After road accidents, insurance companies often try to reject claims citing minor technical glitches, violation of rules or defects in the driver’s license. If the driving license (DL) of the driver driving the vehicle at the time of the accident is found to be fake or unauthorized, then the insurance companies shirk their liability by holding the vehicle owner directly responsible. Due to this, the entire financial burden falls on the vehicle owner.
But recent decisions of the Motor Accident Claims Tribunal (MACT) and the High Courts have changed this practice and provided huge legal relief to millions of car and vehicle owners across the country. The court clarified in an important case that even if the driver’s license is found to be fake during investigation, the insurance company cannot escape its primary liability. Rejecting the arguments of the insurance company, the court awarded the aggrieved party Compensation of ₹5.89 lakh Strict order has been given to repay with interest.
This case involved a tragic road accident in which the victim was seriously injured or died after being hit by a speeding car. The aggrieved party filed a petition in the tribunal demanding appropriate compensation under the Motor Vehicle Act.
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Insurance company’s stance: During the hearing of the case, the lawyers of the insurance company presented the investigation report from the concerned RTO, in which it was proved that the driving license of the driver driving the car at the time of the accident was fake/invalid.
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Company’s argument: The company argued that as per the terms of the policy the vehicle should have been driven only by a person with a valid license. Since the license is fake, it is a direct breach of the insurance contract (Breach of Policy Conditions) and the company is not obliged to pay even ₹1. All damages should be recovered from the personal property of the car owner.
Rejecting this stand of the insurance company, the court cited the legal precedent established by the country’s top court (Supreme Court):
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Bona Fide Belief of the vehicle owner: The court held that when a car owner employs a driver or assigns him to drive the car, he, like an ordinary prudent citizen, takes his driving test and sees his physical license.
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Owner is not an investigation agency: Making a sharp comment, the court said that the vehicle owner cannot be expected to do forensic verification of whether the license is genuine or fake like a professional detective or RTO officer. If the owner hired the driver in good faith after seeing the license, he cannot be held to be a ‘Willful Breach’ of the policy.
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Third Party Security Paramount: The Motor Vehicle Act is a welfare law, the basic objective of which is to provide quick financial relief to the innocent third party victim of a road accident. The victim cannot be left to wander from door to door in a technical dispute between the insurance company and the vehicle owner.
The court made a historic decision in this case ‘Pay and Recover’ Formula applied:
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The court ordered that the insurance company should first determine Full compensation amount of ₹5.89 lakh (including interest) Make payment immediately.
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If the Company believes that there has been a breach of the terms and conditions, it is free to take recovery action from the concerned parties or the defaulter separately under the prescribed legal procedure after paying this amount.
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This order ensured that the victim does not have to wait for years for hospital bills and compensation.
This decision is like a safety net for both private and commercial vehicle owners:
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Avoidance of sudden bankruptcy: If the court had completely acquitted the insurance company, then this huge amount of ₹ 5.89 lakh would have had to be paid directly by the car owner from his own pocket, putting the common middle class family in serious financial trouble.
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Strong precedent for future claims: Now, if a driver’s license is found to be fake in an accident, insurance companies cannot arbitrarily cancel the third party claim completely.
Despite getting relief, every vehicle owner should keep these things in mind to avoid future legal disputes and police cases:
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Online verification through 'Parivahan' portal: Now, before hiring any driver, it is very easy to check whether his license is genuine or not. By visiting the ‘Sarthi’ or ‘Parivahan Seva’ portal of the Road Transport Ministry, enter the driver’s license number and check its validity and category online in just 1 minute.
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Checking the category of license: Always ensure that the driver has a license of the same category as the vehicle he is driving (e.g. LMV, Transport etc.).
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Renewal of valid policy: Renew your vehicle’s ‘Third Party’ and ‘Own Damage’ insurance on time, so that in case of any untoward incident, legal protection remains intact.