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

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. .In the motor accident case at hand, the claimant was denied insurance on the ground that the driver of the claimant's vehicle did not possess a valid driver's licence. .The insurance company argued that in the absence of a valid and effective driving licence with the driver, there was fundamental breach of the terms and conditions of the insurance policy in question. Hence, the claim was not payable, it was contended..The claimant, on the other hand, told the Court that when the driver was employed, reasonable diligence was exercised to ascertain if he possessed a valid driver's licence by checking the documents produced in connection with the case. .The Supreme Court noted that the question of law that arose for consideration was the extent of care/diligence that was expected of the employer while employing a driver..The Court found that the issue had been addressed in the case of United India Insurance Co. Ltd. vs. Lehru & Ors, where it was held that an insurance company could not be permitted to avoid its liability only on the ground that the person driving the vehicle at the time of the accident was not duly licenced. .Pertinently, the Bench noted that a wilful breach of the conditions of the policy should be established. .In this regard, the Court further cited the case of National Insurance Co. Ltd. vs. Swaran Singh & Ors, wherein it was held that,"Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties.".In that case, the Court had held,."To avoid its liability towards the insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by a duly licenced driver or one who was not disqualified to drive at the relevant time.”National Insurance Co. Ltd. vs. Swaran Singh & Ors.However, if the insurance company proves that the owner of the vehicle was aware or had notice that the driver's licence was fake or invalid and still permitted the person to drive, the insurance company would no longer continue to be liable..In this case, however, the claimant had no reason to doubt the genuineness of the driver's licence carried by the driver. Therefore, the Supreme Court ruled in the claimant's favour, observing that,."It is not the contention of the Respondent/ Insurance Company that the Appellant/complainant is guilty of willful negligence while employing the driver... The respondent/ Insurance Company is held liable to indemnify the appellant."Supreme Court.Advocates Jasmeet Singh, Naman Joshi, Satyendra Mani Tripathi and Pushpendra Singh Bhadoriya appeared for the claimant. Advocates Suman Bagga and Manjeet Chawla represented the respondents..[Read the Judgment]