Insurance claim may be dismissed if vehicle has been used without valid registration: Supreme Court

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The Supreme Court observed that an insurance claim can be dismissed if a vehicle is used / driven without a valid registration, as this would constitute a fundamental violation of the terms and conditions of the insurance contract.

The bench of Judges Uday Umesh Lalit, S. Ravindra Bhat and Bela M. Trivedi notes that when an insurable incident which could give rise to liability occurs, there should be no fundamental breach of the conditions contained in the insurance contract. If on the date of the theft, the vehicle had been driven / used without a valid registration, this constitutes a fundamental offense, the court ruled.

In this case, the insured had bought a new Bolero which had a temporary registration. After the registration expired, he traveled outside his residence. He parked in front of the premises of the guest house from which he was stolen. He claimed insurance but it was repudiated on the grounds that the vehicle’s temporary registration had expired. Subsequently, he approached the District Forum to ask the insurer to pay him the sum insured for the vehicle with a rent of 1,40,000 / – and also requested compensation for mental distress and legal costs. The said complaint was dismissed, against which he applied to the National Appeals Commission for Consumer Disputes. Allowing the appeal, the state commission observed that the insurer could not repudiate the real claim of the insured for technical, petty and futile reasons of lack of a permanent registration certificate from the competent authority and thus escape its responsibility to compensate the insured for the loss of the vehicle. The request for review filed by the insurer before the National Appeals Commission for Consumer Disputes was dismissed and therefore referred to the Apex Court.

Relying on the Supreme Court judgment in Narinder Singh Vs. New India Assurance Co. Ltd (2014) 9 SCC 324 and also an order of the NCDRC in Naveen Kumar Vs. National Insurance Company Ltd, the appellant insurer argued that since the vehicle in question had no registration, it constituted a fundamental violation of the policy, authorizing the insurer to repudiate claims under it. On behalf of the applicant, it was argued that the Narinder Singh judgment (supra) sought to seek compensation for a vehicle damaged by accident and not for vehicle theft, and was therefore not applicable to the present Case.

The court noted that in Narinder Singh, it has been ruled that operating a vehicle on public roads without any registration is not only an offense punishable under section 192 of the Motor Vehicle Act, but also a fundamental violation of the terms and conditions of the policy contract. The tribunal also noted that in Naveen Kumar (supra), the NCDRC stated the following:

(i) If a vehicle without a valid registration is or has been used / driven in a public place or any other place which would constitute a fundamental violation of the terms and conditions of the insurance contract even if the vehicle is not driven at the time where it is stolen or damaged

ii) If a vehicle without a valid registration is used / driven in a public place or any other place, it would be a fundamental violation of the terms and conditions of the policy even if the owner of the vehicle has requested the issuance of a registration under the terms of Article 41 of the Law before the expiration of the temporary registration, but the regular registration has not been issued.

Taking note of the facts of the case, the judiciary found that the order of the NCDRC is likely to be annulled. While allowing the appeal, the court observed:

13. In this case, the temporary registration of Respondent’s vehicle expired on 07-28-2011. Not only was the vehicle driven, but also taken to another town, where it was parked overnight in a location other than the Respondent’s premises. There is nothing in the record to indicate that the Respondent requested registration or that he was awaiting registration. In these circumstances, the ratio of Narinder Singh (supra) applies, in the opinion of this court. Whether Narinder Singh (supra) was in the context of an accident, is irrelevant. Despite this, the Respondent drove his vehicle and took it to Jodhpur, where the theft took place. It is of no consequence that the car was not traveling on the road when it was stolen; the essential fact is that it was conceded that it was taken to the place from which it was stolen, after the expiration of the temporary registration. Had it not been for his theft, the Respondent would have turned back the vehicle.

13 …. What is important is the opinion of this Court on the law that when an insurable incident which could give rise to liability occurs there should be no fundamental breach of the conditions contained in the insurance contract. Therefore, at the date of the theft, the vehicle had been driven / used without a valid registration, which is a flagrant violation of Sections 39 and 192 of the Motor Vehicles Act, 19886. The result is a fundamental breach of the terms and conditions of the policy, as this Court held in Narinder Singh (supra), authorizing the insurer to repudiate the policy.

Name and Citation of Case: United India Insurance Co. Ltd v Sushil Kumar Godara LL 2021 SC 522

Case n ° and date: CA 5887 DE 2021 | September 30, 2021

Coram: Judges Uday Umesh Lalit, S. Ravindra Bhat and Bela M. Trivedi

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