Insurers cannot deny third-party compensation over hire-for-reward clauses in agricultural tractor-trailer policies, Karnataka High Court rules

Three fatal accidents occurred when a tractor-trailer overturned and fell on three persons who were waiting near a weighbridge after Nilgiri poles had been cut and loaded for transport.

The owner appealed the Tribunal’s awards, which held him liable and exonerated the insurer on the ground that the tractor-trailer had been used for hire and reward, contrary to the policy’s limitation to agricultural and forestry purposes. The High Court considered whether the owner had purchased the poles from one of the deceased and used his tractor-trailer to transport them for his own purposes. It allowed the appeals and modified the awards to require the insurer to indemnify the owner.

1. Whether the owner had purchased the Nilgiri poles from the deceased Madesha and transported them as their owner.

2. Whether Madesha had purchased the poles and hired the tractor-trailer from the owner for their transportation.

3. Whether an agricultural tractor-trailer constitutes a goods carriage and transport vehicle under the Motor Vehicles Act, 1988.

4. Whether an insurer may rely on a policy condition excluding use for hire or reward when that condition is not among the statutory grounds for avoiding liability under Section 149(2) of the Act.

5. Whether the Tribunal’s order required appellate interference.

The Court applied Sections 2(13), 2(14), 2(44), 2(46), and 2(47) of the Motor Vehicles Act, 1988, concerning goods, goods carriages, tractors, trailers, and transport vehicles, together with Rules 2(b) and 2(c) of the Central Motor Vehicles Rules, 1989, defining agricultural tractors and trailers.

It also considered Sections 147, 149(1), 149(2), and 149(7), and Rule 141 and Form 51: the insurer’s statutory defences to a third-party claim are confined to those specified in Section 149(2), and the insurer must satisfy covered judgments subject to the Act.

Relying on Oriental Insurance Co. Ltd. v. Inderjit Kaur, (1998) 1 SCC 371, and National Insurance Co. Ltd. v. Nicolletta Rohtagi, 2002 ACJ 1950 (SC), the Court stated that an insurer cannot avoid liability on grounds beyond the statutory defences; it also referred to Mounesh v. Thimmanna, 2011 ACJ 2054, and National Insurance Co. Ltd. v. Sri Maruthi, ILR 2011 KAR 4139, on the classification of an agricultural tractor-trailer.

The Court found that the complaint and FIR were not exhaustive accounts of the transaction and preferred the investigation materials, including the charge sheet, the owner’s statement, his application to recover the seized poles, and his insurance claim form, as supporting the conclusion that he had bought the poles and used the tractor-trailer for his own purpose.

It therefore rejected the insurer’s contention that Madesha had hired the vehicle. The Court further held that the tractor-trailer was a goods carriage and transport vehicle, but reasoned that the policy’s exclusion of hire-or-reward use could not furnish an additional defence beyond those permitted by Section 149(2); it treated the policy condition as ultra vires insofar as it purported to avoid liability on that basis.

It allowed all three appeals, modified the Tribunal’s awards, and held the National Insurance Company liable to pay the compensation by indemnifying the owner. No costs were awarded.