SC frowns on risk firms` approach to accident claims

The Supreme Court has expressed concern over the increasing tendency of insurance companies to deny compensation to claimants of motor vehicle accidents.

A bench of Justices Altamas Kabir and H S Bedi lamented that insurance companies, being in a dominant position, often act in an “unreasonable” manner after having taken the premium.

“The insurance companies often act in an unreasonable manner and after having accepted the value of a particular insured goods, disown that very figure on one pretext or the other when they are called upon to pay compensation.”

“This ‘take it or leave it’ attitude is clearly unwarranted not only as being bad in law but ethically indefensible,” the bench remarked in its judgement. The bench passed its observations while upholding an appeal filed by Dharmender Goel, owner of a vehicle.

Goel had insured his vehicle for Rs 3,54,000 with the Oriental Insurance Company. When Goel claimed his insurance after meeting with an accident, the company repudiated the claim on the ground that the driver did not possess a valid driving licence.

The insurance company’s surveyor had submitted a report that the vehicle suffered “total loss” and valued the loss at Rs 1.80 lakh.

The district forum dismissed his complaint seeking more compensation, but the Madhya Pradesh State Consumer Forum upheld his plea.

It, however, modified the amount of compensation at Rs 1.04 lakh. Dissatisfied with the award, Goel filed an appeal before the National Commission, which enhanced the compensation to Rs 1.80 lakh.

Aggrieved again, he appealed in the apex court. The insurance company reasoned that even if the claim was to be entertained, Goel was entitled to only Rs 1.80 lakh as fixed by the surveyor.

Upholding Goel’s plea, the apex court said the insurance company itself had valued the vehicle at Rs 3.54 lakh and since the vehicle had suffered “total loss”, the insurer cannot take the plea that it would pay only Rs 1.80 lakh as compensation.

The apex court said Section 146 of the Motor Vehicle Act casts an obligation on the owner of a vehicle to take out an insurance policy and any vehicle plying without such policy invites punishment.

“It is therefore, obvious that in the light of this stringent provision and being in a dominant position, the insurance companies often act in an unreasonable manner,” the apex court said. Hence, it directed the insurance company to pay a compensation of Rs 3.44 lakh.