Page 51 - The Insurance Times April 2025

Insurance Caselaws

Despite policy cancellation, an insurance sate the family of a fatality in a motor accident and subse-
quently seek reimbursement from the vehicle owner.
company can continue to be liable under
The judgment ordered HDFC Ergo to pay the agreed-upon
the 'Pay & Recover' principle if the propri-
amount. "The appellant was unable to provide evidence that
etor of the offending vehicle fails to re- the insured received the notice of policy cancellation prior
ceive notification: High Court of Bombay to the date of the accident." Sending the notification to the
insured is a matter within the appellant's control. The noti-
Case Title - HDFC ERGO General Insurance Com- fication was not, however, delivered due to an incomplete
pany Ltd. v. Nayajoddin Nijamuddin and Ors. address. "The fact remains that the insured did not receive
the notification of policy cancellation," the court noted.
Summary
The Bombay High Court has ruled that an insurance com- The legal matter at hand pertained to a fatal collision be-
pany can retain liability under the 'pay and recover' prin- tween an auto-rickshaw and a vehicle, which caused the
ciple even after canceling a policy, provided the vehicle pro- demise of an individual riding in the auto-rickshaw. The de-
prietor was not duly informed of the cancellation prior to ceased was en route from Jalgaon to Nashirabad in an auto-
the accident. The ruling, based in Aurangabad, denied HDFC rickshaw. The reverse-bound auto-rickshaw collided with the
Ergo's appeal against a Motor Accident Claims Tribunal, truck after the vehicle abruptly applied its breaks while trav-
Jalgaon, which ordered the company to compensate the eling in the same direction. The family of the deceased filed
family of a fatality in a motor accident and seek reimburse- a claim with the rickshaw proprietor and the insurance com-
ment from the vehicle owner. pany for compensation in the amount of Rs. 25 lakhs.
The insurance company argued that the policy was void at The insurance company lodged objections to the claim, cit-
the time of the accident due to the dishonored premium ing a violation of the terms and conditions of the policy. It
payment cheque. The court referred to the ruling in United asserted that the policy had been canceled on the grounds
India Insurance Co. Ltd. v. Laxmamma and Ors., which un- that the policyholder's premium payment cheque had been
derscored the importance of the insurer canceling the policy dishonored as a result of the account being closed. In part,
and notifying the insured of the cancellation prior to the the Motor Accident Claims Tribunal granted the claim and
accident to absolve the insurer of liability. The court dis- imposed a liability of Rs. 3,87,000 on the vehicle proprietor
missed the appeal, concluding that there was insufficient as compensation, including "No Fault Liability" to the plain-
evidence to interfere with the tribunal's findings. The claim- tiffs. The tribunal ordered the insurance provider to recoup
ants were allowed to withdraw the entire amount, includ- the cost from the vehicle proprietor after making the ad-
ing accrued interest, that the appellant had deposited. vance payment.
About the case Substantiating this decision, the insurance company lodged
The Bombay High Court has rendered a decision stating that the current appeal. Mohit R. Deshmukh, the insurance
an insurance company retains liability under the 'pay and company's counsel, contended that the policy was void at
recover' principle even after canceling a policy, provided the moment of the accident as a result of the premium
that the vehicle proprietor was not duly informed of the cheque for renewal being dishonored and the policy having
cancellation prior to the date of the accident. In his expired. The requirement for the issuance of a pay-and-re-
Aurangabad-based ruling, Justice Kishore C. Sant denied cover order was that a genuine policy be in place. He em-
HDFC Ergo's appeal against a Motor Accident Claims Tribu- phasized that the insured was notified of the policy cancel-
nal, Jalgaon, judgment ordering the company to compen- lation via envelope; however, the letter could not be deliv-

46 April 2025 The Insurance Times