The Bombay High Court (HC) ruled on Tuesday that the “pay and recover” principle – which requires insurance companies to first pay accident benefits to the families of the victims, then recover the amount from from the owner of the offending vehicle – cannot be applied. in cases where the insurance policy has expired and there is no current insurance contract at the date of the loss.
The court had before it an appeal filed by Oriental Insurance Company, challenging the order of March 28, 2014 of the Traffic Accident Compensation Court in Nashik, holding the insurer jointly and severally liable for the payment of compensation of ??6.68 lakh to family members of Milind Gaikwad, who died in a traffic accident.
Judge NJ Jamadar stated that the principle can be legitimately invoked when there is an insurance contract and the insurer is exempt from liability due to breach of the insurance conditions or similar causes, but not when such a contract does not exist.
The incident took place on February 4, 2009, when the deceased was riding a motorcycle en route to the Satpur industrial area and another motorcyclist, Uday Pathak, crashed into him. Milind, 27, was seriously injured and eventually succumbed to his injuries.
Gaikwad’s family members filed an accident complaint under section 166 of the Motor Vehicle Act 1988 with the Tribunal, which ruled that the accident had occurred as a result of driving careless and negligent of the offending motorcycle and of the owner of the vehicle and its insurer – Oriental Insurance Company were jointly and severally liable to pay compensation.
The insurer had challenged the court order, arguing mainly that there was no insurance contract in force between the insurance company and the owner of the offending vehicle at the date of the accident and the court committed an error in holding the insurance company jointly and severally liable for the compensation.
HC accepted the contention, noting that the insurance certificate specifically stated that the policy was valid from October 17, 2006 to October 16, 2007 and therefore expired long before the accident on February 4, 2009. However, after HC ruled that the insurance company cannot be held jointly and severally liable for the payment of compensation, the plaintiffs urged the court to apply the “pay and recover” principle, ordering the insurance company to pay the compensation first and then collect it from the vehicle owner.
It was argued on behalf of the plaintiffs that they would be left out and that the beneficial purpose of the Motor Vehicles Act, 1988 would be denied if no order based on the “pay and reclaim” principle was made. Counsel for the insurer opposed the plea, arguing that the “pay and recover” principle cannot be invoked when there is no insurance contract in force.
HC accepted the claims of the insurance company. “There is no doubt that we must keep in mind the beneficial nature of the legislation. However, the principle of purposive interpretation cannot be extended to the point of imposing liability on a party, who is in no way bound to comply with the award, for the sole reason that there was a contract in the past. insurance between the insurer and insured, ”said Judge Jamadar.
“The legal relationship between the former insurer and the insured is broken with the end of the term of the insurance,” added the judiciary and exonerated the insurance company from the obligation to pay compensation to a victim of accident, Milind Gaikwad, a resident of Nashik.