Constituent policy

Kerala High Court Raps Insurance Department

Quashing the award ordering the Kerala State Insurance Department to pay compensation in a road accident claim case, the Kerala High Court on Friday said that the policy was not issued by it, the department cannot be held responsible for paying compensation. However, the court added, since the department took more than eight years to refuse the policy, the plaintiff deserves compensation.

The ministry had challenged the allocation of the Additional Traffic Accident Claims Tribunal-II, Kozhikode of 19.10.2005 in a case dating back to 1995. The only reason was that since the vehicle in question was not even insured by it, the obligation to indemnify is illegal. Instead, the vehicle was insured with the Oriental Insurance Company, which did not even appear in court.

Judge C. Jayachandran in the order observed that it was “an extremely sad situation” that even in the year 2022 the plaintiff could not benefit from the award rendered in 2005 in respect of an accident occurred in 1995 solely due to inaction, fault and negligence on the part of the appellant insurance company.

“This Court is in complete agreement with the proposition that, in the absence of a valid policy, Appellant/R3 cannot be held liable to pay compensation to the First Defendant/Plaintiff. However, the fact that it took more than eight years for appellant /R3 to deny the policy, as well as liability, is something that cannot be lightly dismissed, as it resulted in serious consequences and harm to the first defendant/plaintiff This Court is therefore of the view that even where the appeal must be allowed, the first defendant/plaintiff must be compensated in order to balance the equities,” he observed.

The court allowed the appeal subject to the payment of the costs of Rs 20,000 to the plaintiff, within 45 days. She also sent the case back to the court for a new examination, in accordance with the law, within six months.

On 19.10.2005, the Court had ordered the department to file the sentence relating to an accident which occurred on 08.04.1995. With more than three years of delay, the applicant lodged a request for reconsideration before the Court, which was rejected by order of 13.10.2010. It was not until 2014 that an immediate appeal was filed by the appellant challenging the sentence.

The Government litigator Sreejith VS and lawyer EC Bineesh argued that the Tribunal made the award without due regard to the fact that there was no insurance policy for the vehicle at the relevant time. It was argued that although there was a delay in filing the present appeal, it was tolerated as per the High Court order of 13.01.2017, upon payment of Rs.2000 .

On behalf of the applicant, he was supported by Lawyer KM Firoz, that he had an accident in the year 1995 and got a favorable reward in 2005 in the amount of Rs. 28,000 with interest but could not realize it even in 2022. L Counsel argued that even if the appeal were successful, the hardship and harm caused to the plaintiff should be compensated. Counsel further asserted that although the Appellant appeared through counsel before the Tribunal, little was done and no written statements were filed denying the policy.

On behalf of the owner of the vehicle in question, he was supported by Lawyer R. Sudhish, that although he erred in admitting the policy claimed by the applicant, this would not exonerate the applicant from establishing before the Tribunal that the policy claimed in the application covers the vehicle in question. It was further asserted that the Claimant never produced the final report before the Tribunal; which, if done, would have prevented the precarious situation.

Findings of the Court

In this case, the Court found that there had been repeated instances of callous negligence and inaction on the part of the appellant insurance company.

First, the court said that the department did not choose to file a written statement denying the insurance policy claimed by the plaintiff, despite appearing before the court through counsel.

Second, the court added, the petition for review was only filed with the Court after a delay of more than three years from the date of award.

Finally, the court observed that no immediate action was taken by the appellant after the rejection of the request for review. The Court also noted that it even took the ministry another three years and nearly eight months to file this appeal in 2014.

“It is one thing to take note, as requested by the learned lawyer for Appellant/R3, that in accordance with the order of 13.1.2017, the enormous delay was tolerated on payment of a cost of Rs.2,000/-. However, it is quite different and all the more important to note that such tolerance of delay would not erase the harm, hardship and risk caused to the first respondent/plaintiff,” said he declared.

With respect to the claimant’s claim that the benefit of the proviso of Section 21 of the Limitation Act should apply, the Court found that, pursuant to the proviso of the provision, it is provided that “where the court is satisfied that the omission the inclusion of a party was due to a mistake made in good faith, the court may order that the action with respect to such new party be deemed to have been brought at an earlier date”.

The court therefore accepted the argument and said that since the department was implicated on the belief that the vehicle in question was covered by a policy issued by it, the plaintiff was entitled to the benefit of the provision.

“However, this Court is of the opinion that the insurance company which is going to be called into question should not be involved in the responsibility for the payment of interest on the amount of the indemnity from the date of the petition until ‘on the date of questioning,’ she added.

The court said that the interest component relating to the period must be borne by the owner of the vehicle as well, as he was also negligent and callous in admitting that the policy was issued by the ministry.

“The Second Defendant/Owner had also contributed to the hardship and harm caused to the First Defendant/Plaintiff. If the Second Defendant/Owner had been diligent in verifying its policy and stating correct and true facts in its written statement, the defendant/plaintiff would not have been put in the current situation,” the bench said.

Lawyers M. Manju, Jacob Abraham, Jeswin P. Varghese, S. Kannan, Raji T. Bhaskar, and Mr Shajna also appeared for the various respondents.

Case title: Kerala State Department of Insurance v P. Rajan & Ors.

Quote: 2022 LiveLaw (Ker) 526

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