Insurance Claim Repudiation of Theft of Vehicle On Basis That Vehicles Was Used As Taxi- Is Not Valid
Summary: In a case involving S from Indore and ABC Insurance Company, a claim for a stolen Jeep Compass was initially repudiated on the grounds that the vehicle was being used as a taxi. S had purchased the vehicle, insured it comprehensively, and reported it stolen from a parking area a month after purchase. Following police efforts and a non-traceable certificate, S pursued the claim, which the insurer delayed and then repudiated based on alleged commercial use. Both the District Forum and the State Commission ruled in favor of S, emphasizing that the vehicle’s use was irrelevant to its theft. The case escalated to the National Forum, where the insured’s counsel cited the Supreme Court’s 2008 judgment in National Insurance Company Ltd. Vs. Nitin Khandelwal. This precedent established that in cases of vehicle theft, a breach of policy conditions regarding usage is not germane, meaning the insurer remains liable to indemnify the owner under a comprehensive policy. Consequently, the insurance company’s attempt to settle the claim on a “non-standard basis” (at 75% of the insured declared value) was deemed unjustified. The ruling reaffirmed that for vehicle theft, the nature of its use cannot be a basis for repudiation or reduced claim settlement, especially when there’s no causal link between the alleged breach and the loss.
BRIEF FACTS:
1. S from Indore purchased a Jeep Compass from its Authorised Dealer in Mumbai 24th April 2019 for a sum of Rs. 21,24,000. The vehicle bearing registration No. MP09-UA-1413 was insured comprehensively from 24th April 2019 to 23rd April 2020 with ABC Insurance Company.
2. S went to RNT Marg for some official work on 23rd May 2019 where he parked and locked the car in a parking area. He returned to the parking area at about 5 PM. To his surprise, he found the vehicle missing.
3. He searched for the car frantically and on not finding it, lodged an FIR with the M. G. Road police station for the missing car. Next day, he also informed the insurance company in writing about the said theft of the vehicle.
4. Despite vigorous efforts of the police, the vehicle could not be traced.
5. Hence, after 90 days, the police gave a non-traceable certificate/report to S.
6. S, thereafter, again pursued the matter of settlement of claim with the insurance company and submitted a copy of the purchase invoice of the vehicle along with copies of the relevant documents.
7. The insurance company did not respond positively and kept delaying the matter on one pretext or the other.
8. S was aggrieved by this inaction on the part of the insurer, filed a complaint with the District Forum.
9. During the pendency of the complaint, the insurance company repudiated the claim on the ground that the vehicle was being used as a Taxi.
10. The District Forum, after hearing both sides, directed the insurance company to pay S, the insured declared value of the vehicle, i.e., Rs. 21,24,000 along with interest @ 6% p.a. from four months after the date of lodging of claim till realisation. The District Forum also awarded Rs. 15,000 as costs.
11. The insurance company filed an appeal before the State Commission. The plea highlighted the fact that the insurer was not liable to reimburse the loss of stolen vehicle as the same was being used as a taxi. This plea was rejected by the State Commission by observing that theft of the vehicle had nothing to do with the use of the vehicle. The appeal, therefore, was dismissed and the awarded amount was ordered to be released by the insurer.
12. The insurance company further filed a revision petition before the National Forum. During arguments, both sides vehemently advocated their views. Finally, it was pointed out by the counsel of the insured that in the decided case of ‘National Insurance Company Ltd. Vs. Nitin Khandelwal’, the Supreme Court had held that,
“In a case where the vehicle had been snatched or stolen, the breach of condition is not germane, and the insurance company is liable to indemnify the owner of the vehicle where the insured owner has obtained a comprehensive policy for the vehicle in question”.’
13. In view of the aforesaid judgment of the apex court in the earlier order of the State Commission in the ‘Nitin Khandelwal case of 2008’, the counsel for the insurance company did not press the point that insurer was not liable to reimburse for the stolen vehicle because it was being used as a taxi. Hence, the claim was finalised at 75% on ‘non-standard basis’ as upheld earlier by the Supreme Court in 2008 plus cost.
ISSUE: Was the stand taken by the Insurance company to settle the claim on ‘‘Non-standard basis’’ justified?
DECISION: The stand taken at first instance by the Insurance Company to repudiate liability on the ground that the vehicle was used as a Taxi by ‘S’ is totally baseless and is not based on facts which have emerged in the present case.
The liability under the policy, therefore, was clear and the Insurance Company should have honoured its liability rather that going to the various forums initially and thereafter in a review petition before the National Forum.
- Though the Supreme Court in 2008 in “Nitin Khandelwal Case” had already laid down that “In a case, where the vehicle had been snatched or stolen, the breach of condition is germane, and the Insurance Company is liable to indemnify the owner of the vehicle where the insured owner had taken a comprehensive policy for the vehicle in question”.
- The Court had taken a view that the breach of the policy condition regarding the hire of the vehicle for a commercial purpose has no bearing on its theft and, hence, would be irrelevant. The Supreme Court in “Nitin Khandelwal Case” left the question “whether the State Commission was justified in allowing the claim of the respondent on the non- standard basis” open as the claimant had not filed any appeal against the said order.
- The insurance company would be bound to pay the insured declared value of the vehicle and not 75 % on non- standard basis.
- Further, the National Consumer Disputes Redressal Commission in case of “Rekha Sardana vs. Oriental Insurance Co. Ltd. & Ors” held the same as mentioned above.
- Thus, keeping in mind the above, the stand taken ultimately by the insurance company to settle the claim on non-standard basis was not justified. Therefore, the non-standard been for the settlement of the clause is not justified. The Supreme Court has held in ”Nitin Khandelwal Case” in 2008 that “where the vehicle is snatched or stolen, the breach of condition of policy is not germane, that the insurance company is liable to indemnify the owner of the vehicle when the insurer has obtained comprehensive policy for the loss caused to the insurer”. If the Supreme Court’s decision is viewed in totally, it becomes clear that in case of theft of a vehicle the nature of use of the vehicle cannot be looked into and the breach of such a condition is not germane and hence the Insurance Company is liable to indemnify the owner for the loss suffered by him.
- However, in the present case, since there is no evidence of breach of usage condition, the claim will have to be paid. Further, as per rules, even if is presumed that there is a breach of any condition, a claim cannot be rejected for breach of a policy condition unless such breach is the cause of the loss. When there is no nexus between the breach and the loss, the claim has to be settled on a non-standard basis.
- Therefore, in the present case, as there is no evidence of misuse of vehicle as taxi, the claimant is liable for total loss payment and not only the total loss suffered by him as a result of theft and not merely settlement on 75% “Non-Standard basis”, as the present facts of the case do not qualify under the guidelines for non-standard claims as mentioned below:
- Where a breach of warranty or policy condition arises and where such breach is of a technical nature or is evidently beyond the control or knowledge of the insured or is considered after rectifying the policy and collecting additional premium where due.
- In settling the claim, a deduction may be made from the assessed claim amount equivalent to the extra premium due for three years or three times the additional premium due for voyage which would have been charged had correct information been available originally.
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DISCLAIMER: the case study presented here is only for sharing information with readers. The views are personal, shall not be considered as professional advice. In case of necessity do consult with professionals.
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