Gratuitous passengers insurance claims
csarengarajan
Source Business Standard 6-4-2009
Supreme Court backs New India Assurance:
The Supreme Court has allowed the appeal of New India Assurance co. which was ordered by the Madhya Pradesh High Court to compensate the victim of a road accident. He was travelling in a jeep as a gratuitous passenger, not paying for the ride. A truck hit the jeep and he died. The Motor Accident Claims Tribunal awarded Rs.3 lakh to his legal representative, to be paid by the truck owner. On appeal , the High court imposed the liability to pay on the insurance company, instead of truck owner. The insurance company appealed to Supreme Court alleging that the deceased person was not covered by insurance. The Supreme Court stated that the high court has not given reason to pass on the liability to the insurance company . Moreover, the deceased person was a gratuitous passenger, he was not insured.
Conclusion: The claim to be payable by the truck owner and not by the Insurance company. The reason behind are as follows.
1) He was travelling in a jeep without paying anything . He was gratuitous passenger.
2) Secondly he was not insured.
The Claim tribunal delivered judgment that the truck owner are supposed to pay the claims to the legal representative. The same has been upheld by the Supreme Court of Inida.
I am enclosing some more cases on this subject written by fellow professional.
Kindly go through the same
regards
Insurer’s Liability Towards Gratuitous Passengers
by Dhananjaya Chak on January 20, 2008
Chapter VIII of the Motor Vehicles Act, 1939 (hereinafter referred to as the “1939 Act”) and Chapter XI of Motor Vehicles Act, 1988 (hereinafter referred to as the “1988 Act”) deal with insurance of motor vehicles against third party risks. This paper is an attempt to study the various changes the law has undergone while dealing with the liability of the insurer towards gratuitous passengers being carried in motor vehicles.
To Section 95 of the old Act the corresponding section is Section 147 of the new Act, which deals with liability to pay the compensation. This paper deals briefly with the position under the 1939 Act and then goes on to discuss in greater detail the position of law under Section 147, both prior and post the amendment.
The cases that have been selected for study are landmark cases that have been relied upon by successive cases. Majority of the cases studied are recent cases, the final case, that of Tilak Singh being as recent as 2006.
II
CHRONOLOGICAL ANALYSIS OF CASES
A. BRIEF SUMMARY OF THE POSITION PRIOR UNDER THE 1939 ACT.
This section deals briefly with the position of law regarding gratuitous passengers under the Motor Vehicles Act, 1939. This is important as a pre-cursor to the cases that follow as there are several changes in the position since which may be compared and contrasted.
In Pushpahai Purshottam Udesh and Ors. v. Ranjit Ginning & Pressing Co. (P) IM and Anr.[1] the insurance company had raised the contention that the scope of statutory insurance under Section 95(1)(a) read with 95 (1)(b)(i) of the Motor Vehicles Act, 1939 does not cover the injury suffered by a passenger and, since there was a limited liability under the insurance policy, the risk of the insurance company would be limited to the extent it was specifically covered. Alter referring to the English Road Traffic Act, 1960, and Halsbury’s Laws of England the Court came to the conclusion that Section 95 of the 1939 Act required that the policy of insurance must be a policy insuring the insured against any liability incurred by him in respect of death or bodily injury to a third party and rejected the contention that the words “third party” were wide enough to cover all persons except the insured and the insurer. This Court held as under:
“Therefore it is not required that a policy of insurance should cover risk to the passengers who are not carried for hire or reward. As under Section 95 the risk to a passenger in a vehicle who is not carried for hire or reward is not required to be insured the plea of the counsel for the insurance company will have to be accepted and the insurance company held not liable under the requirements of the Motor Vehicles Act.”[2]
In Amrit Lal Sood and Anr. v. Kaushalya Devi Thapar[3] it was held that in that particular case that the terms of the policy were wide enough to cover a gratuitous passenger and. therefore there was liability towards the gratuitous person.
In Dr. T.V. Jose v. Chacko P.M. alias Thankachan and Ors.[4] Variava, J. had an occasion to survey the law with regard to the liability of insurance companies in respect of gratuitous passengers. Alter referring to a number of decisions of this Court the learned Judge observed “the law on this subject is clear, a third-party policy does not cover liability to gratuitous passengers who are not carried for hire or reward.”[5] The insurer company was held not liable to reimburse the appellant.
Thus, under the 1939 Act the established legal position was that unless there was a specific coverage of the risk pertaining to a gratuitous passenger in the policy, the insurer was not liable.
B. STUDY OF POSITION OF GRATUITOUS PASSENGERS PRIOR TO 1994 AMENDMENT TO THE 1988 ACT
§ New India Assurance Company v. Shri Satpal Singh and Ors, AIR 2000 SC 235
Facts: A 10 year old girl met with a fatal accident in 1990 while traveling in a truck. Her father brother and sister made a joint claim under the Motor Vehicles Act, 1988. The Motor Accident Claims Tribunal awarded compensation of Rs. 25,000. This was challenged by both parties and the Division Bench of the High Court doubled the compensation.
Issue: Whether the insurer had a liability towards a gratuitous passenger such as the girl under the 1988 Act prior to its amendment in 1994?
Discussion upon Insurer’s Liability towards Gratuitous Passengers: A two judge bench of the Supreme Court in this case first distinguished the case of Mallava v. Oriental Insurance Co. Ltd.[6], which it stated had arisen under the Act of 1939 which had a substantially different provision which dealt with the limits of liability of the insurer.[7] As per the proviso to Section 95 of the 1939 Act when read with its Clause (ii), it was held to be clear that the policy of insurance shall not be required to cover liability in respect of the death of or bodily injury to persons who were gratuitous passengers of that vehicle under the 1939 Act.
However, as this case had arisen under the 1988 Act, the Court focused on Section 147(1) of the 1988 Act[8], which corresponded to Section 95 of the 1939 Act. The Court observed that Section 95 had been substantially altered and recast as Section 147 of the 1988 Act.[9]
The substantial alteration was by way of complete omission in the 1988 Act of the clause corresponding to Clause (ii) of the proviso to Section 95 of the 1939 Act.
The Court then went on to state that, there was no upper limitation for the insurer regarding the amount of compensation awarded in respect of death or bodily injury of a victim of the accident under Sub-section (2) of Section 147 of the 1988 Act. It was therefore apparent to the Court that the limit contained in the old Act had been removed and that the insurance policy would insure the liability incurred and cover injury to any person including owner of the goods or his authorised representative carried in the vehicle.
Therefore, according to the Court in the Satpal Case, the result of the substantial alteration in the wording of the appropriate provisions and the omission of the operative restrictive clause was that under the 1988 Act an insurance policy covering third party risk was not required to exclude gratuitous passengers in a vehicle, no matter that the vehicle is of any type or class.
§ New India Assurance Co. v. Asha Rani, AIR 2003 SC 607
Facts: This case was a reference from a two-judge bench[10] which was dealing with a batch of appeals. The first bunch of appeals, which related to cases under the 1939 Act and the third bunch of appeals which dealt with cases post the 1994 amendment were disposed off by the two judge bench. However, the second category of cases, which were to be decided as per the position prior to the 1994 amendment were referred to the present three-judge bench.
Issue: Whether the insurer is liable to pay compensation to the dependants of the deceased passenger, while the deceased passenger was travelling in a goods vehicle and that vehicle met with an accident, on account of which the passenger died or suffered bodily injury under the Motor Vehicles Act prior to its amendment in 1994? Therefore, the case discussed immediately before, i.e., Satpal’s case would be reconsidered.
Discussion upon Insurer’s Liability towards Gratuitous Passengers: The Court in this case began with the exposure of the erroneous assumption made by the Court in Satpal’s case- the Court in Satpal assumed that the provisions of Section 95(1) of Motor Vehicles Act 1939 were identical to Section 147(1) of the Motor Vehicles Act 1988, as it stood prior to its amendment. However, on closer scrutiny, the Court in the present case came to the conclusion that it was not necessary for the insurer to insure against the owner of the goods of his authorised representative being carried in a goods vehicle.
The Court based this conclusion on the intention of the legislature evinced from Section 46 of the Amendment Act, 1994 by which the expression ‘injury to any person’ in the original Act stood substituted by the expression ‘injury to any person including owner of the goods or his authorised representative carried in the vehicle’. The Court also refused to see the amendment as being clarificatory of the pre-existing position of law. For this purpose, it cited the objects and reasons for the insertion of Section 46 and in this regard, the Court observed:
“It is no doubt true that sometimes the legislature amends the law by way of amplification and clarification of an inherent position which is there in the statute, but a plain meaning being given to the words used in the statute, as it stood prior to its amendment of 1994, and as it stands subsequent to its amendment in 1994 and bearing in mind the objects and reasons engrafted in the amended provisions referred to earlier, it is difficult for us to construe that the expression ‘including owner of the goods or his authorised representative carried in the vehicle which was added to the pre-existed expression ‘injury to any person’ is either clarificatory or amplification of the pre-existing statute.”[11]
As a result, the Court held Satpals case to be wrongly decided and reversed the position exempting the insurers from liability for gratuitous passengers prior to the amendment of 1994.
In a separate but concurring judgment, Sinha, J., first concentrates on the change in the terminology used by the Legislature. The Hon’ble Justice deduces from the change in definition from “goods vehicle” which could carry passengers in the 1939 Act to “goods carriage” which was constructed or adapted for use solely for the carriage of goods in the 1988 Act that carrying of passengers was not contemplated under the 1988 Act. Further, he reasons that if the owner of a passenger vehicle was required to pay a premium for covering the risks of the passengers[12], then the ratio of the Satpal case, once taken to its logical conclusion would be that the owner of a goods carriage would be deemed to have been covered under the insurance policy even when no premium has been paid. The last reason that Sinha, J. gives for his concurring judgment is that the defence of the insurer under Section 149(2) of the 1988 Act- that the vehicle was being used for a purpose other than that allowed by the permit under which the vehicle was being used- would be obliterated in case the ratio in Satpal Singh was considered good law.
For the above reasons, the decision of the Supreme Court in Asha Rani held the Satpal case to be wrongly decided and overruled the same, tilting the position of law in favour of the insurer.
- Oriental Insurance Company Ltd. v. Devireddy Konda Reddy, AIR 2003 SC 1009
Facts: Certain persons were travelling in goods vehicles which were subject-matter of insurance with the appellant insurer. The vehicles met with accidents which resulted in the deaths of several persons who were either unauthorised or gratuitous passengers in the said vehicles. Their legal representatives lodged claims under Motor Vehicles Act, 1988. The Motor Accident Claims Tribunal the Single Judge of the High and the Division Bench of the High Court all relied on Satpal Singh’s case, which has been discussed above, which held the insurer liable to indemnify the legal representatives of the deceased.
Issue: Whether the insurance Company was liable to indemnify the gratuitous passenger?
Discussion upon Insurer’s Liability towards Gratuitous Passengers: Once again, the Court relied upon the difference in terminology between “goods vehicle” and “goods carriage” to reach the conclusion that the legislative intent was to prohibit goods vehicle from carrying passengers under the provisions of the 1988 Act prior to amendment. As may be noted, this is similar to the reasoning put forward by Sinha, J. in his separate but concurring judgment in the Asha Rani case. Therefore, as the provisions of the 1988 Act made no reference to passengers in a goods carriage nor did they place any statutory liability on the owner of the vehicle to get the passenger traveling in the goods carriage insured, the insurer would have no liability for the same.
This case relied on the decision in Asha Rani, which had overruled Satpal’s case in overturning the findings of the Tribunal and the High Court.
The above two cases were relied upon by the Supreme Court in National Insurance Co. Ltd. v. Ajit Kumar[13], in reaching the same conclusion.
C. STUDY OF POSITION OF GRATUITOUS PASSENGERS POST THE 1994 AMENDMENT TO THE 1988 ACT.
By reason of the 1994 Amendment what was added to Section 147 is “including the owner of the goods or his authorised representative carried in the vehicle” instead of the phrase “any person”.
§ National Insurance Co. Ltd. v. Baljit Kaur, AIR 2004 SC 1340.
Facts: The 16 year old victim, returning in the truck from a marriage ceremony died as a result of the rash and negligent driving by the driver of the goods vehicle. The said vehicle was insured by the appellant insurance company. The mother of the victim preferred a claim petition for compensation before the Motor Accidents Claim Tribunal. The Tribunal relied upon Satpal Singh and accepted the claim petition, awarding compensation which was upheld by the High Court.
Issue: Whether the amended Section 147 was intended to cover gratuitous passengers or only third party risks?
Discussion upon Insurer’s Liability towards Gratuitous Passengers: The Court first discussed the cases prior to the amendment such as the Asha Rani case and the Devireddy case (discussed above). The Court examined the effect of the amendment to Section 147, coming to the conclusion that it was unambiguous. The Court held that prior to the amendment, the words “any person” could be held not to include the owner of the goods or his, authorized representative traveling in the goods vehicle. Post the 1994 amendment, Parliament was held to have remedied that construction. However, the Court refused to extend this rationale to covering gratuitous passengers for whom no insurance policy was envisaged, and for whom no insurance premium was paid. They based this interpretation on the observation in the Asha Rani case that true purport of the words “any person” was to be found in the liability of the insurer for third party risk, which was sought to be provided for by the enactment. The Court observed:
“The liability of the owner of the vehicle to insure it compulsorily, thus, by reason of the aforementioned amendment included only the owner of the goods or his authorized representative carried in the vehicle besides the third parties. The intention of the Parliament, therefore, could not have been that the words ‘any person’ occurring in Section 147 would cover all persons who were traveling in a goods carriage in any capacity whatsoever.”[14]
Therefore, despite the amendment, the effect of the provision, i.e., Section 147 of the 1988 Act, was the same with respect to persons other than the owner of the goods or his authorized representative.
The Court, however, laid down an important proposition of law that in place of the insurer the owner of the vehicle shall be liable to satisfy the decree.[15] The Court also held that such decision would be operative prospectively As regards the present case, the Court proceeded to ask the insurer to satisfy the claimant and recover the same from the owner of the vehicle.
§ Sri Pramod Kumar Agrawal v. Smt. Mushtari Begum, AIR 2004 SC 4360.
Facts: The Respondent claimed compensation for death of four persons and injury to several persons due an accident caused by the overturning of a truck, when thirty to forty persons climbed on truck. The Motor Accident Claim Tribunal held that since vehicle was a goods vehicle and was not insured for carrying passengers, the insurer was not liable to pay compensation and this was upheld by the High Court.
Discussion upon Insurer’s Liability towards Gratuitous Passengers: The Court in this case relied upon Asha Rani, Devireddy and Baljit Kaur cases to render the same judgment as discussed above in Baljit Kaur.[16]
The cases of National Insurance Co. Ltd. v. Challa Bharathamma[17] (2004), National Insurance Co. Ltd. v. V. Chinnamma[18] (2004) and National Insurance Co. Ltd. v. Bommithi Subbhayamma[19](2005) also reiterated the same view.
- United India Insurance Co. Ltd., Shimla v. Tilak Singh, AIR 2006 SC 1576.
Facts: One person had insured his scooter with the appellant insurance company. The insurance policy did not cover liability to the pillion passenger. The said scooter was then sold to the respondent and registration too was transferred to him in 1989. However, no notice of transfer of insurance policy was given to the appellant insurer. In 1989, the pillion rider died in an accident that occurred while the respondent was driving the scooter. The LRs of the pillion riders sought compensation under section 166 of the 1988 Act. The Motor Accident Claims Tribunal absolved the insurance company from liability as they had no notice of the sale of the scooter and held the respondent liable for rash and negligent driving. The High Court upheld the finding as to the quantum of compensation but made the insurance company jointly and severally liable to pay the compensation along with the respondent.
Issue: Whether a statutory insurance policy under the Motor Vehicles Act, 1988, intended to cover the risk to life or damage to properties of third parties, would cover the risk of death or injury to a gratuitous passenger in a private vehicle?
Discussion upon Insurer’s Liability towards Gratuitous Passengers:. On application of Section 157 of the 1988 Act[20], it was held that the insurance policy would be transferred along with the transfer of ownership of the motor vehicle, a drastic change from Section 103-A of the 1939, which did not allow for such ‘automatic transfer’. The Court then cited several conflicting High Court cases and the Supreme Court cases of New India Assurance Co. Ltd. v. Sheela Rani (Smt)[21], Rikhi Ram and Anr. v. Sukhrania (Smt.)[22]and G. Gavindan v. New India Assurance Co. Ltd[23] to come to the conclusion that the liability of an insurer does not cease even if the owner or purchaser fails to give intimation of transfer to the insurance company, as the purpose of the legislation was to protect the rights and interests of the third party.
The next point the Court considered was the whether the 1939 Act would apply or the 1988 Act would apply. According to the Court it was not the transfer of the vehicle but the accident in 1989 which furnished the cause of action for the application before the tribunal. As the 1988 Act had come into force by the time the accident occurred, the Court imported the ratio of the Asha Rani case, which was delivered in the context of carrying passengers in a. goods vehicle, to cover gratuitous passengers in other vehicles as well. Therefore, the Court ruled in favour of the insurance company to the effect that it owed no liability towards the injuries suffered by the deceased, who was a pillion rider, as the insurance policy was a statutory policy, and hence it did not cover the risk of death of or bodily injury to gratuitous passenger.
Conclusion
In the course of the project, the position of law with regard to the insurers liability for gratuitous passengers has been studied under the 1939 Act, the pre-amendment 1988 Act and the post amendment 1988 Act.
In summary, the position has not really undergone much of a change, reflecting the position under Section 95 of the 1939 Act, despite the liberal interpretation by the Satpal Singh, as Satpal Singh was very quickly overruled by the decision in Asha Rani. The only difference now is that the owner of the vehicle or his authorized agents would be covered by the policy, not gratuitous passengers traveling in the same.
It may be noted that Courts in pronouncing upon even cases prior to the 1994 amendment relied heavily upon the legislative intent behind the amendment , in cases that came after Satpal Singh to reach a conclusion that the insurer could not be held liable for injury caused to or death of gratuitous passengers. This was based upon the reasoning that a goods carriage was not meant to carry passengers and that there was no statutory obligation to insure passengers or pay premium for the same.
Further, in cases after the amendment, the Court has extended this logic to all types of vehicles as seen in the Tilak Singh case and has held the owner of the vehicle to be liable. In case a claim was made to the insurer, the insurer could recover the claim amount from the owner of the vehicle.
However, as a result of the decisions discussed, which require specific coverage of gratuitous passengers, insurance companies should be given an incentive by the government to provide for policies for them. Further, the premium for such a policy may be a higher owing to the increased risk involved.
CS. Dattatri
Dattatri
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Sent: Monday, 06 April, 2009 10:53 PM
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Subject: [CSMysore] Gratuitous passengers insurance claims