Supreme Court of India

NEW DELHI: The Supreme Court on Wednesday ruled that an insurance company cannot deny claim to the owner of a vehicle involved in a road accident if his driver had falsely claimed to be holding a valid driving licence by producing a fake document.

A bench of Justices Navin Sinha and Krishna Murari said it would not be possible for any owner to make inquiries with regional transport offices all over the country to ascertain the veracity of the driving licence, particularly when he has no reason to doubt its veracity. The SC said wilful breach of the conditions of the insurance policy should be established to deny claim to the insured.

“While hiring a driver, the employer is expected to verify if the driver has a driving licence. If the driver produces a licence which on the face of it looks genuine, the employer is not expected to further investigate into the authenticity of the licence unless there is cause to believe otherwise. If the employer finds the driver to be competent to drive the vehicle and has satisfied himself that the driver has a driving licence there would be no breach of Section 149(2)(a)(ii) and the insurance company would be liable under the policy,” it said.

Breach of conditions under Section 149(2)(a) of the Motor Vehicles Act absolves the insurer of its liability to the insured. The section deals with the conditions regarding driving licence. In case the vehicle at the time of accident is driven by a person who is not duly licensed or by a person who has been disqualified from holding or obtaining a driving licence during the period of disqualification, the insurer is not liable for compensation.

The bench said it would not amount to breach of the section when the owner was himself deceived by his driver. “It would be unreasonable to place such a high onus on the insured to make inquiries with RTOs all over the country to ascertain the veracity of the driving licence. However, if the insurance company is able to prove that the owner/insured was aware or had noticed that the licence was fake or invalid and still permitted the person to drive, the insurance company would no longer continue to be liable,” it said.

The apex court set aside order of National Consumer Disputes Redressal Commission which had absolved an insurance company of its liability since no record of the licence of the driver was found with the licensing authority. In this case, the insured vehicle met with an accident with a tractor as a result of which the owner of the vehicle and his daughter died. United India Insurance Company , however, turned down the claim filed by his wife on the ground that the driver did not have a proper driving licence at the time of the accident.

