If error is inadvertent, claim must be paid

Insurance firms cannot deny claims if there is any inadvertent error on the part of the insured

Seetakanta Patnaik had insured his truck with Oriental Insurance under a policy valid from June 9, 2005 to June 8, 2006. During the tenure of the policy, the vehicle met with an accident on September 3, 2005. The police registered a case.

Since the truck was badly damaged, it was loaded on to another vehicle and transported to Bhandar Gharani Engineering Garage for repairs. The transportation cost came to Rs 3,000 while the repair cost came to Rs 1,65,000, which comprised of Rs 75,000 for purchase of parts and Rs 90,000 towards labour charges.

An insurance claim was lodged for Rs 1,68,000 towards repairs and transport charges, but it was rejected on the ground that the driver did not possess a valid driving licence at the time of the accident. So Patnaik challenged the repudiation by filing a consumer complaint before the Nabaran­gpur District Forum. It was contested by the insurer, which contended that there was no deficiency in service as repudiation was based on the surveyor finding that the driver did not possess a valid driving licence.

Over-ruling the insurer's objections, the Forum directed it to settle the claim by paying the entire amount of Rs 1,68,000 together with compensation and litigation cost of Rs 5,000. This amount was ordered to be paid within 45 days, or else it would carry 12 per cent interest for the period of delay.

Oriental Insurance challenged this order before the Orissa State Commission. The latter observed that the vehicle’s owner had stated on oath that he had seen the licence, which looked to be genuine. And since he had no reason to doubt its validity, he had employed the driver in good faith. Patnaik argued that he had neither wilfully engaged a driver who did not hold a valid licence, nor did he violate any condition of the policy, so he should not be deprived of the claim for repairs. Since there was no evidence to show that Patnaik had any motivated intent to make a false claim, the State Commission accepted his argument, and dismissed the insurer’s appeal.

The insurer then filed a revision petition before the National Commission. The latter observed that the crux of the dispute was whether the claim ought to be rejected outright when the driver's licence was found to be fake, regardless of whether the vehicle owner, who had taken the coverage, was aware or not about the genuineness of the licence. The Commission observed that it would be very difficult for an individual to ascertain whether a licence is genuine. Besides, if the insurer wants to repudiate the claim, the onus would be upon it to prove that the insured owner of the vehicle was negligent while employing the driver. The Commission noted that both the District Forum as well as the State Commission had concluded that the insurer had failed to prove any negligence on the part of the vehicle owner while engaging the driver, and such concurrent finding could not be challenged in the limited scope of a revision petition. 

Accordingly, by an order dated October 8, 2020, delivered by Anup Thakur, the National Commission dismissed the insurer's revision petition and held that Patnaik was entitled to receive the claim amount.

The writer is a consumer activist