Insurance Companies not Liable to Pay Compensation to Unauthorized Passengers for Motor Vehicle Deaths/ Injuries

The Madras High Court recently reiterated that insurance companies cannot be held liable to compensate for deaths or injuries of unauthorized/ gratuitous passengers in goods or transport vehicles.

The said decision was held in the matter of K Sasidharan Vs. New India Assurance Company, decided on 12.11.2018.

Challenge

The Court was dealing with a case involving 18 compensation claims, which arose after an Eicher transport van carrying unauthorized people from a wedding function got into an accident. The claimants in the case at hand, had engaged a goods vehicle to travel for a wedding and were therefore, unauthorized passengers.
Held

The Madras High Court noted that following a 1994 amendment to the Motor Vehicles Act, 1988, Section 147 of the Act restricts an insurer’s liability in case of motor vehicle accidents:

• to a third party;
• the owner of the goods or his authorized representative carried in a goods vehicle
• and the passenger of a public service vehicle.

It also noted that Section 149 (2)(a)(i)(c) of the Act allows insurance companies to be exempted from liability if the vehicle in question, being a transport vehicle, was used for a purpose not allowed by its permit.

Further, the High Court refused to consider as precedent the recent judgment in Shivraj v. Rajendra, wherein the Supreme Court had affirmed the High Court’s conclusion that the insurance company was not liable for the loss or injuries suffered by the unauthorized passenger, but had opined that the High Court should have directed the company to pay such compensation with liberty to recover the same from the tractor owner.

The High Court also observed that the Division Bench of the Supreme Court had failed to take note of the contrary decisions of the larger bench in New India Assurance Company v. Asha Rani and others or National Insurance Company Ltd., v. Baljit Kaur and others.