Insurance Company Liability in Compensation Claims: Supreme Court Judgment

In a significant legal development, the Supreme Court of India has rendered a judgment regarding the liability of insurance companies in compensation claims. This case addresses the issue of compensation for injuries sustained in accidents, involving the insurance company, claimants, and other parties. Stay informed about the implications of this ruling for future legal proceedings.


  • The Motor Accidents Claims Tribunal dismissed the claim petitions citing lack of proof of the driver’s negligence.
  • The appeals are against the judgment of the High Court of Punjab and Haryana regarding compensation claims for injuries to two gratuitous passengers in a goods vehicle.
  • Leave has been granted to proceed with the appeals.
  • Tribunal assessed total compensation of Rs.5,78,000 after considering disability compensation of 70% at Rs.50,000, income assessed at Rs.54,000, and cost of artificial limb at Rs.3,90,000.
  • High Court held the accident was due to composite negligence of the jeep driver and the other offending vehicle.
  • Owner and driver of the jeep were held liable for compensation, while the insurer of the jeep was exonerated.
  • High Court found the insurance of the jeep as a goods vehicle to be valid.
  • High Court in another case enhanced compensation to Rs.6,41,750 for a victim who had to have his arm amputated below the elbow, resulting in 70% disability.
  • High Court further enhanced compensation to Rs.7,36,000 taking into account additional factors like medical expenses, pain and suffering, income loss, etc.
  • Appeals have been filed for enhancement of compensation and to direct payment by the insurer.
  • In a different case, Tribunal assessed total compensation of Rs.5,26,000 for a victim who had to have wrist amputation resulting in 55% disability, including loss of prospect of marriage and cost of artificial limb.

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  • The court is considering whether the compensation awarded was adequate.
  • The age of the claimants is taken into account while assessing the compensation.
  • No interference is necessary regarding the quantum of compensation for the claimants.
  • The question of liability for compensation payment arises, whether it falls on the owner, driver, or the insurer of the vehicle.
  • The principle of pay and recover is invoked for the insurance company to make the initial payment of compensation to the claimants.
  • Legal decisions are cited in support of holding the insurance company liable for compensation payment in cases involving gratuitous passengers in goods vehicles.
  • The insurance company argues that the liability for compensation does not apply to gratuitous passengers in goods vehicles.

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  • The order of the High Court is justified in law
  • The order does not require interference from this Court
  • Counsel relied on several cases to support the submission
  • Cases cited include New India Assurance Co. Ltd. v. Asha Rani (2003) 2 SCC 223, National Insurance Co. Ltd. v. Baljit Kaur (2004) 2 SCC 1, National Insurance Co. Ltd. v. Kaushalya Devi (2008) 8 SCC 246, National Insurance Co. Ltd. v. Rattani (2009) 2 SCC 75, National Insurance Co. Ltd. v. Prema Devi (2008) 5 SCC 403, Bharat AXA General Insurance Co. Ltd. v. Adani MANU/TN/6503/2018, Bajaj Allianz General Insurance Co. Ltd. v. Lal Singh (2015) SCC Online Del 7508

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  • 1.1
  • The claimants are young children who have suffered permanent disability due to injuries in the accident.
  • In this case, the principle of ‘pay and recover’ should be invoked.


  • There shall be no order as to costs in the appeals.
  • Insurance company shall have the right to realize the compensation amount from the driver and owner of the vehicle.
  • The insurance company is liable to pay the awarded compensation to the claimants in both the appeals.


Case Number: C.A. No.-006231-006232 / 2019

Click here to read/download original judgement

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