner and driver absent proved policy breach.

On 17 September 2018, Vijaybhai Natvarbhai Chauhan and his minor son, Rohitbhai Chauhan, aged approximately two years, were waiting for a vehicle at Village Jamba-na-Muwada when a dumper bearing registration No. GJ-17-TT-3301, allegedly driven rashly and negligently by respondent No. 1, collided with them. Both sustained fatal injuries and died.

The claim petition was filed before the Motor Accident Claims Tribunal, Panchmahals at Godhra, in MACP No. 35 of 2019. The Tribunal awarded Rs.2,00,000 with interest at 9% per annum from the date of the claim petition but exonerated the insurer on the ground that the driver did not possess a valid driving licence.

The claimants appealed against the inadequacy of compensation and the insurer’s exoneration.

Whether the compensation payable for the death of the two-year-old minor Rohit Vijaybhai Chauhan required enhancement by assessing his income on the basis of the applicable minimum wages, adding future prospects, applying the appropriate deduction and multiplier, and awarding amounts under conventional heads?

Whether the insurer could be completely exonerated from liability merely because the offending vehicle’s driver did not possess a valid driving licence, without proof of a conscious breach of the policy conditions by the vehicle owner?

The Court applied the principle in Hitesh Nagjibhai Patel v. Bababhai Nagjibhai Rabari, 2025 INSC 1070, that the income of a deceased minor may be assessed on the basis of the minimum wages prevailing at the time of the accident.

It applied National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680, for addition of 40% towards future prospects and for compensation under conventional heads such as loss of estate and funeral expenses.

The Court relied on Magma General Insurance Co. Ltd. v. Nanu Ram @ Chuhru Ram, (2018) 18 SCC 130, for awarding parental consortium to the deceased child’s mother.

On insurer liability, Sections 5, 149(2)(a)(ii) and related provisions of the Motor Vehicles Act were considered along with National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297, which holds that mere absence, invalidity or disqualification of a driving licence does not by itself absolve the insurer; the insurer must prove both the policy breach and the insured owner’s conscious failure to exercise reasonable care.

The Court also considered Sardari v. Sushil Kumar, (2008) 17 SCC 208, and held that, where breach is not satisfactorily established, the insurer may be directed to pay the award initially with liberty to recover it from the owner and driver.

Since Rohit was approximately two years old and had no actual income, the Court reassessed his notional income using the Gujarat minimum wage for a skilled worker prevailing in 2018, namely Rs.7,910 per month. Applying the 40% addition for future prospects, the monthly income became Rs.11,074. After deducting 50% towards personal expenses, the monthly contribution was assessed at Rs.5,537. Applying a multiplier of 15, the loss of dependency was calculated at Rs.9,96,660.

The Court further awarded Rs.18,150 for loss of estate, Rs.18,150 for funeral expenses and Rs.48,400 for loss of consortium to the mother, resulting in total compensation of Rs.10,81,360.

Regarding the driving licence, although the insurer’s witness asserted that the driver was unlicensed, the insurer did not examine any witness from the RTO to establish the licence position. Nor did it prove that the owner knowingly permitted an unlicensed or invalidly licensed driver to operate the vehicle. The mere invocation of Sections 181, 184 and 177 of the Motor Vehicles Act, or the alleged absence of a valid licence, was insufficient to establish a conscious breach under the rule in Swaran Singh.

Accordingly, complete exoneration of the insurer was unwarranted; however, consistent with the statutory and equitable “pay and recover” principle, the insurer was directed to satisfy the award initially and recover the amount from the owner and driver.

The claimants were entitled to an additional Rs.8,81,360, together with interest at 9% per annum from the date of filing of the claim petition until realization.

The insurer was directed to deposit the awarded amount with interest within six weeks of receiving the judgment, with liberty to recover the amount from the owner and driver by filing execution proceedings before the Tribunal.

The Tribunal was directed to disburse the amount after deducting any deficit court fee and completing due verification.