Insurer Liable Unless Breach of Policy Knowledge Is Proven: Himachal Pradesh HC

Insurers cannot evade liability in motor accident claims merely by showing that an unauthorized or unlicensed individual was at the wheel without establishing deliberate negligence or knowledge on the part of the vehicle owner. Dismissing an appeal filed by the insurance company, the High Court held that the burden of proving a wilful breach of policy conditions rests squarely on the insurer.

In a judgment delivered by Justice Sushil Kukreja, the High Court affirmed the award passed by the Motor Accidents Claims Tribunal, Shimla, which had directed the insurer to pay Rs. 9,24,800/- with 9% interest per annum to the mother of a deceased victim.

Court Observations and Rationale

The High Court carefully evaluated the evidence regarding the circumstances under which the vehicle rolled down into the Satluj river. The court noted that the regular driver engaged by the owner possessed a valid driving licence and had stepped down from the vehicle after taking necessary precautions, whereupon another individual unauthorizedly operated the vehicle's controls.

Addressing the insurer's defence regarding the absence of a valid licence of the driver at the wheel, the Court emphasized that liability cannot be avoided without establishing intentional breach by the owner. Quoting established precedents, the Court, in its reasoning, observed: "In order to avoid liability it is not sufficient to show that the person driving at the time of accident was not duly licensed. The Insurance Company must establish that the breach was on the part of the insured."

Highlighting the legal principle governing employer diligence, the Court further reiterated that: "While hiring a driver the employer is expected to verify if the driver has a driving licence. If the driver produces a licence which on the face of it looks genuine, the employer is not expected to further investigate into the authenticity of the licence unless there is cause to believe otherwise."

The Court issued the following directions: "Hence, the appeal filed by the appellant being devoid of any merit is dismissed and the impugned award dated 27.06.2016 is upheld."

Background

The dispute arose from a fatal motor accident on March 16, 2010, when a vehicle carrying an agricultural worker rolled down a gorge into the Satluj River at Morang curve on NH-22. The deceased's mother filed a claim under Section 166 of the Motor Vehicles Act, 1988 before the Motor Accidents Claims Tribunal (IV), Shimla. The Tribunal awarded Rs. 9,24,800/- with 9% interest, holding the insurer liable.

Aggrieved by the award, the Insurance Company preferred an appeal under Section 173 of the Motor Vehicles Act, 1988, contending that the vehicle was being driven by an individual with a fake licence and that the parties had acted in collusion. The High Court analyzed principles laid down in New India Assurance Co. Vs. Satya Parkash Thakur and Ors., National Insurance Co. Ltd. v. Swaran Singh, Hind Samachar Ltd. (Delhi Unit) Versus National Insurance Company Ltd. & ors. ( "2026 (7) SCC 773": 2025 CaseBase(SC) 1138), New India Assurance Co. v. Kamla, Lehru and Ors., Geeta Devi, Nirmala Kothari, Pepsu, and Ram Chandra Singh. Finding no evidence of knowledge or negligence on the part of the owner, the High Court dismissed the appeal and upheld the Tribunal's award.

Case Details:
Case No.: FAO (MV) No. 509 of 2016
Neutral Citation: 2026:HHC:30615
Case Title: New India Assurance Co. Ltd. v. Shyam Kumari & Ors.
Appearances:
For the Petitioner(s): Mr. B.M. Chauhan, Senior Advocate with Ms. Kamakshi Tarlokta and Mr. Amit Himalvi, Advocates
For the Respondent(s): Mr. N.D. Sharma, Advocate for Respondent No. 1

Source: 2026 CaseBase(HP) 4590