Is the Insurance Company Liable for Compensation for an Employee of the Insured Travelling in the Insured Vehicle?

In Oriental Insurance Co. v. Meena Variyal (2007), the Supreme Court said that an employee of the insured was not covered as a Third Party under the Motor Policy.

In New India Assurance Co. v. Shanti Bopanna (2017), another case where the deceased was an employee of the insured, the Supreme Court held the insurer liable.

There are various situations where such seemingly divergent views have been taken. In my interactions with advocates, I very often hear the lament that the courts, sometimes even the Supreme Court, are inconsistent in their pronouncements, and they are guided more by empathy for the claimant than the law on the matter. Is it so in this case, or can it be explained otherwise?

Oriental Insurance Co. v. Meena Variyal

Facts – A Regional Manager of the insured company, met with a fatal accident while travelling for work in the insured Pvt Car registered in the name of the company. There was some doubt as to who was driving the vehicle, the deceased himself or the person who lodged the FIR stating that the deceased himself was driving. The petition alleged that the author of the FIR was the driver, even though he was not made a respondent in the case instituted under Sec 166 of the MV Act. The insurance policy in this case was a policy issued in accordance with the statutory requirements of the Motor Vehicles Act (also referred to as the Act only Policy).

The Supreme Court, hearing the insurer’s appeal against a ‘Pay & Recover’ order by the High Court concluded that there was no evidence that Mahmood Hasan (the author of the FIR) was driving the vehicle at the time of the accident. Even if he was, there was no finding of his negligence. The victim was the Regional Manager of the insured company that owned the car. Whether the deceased was treated as the owner of the car or as an employee of the insured, he was not covered under the insurance policy taken in terms of the Act, without a special contract.

In ruling that the insurer was not liable for the employee of the insured in an Act Policy, the Supreme Court was relying on the proviso to Sec 147(1) of the Act, which very categorically creates certain specific exceptions to the general rule that an employee of the insured was not covered under the Act Policy. The deceased here did not fall under the category of the employees who are covered under the Act Policy (even for those covered, the coverage is to the extent of the liability of the employer under the Workmen’s Compensation Act, 1923). Thus the deceased being an employee not being covered under the proviso to Sec 147(1) of the MV Act, there would be no liability of the insurance company under any of the sections under which the Act makes provisions to make a claim against a Motor policy, including a claim under Workmen’s Compensation Act.

New India Assurance v. Shanti Bopanna

Facts – The facts in this case are similar to the above case with the only difference that the Policy in this case was a Package policy, also referred to as a Comprehensive Policy. An employee of the insured company, while travelling for work in the employer’s vehicle, met with a fatal accident caused by the negligence of the driver of the vehicle.

One of the issues framed by the tribunal was whether the risk of the alleged deceased being employee or member of the insured is not covered under the insurance policy and thus respondent no.1 (the insurer) is not liable to pay the compensation. The Divisional Manager of the Insurance Co. stated in his deposition that being the employee of the owner of the offending vehicle, the victim was not covered. During the cross-examination, he mentioned that the policy in question was a Comprehensive Policy.

The Tribunal held the insurer liable. The High Court, hearing an appeal by the insurance company, concurred with the decision of the Tribunal. It is interesting to note that the para 1 of the High Court judgement mentions as below:

Does the 'comprehensive policy of insurance' exempt the insurance company from its liability of paying the compensation to the victim of a vehicular accident who is travelling in a vehicle which is covered under such policy at the time of accident? This is the only important point raised in the instant appeal … Here the High Court was considering the question of the liability of the insurer for a victim travelling in the insured vehicle, and not the liability for an employee of the insured.

It is settled law that the Act Policy does not cover the liability for death or injury to the occupants of a Pvt Car. It is also settled law that the terms of the Package Policy extend the cover to the occupants of a Pvt. Car. This cover for the occupants is provided under the terms of the Package Policy, even as the Motor Vehicles Act does not require a cover for the occupants. In deciding that the Tribunal was right in fixing the liability on the insurer, the High Court was only considering the settled law on the point that occupants of a Pvt Car are covered as third parties under a Package Policy. The High Court was not cognizant of the fact that the exclusion of cover for employees under the proviso to Sec 147(1) continues under the Package Policy under specific terms of the Clause 1.a of Section 2 of the Motor Pvt Car Package Policy. Hence, even as the cover for occupants of a Pvt Car is provided under the Package Policy, such cover is still not available for employees of the insured. From a reading of the judgment of the High Court, it appears that even though the Divisional Manager of the insurance company had generally stated in his deposition that the deceased being an employee of the insured was not covered under the policy, the point was not pressed on behalf of the insurance company with specific mention of the terms of the Package Policy which carve out an exclusion in case of employees of the insured, inspite of the extension of cover for the occupants of the car. In finding that the insurer was liable for compensation for occupants in case of a Package Policy, the Court was not deciding on the issue of whether or not the insurer is liable for the employee of the insured.

In finding liability on the insurer, the High Court has referred with approval to the decision of the Punjab & Haryana High Court in Jyoti v. Geeta Devi (2010) which itself was based on the decision of the Delhi High Court in Yashpal Luthra v. United India Insurance (2009). It may be noted that in both these cases the issue was whether there was liability on the insurer for the occupants of a Pvt Car in case of a Comprehensive Policy. The question of liability for an employee of the insured was not in question in these cases.

The High Court has also referred to the Supreme Court judgment in National Insurance Co. v. Balakrishnan (2012). The Managing Director of the insured Co suffered bodily injuries while travelling in the insured vehicle. The defense of there being no cover for an employee of the insured was not raised by the insurer in this case. Also, there was no mention throughout, up to the Supreme Court, whether the insurance policy was an Act Only Policy or a Package / Comprehensive Policy. Going by the settled law that occupants of Pvt Car were not covered under the Act Only Policy, but were covered under the Package Policy, the Apex Court remanded the matter back to the Tribunal to ascertain the type of policy. As the issue of coverage for employee was not raised, the Supreme Court was not deciding the issue and this case cannot be cited as an authority on the issue of cover for an employee of the insured. Coming back to New India Assurance v. Shanti Bopanna, the High Court agreed with the decision of the Tribunal that the insurer was liable for compensation for an amount of Rs. 1.68 Crores plus interest. The Supreme Court, hearing an appeal from the insurance company, agreed with the Tribunal and the High Court.

This case involved the matter of compensation in case of the death of an employee of the insured, who, at the time of the accident, was travelling in the insured vehicle in the course of his employment. It is possible that the decision of the Supreme Court in this case would be cited as an authority on the issue of the insurer’s liability for the death of an employee of the insured travelling in the insured vehicle. However, in view of the fact apparent from the judgements of the two appellate courts that the specific defense based on the proviso to Sec 147(1) of the Act was not raised, it would be incorrect to consider this case as an authority on the subject. It appears that an opportunity to defend the case was lost.