‘Denied’ insurance claim over electric cycle’s RTO registration, woman wins Rs 25,500

“It is highly contradictory and a clear sign of bad faith for an insurance company to collect a premium to comprehensively insure a certified ‘Non-RTO Category’ vehicle, only to later repudiate a legitimate damage claim on the ground that the vehicle was not registered with the RTO…The ground of repudiation is entirely flimsy, arbitrary, and legally unsustainable, constituting a glaring deficiency in service and an unfair trade practice on the part of Cholamandalam MS General Insurance Company Limited,” the commission said on July 17./

The dispute arose after the complainant’s newly purchased low-speed electric cycle was allegedly damaged by stray animals while parked outside her residence in May 2024. Although the insurer appointed a surveyor, it rejected the claim solely because the vehicle was not registered with the RTO. The commission held that the vehicle was legally exempt from mandatory registration and that the insurer was aware of its Non-RTO status when it issued the comprehensive policy.

Insurance claim rejected

According to the complaint, Kesri Devi purchased a Komki XGT-X4 slow-speed (Non-RTO Category) electric cycle from GOROX, Hamirpur, on February 28, 2024, for personal use. The vehicle carried a certified maximum speed of 25 kmph and was comprehensively insured with Cholamandalam MS General Insurance Company under a policy valid from March 6, 2024, to March 5, 2025.

The complaint stated that on May 7, 2024, the electric cycle was parked near the complainant’s residence when it was allegedly severely damaged after being hit by stray animals. She took the vehicle to the dealer’s workshop on May 18, 2024, where she was advised to intimate the insurer. The insurer appointed a surveyor to inspect the damaged vehicle.

However, by a letter dated May 28, 2024, the insurance company repudiated the claim solely on the ground that the vehicle did not have temporary or permanent registration with the RTO at the time of the incident.

The insurer opposed the complaint, contending that the vehicle was not legally registered with the RTO at the time of the incident, which, according to it, violated the Motor Vehicles Act, 1988, and the terms and conditions of the insurance policy. It also disputed the complainant’s assertion regarding the assessment of loss and maintained that the repudiation was valid.

Commission’s findings

• The commission observed that the dispute lay within a narrow compass, whether the insurance company was justified in rejecting the comprehensive insurance claim solely because the electric cycle had not been registered.
• It noted that under the Central Motor Vehicles Rules, 1989, electric two-wheelers having a maximum motor output of 250 watts or less and a maximum speed of 25 kmph or below are exempt from registration, driving licence requirements and mandatory third-party insurance.
• It also referred to the Gazette Notification dated April 24, 2014, which exempts this category of slow-speed electric vehicles from RTO registration, finding that the complainant’s vehicle fulfilled these statutory conditions.
• The commission noted that the insurance policy itself described the vehicle as an “electrical vehicle” under the “SLOW SPEED, NON-RTO” category, while the dealer had also admitted that registration was not required.
• According to the commission, the insurer was therefore fully aware of the nature and legal status of the vehicle when it accepted the premium and issued the comprehensive insurance policy.
• It held that the insurer could not subsequently reject the claim on the ground of non-registration and concluded that the repudiation was legally unsustainable and constituted deficiency in service as well as an unfair trade practice.
• At the same time, it held that no deficiency in service was established against the dealer, which had actively assisted the complainant in pursuing the insurance claim.

The commission directed the insurance company to pay Rs 15,526.50 towards the assessed loss, together with interest at 9 per cent per annum from the date of filing of the consumer complaint until actual realisation. It also awarded Rs 5,000 as compensation for the mental agony, harassment and inconvenience caused due to the repudiation of the claim, along with Rs 5,000 towards litigation costs. The complaint against the dealer was dismissed.

Consumer takeaway

If your low-speed electric vehicle is legally exempt from RTO registration, an insurer cannot reject your comprehensive insurance claim solely because it is not registered, especially after knowingly issuing the policy and accepting the premium, the Commission held.

Aggrieved consumers may contact the consumer helpline in their respective states (Himachal Pradesh helpline: 1800–180–8087) or call the National Consumer Helpline at 1915 for assistance.

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