The Supreme Court has partly allowed an appeal by National Insurance Company Ltd. challenging its liability to pay compensation in a 2005 fatal road accident after the policy covering the offending truck had been cancelled due to dishonoured premium cheque.
The Motor Accident Claims Tribunal had held the truck driver solely negligent and awarded ?8.23 lakh compensation, directing the insurer to pay first and recover from the owner. The Delhi High Court upheld this, prompting the insurer’s appeal, arguing that policy cancellation intimated to both the owner and the RTO months before the accident—absolved it of liability.
Relying on precedents in Deddappa v. Branch Manager, National Insurance Co., (2008) 2 SCC 595 and United India Insurance Co. v. Laxmamma (2012) 5 SCC 234, the bench of Justices K. Vinod Chandran and N.V. Anjaria reaffirmed that while cancellation before an accident can absolve an insurer in law, courts have exercised discretion under Article 142 to order payment to third-party victims, preserving the insurer’s right to recover from the vehicle owner.
In this case, the insurer had already deposited 50% of the award with interest, which the claimants withdrew. Observing that reclaiming this amount from the victims would be harsh and “set the clock back,” the Court barred such recovery. The insurer may recover that sum from the vehicle owner, while the victims can seek the remaining 50% directly from the owner.
The appeal was disposed of on these terms, balancing the legal position with equitable considerations for accident victims.
