In a landmark ruling, the Supreme Court of India has declared that insurance companies must compensate the victims of road accidents, even if the terms of the insurance contract have been violated. The Court recently overturned a decision by the Telangana High Court and ruled that in such cases, the insurance company is still liable to provide compensation. However, the insurer can later file a counterclaim to recover the compensation amount from the vehicle owner.
This ruling came in response to a petition filed by Akul Narayan, who was injured in a road accident. A bench comprising Justices Sanjay Karol and Manoj Mishra noted that while the insurance contract might have been violated, the insurance company must still compensate the injured party. The Court cited several past cases to reinforce its decision and stated, “The insurer must adhere to this order. However, they can recover the compensation amount from the vehicle owner. We believe that the insurer should also be allowed to file a separate case to reclaim the funds.”
Akul Narayan had been travelling in a five-seater passenger vehicle when the accident occurred. Following the accident, the Motor Accidents Claims Tribunal ordered both the insurance company, Oriental Insurance Company Ltd, and the vehicle owner to jointly compensate the victim. However, the Telangana High Court later overturned this order, arguing that the insurance contract was violated because the driver had nine passengers in the vehicle instead of the permitted five.
The insurance company argued that the terms of the policy clearly stated that compensation would only be provided to the driver and conductor, and not to other passengers. The insurer also pointed out that the presence of nine passengers in a five-seater vehicle was a clear violation of the policy terms, and therefore, they should not be held liable. The Supreme Court, however, dismissed this argument and reaffirmed that the insurance company was still obligated to pay compensation.
The Court further clarified that the insurer could later recover the amount paid to the victim from the vehicle owner, acknowledging the practical need to protect accident victims while still allowing the insurer to address violations of the policy terms.