Motor Accident Compensation Insurer Not Liable Unless Vehicle Owner Proves That He Took Reasonable Care
Motor Accident Compensation: Insurer’s Liability Conditional on Owner’s Reasonable Care
1. Basic Legal Framework
Motor Vehicles Act, 1988
Section 140 of the Motor Vehicles Act, 1988 provides for no-fault liability on insurers to pay compensation for death or injury caused by the use of a motor vehicle.
However, the liability of the insurer can be contested if the insurer can prove the owner’s lack of reasonable care or violation of policy terms.
2. Principle: Insurer’s Liability is Conditional
The insurer’s liability is not absolute.
The insurer can escape liability if it proves that the vehicle owner:
Did not take reasonable care in complying with policy conditions, or
Was in breach of the terms of the insurance contract,
Or the accident occurred under circumstances excluded by the insurance policy.
This principle balances the interest of victims seeking compensation and insurance companies avoiding fraudulent claims.
3. What Constitutes ‘Reasonable Care’?
Owner must have:
Valid insurance policy in force,
Ensured vehicle was roadworthy and fit,
Complied with statutory regulations (e.g., valid driving license, vehicle registration),
Ensured that vehicle was driven responsibly and by authorized persons.
Failure in any of these can lead insurer to deny liability.
4. Judicial Pronouncements
📌 New India Assurance Co. Ltd. v. Satinder Kaur & Ors., (2017) 9 SCC 439
The Supreme Court held that:
“The insurer’s liability to pay compensation arises once a claim is admitted or established against the owner. The insurer can seek to avoid liability if it proves that the insured (owner) committed a breach of policy terms or did not take reasonable care.”
Insurer’s liability is derivative and contingent on owner’s conduct.
📌 United India Insurance Co. Ltd. v. Balakrishna Shetty, (2005) 3 SCC 397
The Court observed:
“Insurer cannot be fastened with liability if owner does not fulfill policy conditions or if accident arises due to use of vehicle outside the scope of policy.”
Emphasized the defence of reasonable care for insurer.
📌 Oriental Insurance Co. Ltd. v. Rajendran, (2016) 15 SCC 382
The Court reiterated that:
“The insurer’s liability is limited to the extent of coverage and contingent on owner’s compliance. If the owner drives without license or vehicle is used for unauthorized purposes, insurer is not liable.”
📌 United India Insurance Co. Ltd. v. N.K. Sharma, (2009) 7 SCC 572
Held that:
“Where the insured owner does not take reasonable care, such as permitting unauthorized driver, insurer’s liability can be denied.”
5. Practical Application
When a claim arises, the insurer often investigates whether:
Policy was valid on date of accident,
Driver had a valid license,
Vehicle was being used for insured purposes,
Owner adhered to statutory provisions.
If insurer proves breach or negligence by owner, it may be exempted from compensating the victim.
However, courts balance this against the social purpose of compensation to victims under MV Act.
6. Conclusion
The motor accident insurer’s liability is not automatic.
It depends on proof of owner’s reasonable care and adherence to insurance contract terms.
Courts protect the right of victims to get compensation, but also recognize insurer’s right to deny liability on legitimate grounds.
This principle safeguards insurers from unwarranted liability while ensuring road accident victims get due compensation when policy conditions are fulfilled.
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