Why this Tamil Nadu consumer lost his Rs 22 lakh vehicle insurance claim despite having valid policy

‘No permit to run carry passengers’

• The state consumer commission has misconstrued the said provisions even though it has recorded that the vehicle was being utilised and passengers were carried.
• The passengers were dropped in the way for which tickets had been issued from Chennai to Pollachi via Tiruppur and Udumalpet etc.
• There was no permit for the vehicle to run as a stage carriage (to carry passengers).
• It was a clear case where there was no valid permit with the vehicle to run as a stage carriage.
• The said decision was held to be not applicable on the facts of the said case inasmuch as in the instant case the vehicle was not plying without a permit.
• If the permit was only for a specific purpose then its use under a different head and its operation amounts to a fundamental breach.

• The usage of the vehicle as a stage carriage in spite of the fact that the permit was for a contract carriage which was accepted by the state consumer commission yet the state commission has recorded that this will not amount to a fundamental breach.
• The central question before the NCDRC was whether operating a vehicle as a stage carriage, despite possessing only a contract carriage permit, constituted a fundamental breach of the insurance policy.
• The insurance policy clearly limited coverage to use of the vehicle “only under a permit within the meaning of the Motor Vehicles Act, 1988”.
• The commission noted that while the vehicle did indeed have a valid contract carriage permit for the relevant period (January 28, 2011 to January 27, 2012), evidence on record showed that on the date of the accident, it was being run as a stage carriage.

Order set aside

• Allowing the insurer’s appeal, the NCDRC set aside the October 22, 2021 order of the state commission to pay Rs 22.42 lakhs to the consumer.
• The commission also directed that any statutory deposit made by the insurer during the pendency of the appeal be released along with accrued interest upon appropriate application before the registry.

Accident, insurance claim

• The dispute traces back to June 7, 2011, when the insured vehicle met with an accident having a valid insurance policy issued by National Insurance Company.
• The vehicle owner, one K P Natarajan, subsequently sought indemnification under the policy.
• However, on December 7, 2012, the insurer rejected the claim, alleging that the vehicle was being operated in violation of the permit conditions at the time of the accident.

• According to the insurer, although the vehicle held a valid contract carriage permit, it was functioning as a stage carriage picking up and dropping passengers along a route and issuing tickets which was not permitted under its licence or under the insurance policy.

State commission’s relief in 2021

• After nearly a decade of litigation, the Tamil Nadu State Consumer Disputes Redressal Commission, by its order dated October 22, 2021, ruled in favour of the complainant.
• The state commission held that there was no “fundamental breach” of policy conditions and directed the insurer to settle the claim on a non-standard basis, awarding 70% of the admissible claim amount.

• The payable sum was calculated at Rs 22,42,847, along with compensation and litigation costs.
• The state commission relied on Supreme Court precedent to conclude that the violation, if any, did not justify complete repudiation of the claim.

Appeals before national commission

• Aggrieved by the award, National Insurance Company approached the NCDRC in 2022.
• Simultaneously, Natarajan filed an appeal in 2023, seeking enhancement of the compensation.
• Advocates Abhishek Gola, Anshul Mehral and Abhishek Kumar submitted that the inference drawn by the state consumer commission by construing that there was no fundamental breach is unsustainable.
• However, when the matter was taken up for final hearing, no one appeared on behalf of the complainant.
• The commission recorded that despite previous representation, the complainant remained absent during the final stages.
• Consequently, the appeal seeking enhancement was dismissed for want of prosecution.