Insurers must hear vehicle owners before recovering accident compensation, Calcutta High Court rules

The claimants sought compensation under Section 166 of the Motor Vehicles Act, 1988, for the death of Tuhina Parvin Mondal in an ambulance accident.

The Motor Accident Claims Tribunal awarded ₹7,20,000 with 7% annual interest and directed National Insurance Company to pay, while permitting it to recover the amount from the vehicle owner.

The owner appealed against the finding concerning breach of policy conditions and the recovery direction.

The High Court noted that the insurer had not pleaded that the ambulance exceeded its approved seating capacity, and the owner had therefore had no opportunity to answer that allegation.

1. Whether the insurer could recover the compensation paid from the vehicle owner without first giving the owner an opportunity to contest the alleged policy breach

2. Whether the Tribunal’s recovery direction should be modified where the alleged policy breach had not been raised in the pleadings or determined after an opportunity to be heard

Section 166 of the Motor Vehicles Act, 1988, governs the claim for compensation in this case.

An insurer seeking to avoid liability or obtain “pay and recover” relief must establish a breach of the policy condition.

Before recovery is pursued against the insured, the vehicle owner must be given notice and an opportunity to be heard on the alleged breach; where necessary, the insurer should conduct an enquiry, record its findings, and place the enquiry report and supporting evidence before the court.

The Court relied on National Insurance Company Ltd. v. Liraza Bibi, FMA 2003 of 2025, and Reliance General Insurance Company Ltd. v. Niyati Kumar & Ors., 2025 SCC OnLine Cal 8886, concerning proof of breach and procedural fairness in recovery proceedings.

The Tribunal had permitted recovery, but the alleged excess occupancy had not been pleaded, leaving the owner without an opportunity to defend against that specific allegation.

The Court held that a recovery direction could not stand without procedural safeguards. It therefore required that the owner be heard before recovery and that recovery depend on a finding that the owner’s conduct was mala fide; the owner must be allowed to submit relevant documents.

Execution proceedings are to remain in abeyance until the insurer decides the issue; if execution resumes, all points of law remain open.