Insurance Company Must Pay Victim Compensation Despite Route Deviation; Right to Recover from Insured Affirmed

A Bench of Justices Sanjay Karol and Prashant Kumar Mishra heard appeals against a common judgment of the High Court of Karnataka arising from a claim petition under the Motor Vehicles Act following a fatal road accident. The appeals challenged the High Court’s decision that reassessed the compensation awarded to the claimants and applied the “pay and recover” principle to fix initial liability on the insurer despite a deviation from the permitted route.

The Court held that an insurer remained statutorily liable to satisfy compensation to victims even where the offending vehicle had deviated from the route permitted by its permit, but that the insurer was entitled to recover the amount from the insured/owner if policy conditions were breached. The Court relied on established precedents on the statutory obligation of insurers and the limited scope for denying third‑party relief. The Court, in its reasoning, observed: "At the same time though, when an Insurance Company takes on a policy and accepts payments of premium in pursuance thereto, it agrees to do so within certain bounds. The contract lays down the four corners within which such an insurance policy would operate. If that is the case, to expect the insurer to pay compensation to a third party, which is clearly outside the bounds of the said agreement would be unfair. Balancing the need for payment of compensation to the victim vis‑à‑vis the interests of the insurer, the order of the High Court applying the pay and recover principle, in our considered view, is entirely justified and requires no interference." The Court also noted that "To deny the victim/dependents of the victim compensation simply because the accident took place outside the bounds of the permit and, therefore, is outside the purview of the insurance policy, would be offensive to the sense of justice."

Background On 7 October 2014 Srinivasa alias Murthy, who rode a motorcycle, was struck by the offending bus (registration KA‑52‑9099) and died on the spot. His dependents filed a claim petition seeking Rs 50,00,000 with 18% interest, asserting that the deceased ran a Shamiyana centre and a ration shop and earned up to Rs 15,000 per month. The Claims Tribunal accepted a notional monthly income of Rs 8,000 and awarded Rs 18,86,000 with interest. The claimants appealed to the High Court, which reassessed the deceased’s monthly income at Rs 15,750, applied 40% towards future prospects, deducted one‑fourth for personal expenses, applied multiplier 16, and awarded compensation under various heads totaling Rs 31,84,000. The insurer separately challenged liability on the ground that the bus had deviated from the permit route and that the driver was not authorised to enter Channapatna.

The High Court relied on this Court’s authority in Amrit Paul and other precedents (including National Insurance Co. Ltd. v. Swaran Singh and New India Assurance Co. v. Kamla) and directed the insurer to satisfy the award while permitting recovery from the owner — applying the established “pay and recover” principle. The Supreme Court reviewed the legal question whether deviation from a permitted route absolved insurer liability to third parties and analysed earlier decisions which endorsed statutorily imposed initial liability on insurers and a right to recover from the insured where policy conditions were breached. The Court affirmed the High Court’s conclusions, dismissed the appeals, and recorded that there would be no order as to costs. The insurer remained directed to satisfy the award with liberty to recover the amount from the vehicle owner.

Case Details: Case No.: 2025 INSC 1270 Case Title: K. Nagendra v. The New India Insurance Co. Ltd. & Ors. Appearances: For the Petitioner(s): Not indicated in the judgment text For the Respondent(s): Not indicated in the judgment text