SC sets aside NCDRC order absolving insurance firm of its liability

The apex court held that the insurance company is liable to indemnify the owner of the vehicle, which was damaged in a road accident, as there was no reason for the owner to doubt the veracity of the licence of his driver who was driving competently.

"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," a bench of Justices Navin Sinha and Krishna Murari said.

It said if the employer finds the driver to be competent to drive and has satisfied himself that the driver has a driving licence, there would be no breach of section 149(2)(a)(ii) of the Motor Vehicles Act and the insurance firm would be liable under the policy.

Breach of conditions under section 149(2)(a) of the Motor Vehicles Act absolves the insurer of its liability to the insured and section 149(2)(a)(ii) deals with the conditions regarding driving licence.

According to the Act, the insurer is not liable for compensation if a vehicle at the time of accident is driven by a person who is not duly licenced or by a person who has been disqualified from holding or obtaining a driving licence during the period of disqualification.

"It would be unreasonable to place such a high onus on the insured to make enquiries 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 notice that the licence was fake or invalid and still permitted the person to drive, the insurance company would no longer continue to be liable," the bench said.

The bench delivered its verdict in a case in which the vehicle had met with an accident in 2010 in which its owner had died.

The insurance firm had rejected the claim on the ground that the driver did not have a proper driving licence at the time of the accident.

The insurance company had said that the licence produced by the driver could not be verified as the concerned officer of the transport department had said that record pertaining to the licence was not available.

The wife of the vehicle's owner moved the consumer forum alleging deficiency on the part of the insurance firm.

The district consumer directed the insurance firm to make payment of Rs 3,57,500 to the complainant.

The state consumer commission dismissed the appeal filed by the insurance firm, which later approached the NCDRC.

The NCDRC absolved the insurance company of its liability on the ground that no record of the driver's licence was found with the licencing authority.

Later, the complainant moved the apex court against the NCDRC order.