On Monday, October 30, the Supreme Court ruled that an insurance company cannot argue that it is exempt from liability in a car accident claim simply because the owner of the vehicle failed to confirm the validity of the driver who was hired. According to the Court, the insurance company bears the burden of demonstrating that the owner of the vehicle failed to exercise due diligence with respect to the driver hired.

It would be impractical to ask every individual hiring a driver to check that the driver’s driver’s license is valid and authentic, according to a bench comprising Justices CT Ravikumar and Sanjay Kumar.

“..once a seemingly valid driving license is produced by a person employed to drive a vehicle, unless such license is demonstrably fake on the face of it, warranting any sensible employer to make inquiries as to its validity, the burden is upon the insurance company to prove that there was a failure on the part of the vehicle owner in carrying out due diligence apropos such driving license before employing that person to drive the vehicle” the Apex Court said.

The Supreme Court also expressed shock at insurance companies pursuing such matters till the Apex Court, when the question of law is well settled.

In the matter at hand, the Appellant Insurance Company approached the Apex Court challenging the order of the Delhi High Court that reversed the award passed by the Motor Accident Claims Tribunal granting the right of recovery to the Insurance Company. The Insurance Company filed the appeal before the Supreme Court, aggrieved by the denial of the right of recovery from the vehicle owner.

Before the Apex Court, the insurance company contended that it was exempt from liability because the car’s owner had neglected to confirm the validity of the driver’s license, which turned out to be a fake.

The court said “The Motor Vehicle Act, 1988’s Section 149(2)(a)(ii) and the relevant insurance policy’s “Driver Clause” do not require the owner of an insured vehicle to typically obtain the driver’s license from the relevant transport authorities and have it verified.   

Generally, and as a matter of course, no person employing a driver would undertake such a verification exercise and would be satisfied with the production of a license issued by a seemingly competent authority, the validity of which has not expired. It would be wholly impracticable for every person employing a driver to expect the transport authority concerned to verify and confirm whether the driving license produced by that driver is a valid and genuine one, subject to just exception., the court said.

The Court noted that no evidence had been filed to support the claim that the owner of the vehicle should have had the relevant transport authority verify the driver’s license. The insurance company was unable to establish a deliberate violation by the car owner, according to the court, so it was unable to collect the compensation amount from the owners of the vehicle.

The court observed  “In effect and in consequence, the petitioner-insurance company cannot blithely claim that the deceased vehicle owner did not conduct due diligence while employing Ujay Pal as a driver, by now insisting upon a condition which was neither prescribed in the statute nor in the insurance policy. More so, an unrealistic condition that every person employing a driver must get the driving license of such driver verified and confirmed by the RTO concerned, irrespective of the actual necessity to do so.

The Court thus refused to interfere with the order of the Delhi High Court.

Written by Adv Rohit Yadav

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