A comprehensive policy would cover liability of insurer for payment of compensation for occupant in car

In Sheela Vs. National Insurance Co. Ltd., First Appeal Nos. 1523 of 2008, 648 of 2009, a vehicle carrying several passengers met with an accident and the injured/claimants filed claim petition for compensation under Section 166 of the Motor Vehicles Act, 1988 claiming compensation towards various heads while the appellant - owner and respondent No. 1 - Insurance Company resisted the claim on the ground that there was no reason for the claimants to sit unauthorisedly in the private car and therefore, owner and Insurance Company are not liable. The Insurance Company has also taken the defence of fundamental breach of policy by the owner inasmuch as the offending vehicle which was for private use of the owner, was used for the purposes of 'Hire or Reward'.

The Tribunal partly allowed the claim petitions, thereby fixing the liability on the owner and absolving the Insurance Company on the ground that owner has committed fundamental breach of terms and conditions of the policy. Against this judgment, the appeal was filed before the Bombay High Court.

The High Court observed that Insurance Company does not dispute the offending vehicle was insured with the insurer under a comprehensive policy which did not cover 'Hire or Reward' and the driver of the offending vehicle was having effective and valid driving licence. Also apart from admission by the claimants that he paid Rs. 20/- towards ticket for travelling in the vehicle, there is no other evidence brought on record by the Insurance Company to show that the owner was using the offending vehicle for the business of travelling passengers on 'Hire or Reward' basis. Only on stray admission by the claimants, who obviously gave admission to show his authorized entry in the said vehicle cannot be said that the said vehicle was being used by the owner for hire purpose.

Furthermore, the insurer could not point out from the record that the appellant - owner of the vehicle was knowing that his driver was carrying the passengers in his vehicle. In the absence of any knowledge on the part of owner of the offending vehicle, the finding of the wilful default by the owner cannot be given against him. There is absolutely no evidence on record that the owner was intentionally and knowingly using the offending vehicle for hire purpose.

Referring to the judgment of the Supreme Court in Jagtar Singh alias Jagdev Singh Vs. Sanjeev Kumar, (2018) 15 Supreme Court Cases 189 and National Insurance Co. Ltd. Vs. Balakrishnan and another, (2013) 1 Supreme Court Cases 731, the High Court held that the Supreme Court has clearly stated that comprehensive policy would cover the liability of the insurer for payment of compensation   to pillion riders in case of motorbikes and passengers in case of cars.

In the light of the aforesaid ratio, the Insurance Company is liable to pay compensation to the occupants in the private car, inasmuch as the Insurance Company has failed to prove by way of credible and substantive evidence that the owner/insured was knowingly and wilfully driving the offending vehicle for 'Hire or Reward'.