Lorry Cleaner’s Family Awarded Rs 9.64 Lakh As Bombay HC Holds Insurer Liable Despite Policy Cancellation After Premium Cheque Bounce

The insurer had issued a comprehensive policy for the period 27 September 2000 to 26 September 2001.

The premium cheque, dated 18 October 2000, was dishonoured for insufficient funds; the insurer asserted that it had notified the insured of cancellation before the accident.

On 7 December 2000, the insured lorry’s driver struck an electric pole, fatally injuring Lahu Pandurang Mane, who was travelling in the lorry and working as its cleaner.

The insurer contested liability before the Tribunal on the ground that the policy was no longer in force.

The Tribunal awarded the claimants Rs. 2,19,000, holding the insurer and insured jointly and severally liable.

The insurer appealed, and the claimants filed a cross-objection seeking enhancement.

Section 64-VB of the Insurance Act, 1938, concerning the receipt of premium before an insurer assumes risk, was considered alongside the principle in Oriental Insurance Co. Ltd. v. Inderjit Kaur that an insurer’s policy may be relied upon by authorities and third parties, and that non-receipt of premium does not absolve the insurer of its obligations to third parties; the insurer’s remedy lies against the insured.

The Court also relied on Oriental Insurance Co. Ltd. v. Prakash Chunilal Mirgany for the same third-party liability principle.

Under Section 147(1)(b)(i) of the Motor Vehicles Act, 1988, the expression “any person” includes a cleaner; an employee injured or killed in a vehicle accident may pursue a claim under the Motor Vehicles Act or the Workmen’s Compensation Act.

National Insurance Co. Ltd. v. Prembai Patel was distinguished because it concerned an Act-only policy and the insurer’s liability was limited by that policy’s terms.

The Court also applied the compensation principles it considered appropriate to the deceased’s income, future prospects, personal-expense deduction, multiplier and conventional heads.

The Court found that the insurer had issued the policy and that the accident occurred during its stated period. Although the insurer relied on the dishonoured cheque and claimed to have notified the insured of cancellation, the record did not establish that the Regional Transport Office had been informed before the accident; the insurer’s letter to that office was dated after the accident, and the insurer’s witness could not produce proof of the relevant notification.

Applying Inderjit Kaur, the Court held that the asserted non-payment did not defeat the claimants’ third-party rights under the policy, leaving the insurer to pursue any remedy against the insured.

The deceased was not the driver and was travelling as the lorry’s cleaner; given the finding that the driver was negligent and the wording of Section 147(1)(b)(i), the Court rejected the argument that the claim could only be brought under the Workmen’s Compensation Act.

On enhancement, it considered the Tribunal’s monthly income assessment of Rs. 1,500 too low, fixed income at Rs. 3,000, and recalculated compensation using 50% future prospects, a one-quarter deduction, multiplier 17, and the stated conventional heads.

It recalculated total compensation at Rs. 9,64,500, including the Tribunal’s original award of Rs. 2,19,000, and directed the insurer and vehicle owner to pay the enhanced amount of Rs. 7,45,500, with interest at 6% from the petition date until payment, within 12 weeks of uploading of the order.

The Tribunal was directed to apportion the amount, address payment for any minor claimants through their natural guardian, and include the statutory deposit with interest; the claimants were directed to pay any outstanding court fees on the enhanced amount.