The Bombay Excessive Court docket has dominated that an insurance coverage firm, regardless of cancelling the coverage, stays liable underneath the ‘pay and get better’ precept if the automobile proprietor was not notified about such cancellation earlier than the accident date.

Justice Kishore C Sant sitting at Aurangabad dismissed an enchantment filed by HDFC Ergo contesting a judgment of the Motor Accident Claims Tribunal, Jalgaon, directing it to pay compensation to the household of the deceased in a motor accident and get better the quantity later from the automobile proprietor.

“the appellant couldn’t produce proof to point out that the intimation of cancellation of coverage was acquired by the insured previous to the date of accident. It’s the case of the appellant that the intimation was despatched to the insured. Nevertheless, stated intimation was not served for need of full handle. The very fact stays that the intimation of cancellation of coverage was not acquired by the insured”, the court docket noticed.

The case revolved round an accident involving an auto-rickshaw and a truck, ensuing within the demise of a passenger within the auto-rickshaw. The deceased was travelling within the auto-rickshaw in direction of Nashirabad from Jalgaon. A truck continuing in the identical course instantly utilized breaks inflicting the auto-rickshaw coming from behind to collide with the truck.

The household of the deceased claimed compensation of Rs. 25 lakhs from the proprietor of the rickshaw and the insurance coverage firm. The insurance coverage firm raised objections to the declare on the grounds of a breach of coverage phrases and circumstances. It submitted that it had cancelled the coverage because the policyholder’s cheque for fee of the premium was dishonoured attributable to a closed account.

The Motor Accident Claims Tribunal partially allowed the declare and held the proprietor of the automobile liable to pay compensation of Rs. 3,87,000, which included ‘No Fault Legal responsibility’ to the claimants. The tribunal directed the insurance coverage firm to make the fee upfront and subsequently get better the quantity from the automobile proprietor.

The insurance coverage firm filed the current enchantment difficult this choice.

Advocate Mohit R Deshmukh for the insurance coverage firm argued that the coverage was not in drive on the time of the accident as a result of dishonouring of the premium cheque for renewal, coupled with the expiration of the coverage.

It was emphasised that the pay-and-recover order may solely be issued if a legitimate coverage was in existence. He highlighted that an intimation was given to the insured concerning the cancellation of coverage however it couldn’t be served upon the addressee because the envelope was returned as ‘handle incomplete’.

Advocate Vishnu B Madan Patil for the claimants contended that correct intimation of the coverage cancellation was needed and required strict proof of the insured receiving such intimation.

The earlier insurance coverage coverage of the insured expired on February 22, 2015, the insured issued a cheque for coverage renewal on December 12, 2015, and the accident occurred on March 28, 2015. The intimation of coverage cancellation was despatched on March 12, 2015, however it could not be served attributable to an incomplete handle.

The court docket referred to the judgment in United India Insurance coverage Co. Ltd. v. Laxmamma and Ors., the place the Supreme Court docket emphasised the need for the insurer to cancel the coverage and intimate this cancellation to the insured earlier than the accident for the insurer to be absolved of legal responsibility. The court docket additionally cited Part 64-VB of the Insurance coverage Act, highlighting that no danger ought to be assumed until the premium is acquired prematurely.

The court docket distinguished the case from Nationwide Insurance coverage Co. Ltd. v. Seema Malhotra and Ors., clarifying that it was circuitously relevant as the current case concerned a third-party declare underneath helpful laws, and the claimants had been passengers within the automobile, not the homeowners or drivers.

The court docket concluded that the appellant failed to offer proof demonstrating that the insured acquired correct intimation of the coverage cancellation earlier than the accident. The court docket, contemplating the rights of third-party claimants underneath the Motor Automobiles Act, a helpful laws, discovered no benefit within the enchantment and dismissed it. The court docket relied on the Apex Court docket judgment in Oriental Insurance coverage Co. Ltd. v. Inderjit Kaur & Ors. which held that underneath the helpful laws, when the declare is by third social gathering, it’s responsibility of the insurance coverage firm to pay the quantity of compensation.

Consequently, the court docket held that no substantial case was made out to warrant interference with the tribunal’s findings and dismissed the enchantment. The court docket allowed the claimants to withdraw the quantity deposited by the appellant, together with any accrued curiosity.

Case no. – First Enchantment No. 2929 of 2019

Case Title – HDFC ERGO Common Insurance coverage Firm Ltd. v. Nayajoddin Nijamuddin and Ors.

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