Liability of Insurance Company towards third parties remains unaffected by breach of policy conditions

Madras High Court Directs Insurance Company to Compensate Accident Victims Despite Policy Breach. Court Upholds 'Pay and Recover' Principle, Ensures Timely Relief to Legal Heirs of Deceased Victim

In a significant decision by the Madurai Bench of the Madras High Court, Justice Ms. R. Poornima upheld the principle of 'pay and recover' in a motor accident compensation case, ensuring that the legal heirs of the deceased victim receive timely financial relief. The case, Chellammal v. Seenivasan, revolved around a tragic accident that occurred on July 18, 2003, involving the deceased Angu and a TVS Victor motorcycle driven recklessly by the respondent's driver.

The court was faced with the dilemma of addressing an internal breach of policy conditions between the insured and the insurer, as the driver did not possess a valid driving license at the time of the accident. Despite this, the court ruled in favor of the claimants, directing the insurance company to satisfy the compensation amount first, and subsequently recover the same from the vehicle's owner.

Justice Poornima noted that the Motor Vehicles Act, 1988, is a beneficial legislation designed to protect third parties from suffering due to the negligence of insured drivers. The court emphasized that the liability of the insurance company towards third parties remains unaffected by any internal breach of policy conditions.

The appeal was filed by the appellants seeking modification of the tribunal's original direction, which held both the owner and insurance company jointly responsible. The appellants argued that the owner did not contest the case as he was set ex-parte, and the insurance policy was in force at the time of the accident. Their plea for invoking the 'pay and recover' principle was upheld by the court, considering the circumstances that the claimants, being legal heirs, were unable to recover the amount directly from the vehicle owner.

The judgment also highlighted that the motorcycle was insured with the second respondent, and the policy was active during the accident. Justice Poornima relied on established precedents from both the Madras High Court and the Supreme Court of India, reaffirming that the insurance company must fulfill the compensation obligation first and can pursue recovery from the vehicle owner later.

In conclusion, the court allowed the appeal, directing the insurance company to deposit the entire award amount with interest and costs within eight weeks. The decision ensures that the affected families receive immediate financial support, while the insurance company retains the right to reclaim the amount from the vehicle owner as per legal provisions.

This ruling underscores the judiciary's commitment to upholding legislative intent and ensuring justice for victims and their families, reinforcing the protective measures embedded within the Motor Vehicles Act.

Bottom Line:

Liability of Insurance Company towards third parties remains unaffected by internal breach of policy conditions between insured and insurer - Insurance Company directed to satisfy the award amount in the first instance and recover the same from the owner of the vehicle.

Statutory provision(s): Motor Vehicles Act, 1988, Sections 279, 337, 338, 304A IPC

Chellammal v. Seenivasan, (Madras)(Madurai Bench) : Law Finder Doc Id # 2796690