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Insurance Company cannot deny a vehicle owner's claim merely because the driver possessed a fake license: Supreme Court [Read Judgment]

The Court observed that to avoid liability, the onus was on the insurance company to prove that the insured did not take adequate care and caution to verify the driver's licence.

Aishwarya Iyer

The Supreme Court recently held that an insurance claim cannot be denied only on the ground that the vehicle was driven by a driver possessing a fake license, in the absence of proven wilful negligence by the insured in verifying the genuineness of the licence (Nirmal Kothari v United India Insurance Co Ltd).

A Division Bench of Justices Navin Sinha and Krishna Murari reiterated,

"While the insurer can certainly take the defence that the licence of the driver of the car at the time of accident was invalid/fake however the onus of proving that the insured did not take adequate care and caution to verify the genuineness of the licence or was guilty of willful breach of the conditions of the insurance policy or the contract of insurance lies on the insurer."
Supreme Court

On the facts an hand, the Court added that if an employer found the driver to be competent to drive the vehicle and had satisfied himself that the driver has a driving licence, the insurance company would be liable to pay the claimant.

In such a scenario, only a reasonable standard of care is required to be exercised. The insured does not have to go to the "unreasonable" extent of making enquiries with RTOs all over the country to ascertain the veracity of the driving licence, the Court observed.

Provided that this standard of care is exercised, Section 149(2)(a)(ii) of the Motor Vehicles Act would not be breached, the Court said.

This provision states thatiInsurance companies are not liable to indemnify the insured, if the driver of the vehicle did not hold a valid driver's licence or if the driver was not eligible to carry the licence at the time of the accident.

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