Policy breaches do not exonerate insurers from third-party liability; pay first, recover from owner.

On 11.03.2008, a motor accident resulted in the deaths of Somra Tirky, the jeep driver, and Bishu Lakra, its khalasi

The truck involved, bearing registration No. BR-14G-9205, was insured with National Insurance Co. Ltd. under a policy valid from 20.09.2007 to 19.09.2008

The Motor Accident Claims Tribunal, Ranchi, awarded Rs. 7,60,000 to the dependants of Somra Tirky and Rs. 4,17,000 to the dependants of Bishu Lakra, after adjustment of interim compensation of Rs. 50,000 in each case, while granting the insurer liberty to recover the amount from the vehicle owner

The claimants preferred appeals seeking enhancement, whereas the insurer appealed seeking complete exoneration on the ground that the driver lacked a valid licence to drive a heavy motor vehicle and that the truck had no route permit or fitness certificate

1. Whether the insurer was entitled to complete exoneration from liability towards the third-party claimants on account of breach of the policy conditions relating to the driver’s licence, route permit and fitness certificate

2. Whether the compensation awarded by the Tribunal was just and reasonable, or required enhancement

The Court applied the third-party protection principle under Section 149 of the Motor Vehicles Act, 1988, as explained in National Insurance Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297, that even where breach of a policy condition is proved, the insurer is ordinarily required to satisfy the award vis-à-vis third-party victims and may thereafter recover the amount from the owner

For quantification of compensation, the Court applied Sarla Verma v. DTC, (2009) 6 SCC 121, regarding deductions for personal expenses and selection of multipliers; National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680, regarding future prospects and conventional heads; and Magma General Insurance Co. Ltd. v. Nanu Ram, (2018) 18 SCC 130, regarding consortium payable to eligible claimants

The Tribunal correctly found that Israil Ansari’s original driving licence authorised him only to drive a light motor vehicle, while the endorsement for driving a heavy motor vehicle and public service vehicle became effective only from 19.06.2008, after the accident; the route permit and fitness certificate were also not produced

Nevertheless, applying Swaran Singh, the Court held that the breach did not justify complete exoneration from liability to third-party claimants. The insurer was therefore required to pay the compensation first, with liberty to recover it from the owner

On quantum, the Court maintained the Tribunal’s findings regarding age, income and multipliers. For Somra Tirky, it added 40% future prospects to the annual income of Rs. 60,000, deducted one-fourth for personal expenses owing to five dependants, and applied a multiplier of 17, resulting in loss of dependency of Rs. 10,71,000

It then awarded consortium of Rs. 40,000 each to five claimants, along with funeral expenses and loss of estate, producing a total of Rs. 13,01,000

For Bishu Lakra, the Court added 40% future prospects to the annual income of Rs. 48,000, deducted one-half as he was a bachelor, and applied a multiplier of 18, resulting in loss of dependency of Rs. 6,04,800; with conventional heads, the amount was rounded to Rs. 7,15,000

Compensation was enhanced to Rs. 13,01,000 for the dependants of Somra Tirky and Rs. 7,15,000 for the dependants of Bishu Lakra, subject to adjustment of the Rs. 50,000 interim compensation and statutory deposits

Interest was fixed at 7.5% per annum from the date of filing of the respective claim petitions until realisation

The insurer was directed to satisfy the enhanced awards within eight weeks and was granted liberty to recover the amounts from the truck owner

The Tribunal’s direction to deposit Rs. 2,00,000 each for the two minor children of Somra Tirky in fixed deposits until majority was affirmed