Karnataka HC Raises Injured Driver’s Award To ₹9.26 Lakh, Requiring Insurer To Pay First But Allowing Recovery From Owner After Cancellation Notice Service Was Unproved

In brief

The question

1. Whether the insurer could avoid liability to the third-party claimant because the premium cheque was dishonoured and the policy cancelled.

The court held

Both appeals were allowed in part, and the Tribunal’s award was modified.

It also directed

The Court held the claimant entitled to reassessed compensation of Rs.9,26,560 with interest at 6% per annum, excluding 228 days’ delay.

The insurer was directed to pay first, with liberty to recover from the insured.

The balance was to be deposited within six weeks, and the compensation on deposit released to the claimant.

01Facts

The claimant, a heavy-goods-vehicle driver, was injured when his tempo collided with a trailer allegedly parked in the road without indicators.

¶ 2–6

He filed a claim under Section 166 of the Motor Vehicles Act, 1988.

¶ 2–6

The Tribunal found the trailer’s driver negligent, assessed permanent disability and awarded Rs.4,25,750 with interest at 6% per annum, holding the insurer liable.

¶ 2–6

The insurer appealed, contending that the premium cheque had been dishonoured and the policy cancelled; the claimant appealed for enhanced compensation.

¶ 7–9

02Issues

i.1. Whether the insurer could avoid liability to the third-party claimant because the premium cheque was dishonoured and the policy cancelled.

¶ 11(i)

ii.2. Whether the claimant was entitled to enhanced compensation, including for future loss of income and non-pecuniary heads.

¶ 11(ii)

03Law Applied

Section 166 of the Motor Vehicles Act, 1988 provides the basis for a claim for compensation arising from a motor-vehicle accident, and Section 173(1) provides for an appeal against the Tribunal’s award.

¶ 2, 11

The insurer relied on Section 64-VB(4) of the Insurance Act, 1938 in contending that dishonour of the premium cheque affected the policy.

¶ 7

Applying United India Insurance Co. Ltd. v. Laxmamma, (2012) 5 SCC 234, the Court held that an insurer remains liable to third-party claimants if it fails to establish due service on the insured of the cancellation notice, while retaining liberty to recover from the insured.

¶ 12

For compensation assessment, the Court relied on Kala Devi v. Bhagwan Das Chauhan, 2014 ACJ 2875, regarding income of a heavy-goods-vehicle driver, and Erudhaya Priya v. State Express Transport Corporation Ltd., (2020) SCC OnLine SC 601, regarding addition of future prospects.

¶ 13

Provisions in the judgment · 2 · Linked ones open on LawLens

Motor Vehicles Act, 1988 Section 173 Section 166

04Reasoning

Although the insurer produced documents relating to the premium cheque, its dishonour and cancellation, it did not establish that the cancellation notice had been duly served on the insured.

¶ 12

Under Laxmamma, the insurer therefore remained liable to the claimant, subject to its right of recovery from the insured.

¶ 12

On quantum, the Court assessed monthly income at Rs.9,000, added 40% future prospects because the claimant was under 40 and self-employed, and applied 25% functional disability and a multiplier of 16. It calculated future loss of income at Rs.6,04,800.

¶ 13

It also enhanced compensation for loss of income during treatment, loss of amenities, and pain and suffering, while leaving the awards for medical expenses, incidental expenses and future medical expenses unchanged.

¶ 14