Insurance Company Liable To Indemnify Driver If Premium For Accident Coverage Has Been Paid: Himachal Pradesh High Court

The Himachal Pradesh High Court dismissed an appeal by United India Insurance Co. Ltd., holding that although the 'Act only policy' in motor vehicle insurance covers only third-party damages and injuries but if the Insurance Company is charging premium for personal accident coverage of the driver, it is liable to indemnify the driver.

Justice Satyen Vaidya: “Since the insurer has charged a premium of Rs. 100/- for personal accident of owner and driver, it cannot get itself absolved from indemnifying the insured”.

Background Facts:

On 08.07.2012, a Maruti car met with an accident near District Shimla. The vehicle went off the road and rolled down into about 150 feet deep gorge. At the time of accident, the vehicle had four occupants, including the driver, Vijay Thakur. However, the driver and occupant of front passenger seat , died as result of accident and the other two who were seated in the back seat survived.

A petition was filed by the family of the deceased driver, Vijay Thakur, before the Motor Accident Claims Tribunal, Shimla under Section 163 A of the Motor Vehicles Act, seeking compensation based on the structured formula provided under the Act.

The insurance company submitted that the insured had purchased an “Act only insurance policy” that only covers third-party liabilities and does not extend coverage to the driver. It further contended that the driver's conduct was in violation of Rule 3 of Central Motor Vehicles Rules, as we was driving with a learner's license.

The Motor Claims tribunal noted that the deceased had a salary of Rs.2500/-per month and was 22 years old at the time of death. It awarded a compensation of Rs. 7,35,000/- to the deceased's family, directing the insurance company to pay the amount for their loss.

Subsequently, the insurance company filed an appeal against the award passed by the Motor Accident Claims Tribunal.

Findings:

The Court noted that a perusal of the insurance policy revealed that the insured had paid premium of Rs. 740/- towards third party coverage and Rs. 100/- towards personal accident coverage for the owner-driver. Hence, since a premium had been paid specifically for the accident of the owner-driver, the insurer could not deny compensation.

Regarding the issue of driver having only a learner's license, the Court observed that he was accompanied by another person, holding a valid driving license who was instructing him. Thus, there was no violation of Rule 3 of Central Motor Vehicles Rules.

Therefore, the Court disposed of the appeal, holding that the Insurance company is liable to indemnify the driver under an 'Act Only Policy' when a specific premium has been charged for personal accident coverage of the driver.

Case Name: United India Insurance Co. Ltd. v/s Ram Lal & Ors.

Case No.: FAO No.236 of 2017

Date of Decision: 10.04.2025

For the appellant : Mr. Vivek Negi, Advocate.

For the respondents : Mr. Bhupender Singh Kanwar, Advocate, for respondents No. 1 to 3. Mr. Arvind Sharma, Advocate, for respondent No.4.

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