Cover Note issued has no validity in case insurance premium not paid on the date of accident

KOTHAI AND ANR. VS ORIENTAL INSURANCE CO. LTD. AND OTHERS
DATED 20TH AUGUST 2001
MADRAS HIGH COURT

HELD THAT

Cover Note issued has no validity in case insurance premium not paid on the date of accident.

BRIEF FACTS

1. The claimants are wife and daughter of the deceased Krishnamurthy who died in the road accident which occurred on 28.2.1988 at about 9 p.m. On the date of the accident, when the deceased was travelling in the bus bearing registration No. TCB 3397 belonging to the respondent No. 3 from Vellore to Chennai and when the bus reached Kalathur junction road and was coming near Aavalur, the lorry bearing registration No. MDR 3532 belonging to the respondent No. 2 and insured with the respondent No. 1 driven by its driver in a rash and negligent manner dashed against the bus and the deceased who was sitting in the fifth row of the bus sustained injury because of the dashing of the lorry with the bus and he succumbed to the injuries. It is further stated in the petition that at the time of accident, the lorry was fully loaded with logs and the logs were protruding outside and due to dashing of the lorry with the bus, the protruding logs hit the bus and in turn the passenger, the deceased and he died in that accident. The claimants filed claim petition claiming compensation of Rs. 2,30,000.

2. The respondent No. 1 filed counter contending that the accident did not occur as stated in the petition and it occurred due to negligent driving of the driver of the bus and the respondent No. 2 insured the lorry with the respondent No. 1 playing fraud and the lorry was not insured with the respondent No. 1 on the date of the accident and so, the respondent No. 1 is not liable. The respondent No. 1 further contends that only on the next day after the accident, premium was paid for taking the insurance policy in respect of the lorry and the cover note obtained by the respondent No. 2 was cancelled.

3. The respondent No. 2 filed counter contending that only due to rash and negligent driving of the bus driver the accident occurred, and the lorry driver was driving the vehicle very carefully and the compensation claimed is on the higher side.

4. The respondent No. 3 Transport Corporation filed counter contending that its driver was driving the bus very carefully and only the lorry driver drove the lorry rashly and negligently and dashed against the bus and caused the accident and the respondent No. 3 is not liable.

5. Motor Accidents Claims Tribunal, Madras heard the petitioner and awarded compensation of Rs. 56,000 and directed the respondent No. 2 to pay the compensation with interest at 12 per cent per annum holding that only the lorry driver was responsible for the accident and the lorry was not insured with the respondent No. 1 on the date of the accident.

6. Not satisfied with the award of the Tribunal, the claimants filed the present appeal for the disallowed portion of the claim and for directing the respondent No. 1 insurance company to pay the compensation amount contending that since the insurance cover note was issued for the vehicle lorry through duly authorised agent, the respondent No. 1 cannot seek to avoid liability to innocent third-party claimant. Appellant further contends in the appeal that there was composite negligence on the part of both the drivers of respondent Nos. 2 and 3 and the accident had occurred while they were negotiating the welcome arch put up on the highway and on the composite negligence, the respondent No. 3 is also liable.

7. The respondent No. 2 in the petition, owner of the lorry filed cross-objection contending that there was no fault on the part of the driver of the cross-objector and the accident had occurred due to negligent driving of the driver of the bus and there is also no evidence to show that the accident had occurred due to negligent driving of driver of the cross-objector's vehicle and the cross-objector's vehicle was insured with the insurance company and it is fully covered with insurance cover note and the premium had also been paid and so, the insurance company is liable.

8. Points that arise for consideration in this appeal and cross-objections are:

(i) Whether there is composite negligence on the part of the respondent No. 3 also?
(ii) Whether the lorry was covered with insurance policy and the insurance company, the respondent No. 1, is liable to pay the compensation amount? and
(iii) Whether the claimants are entitled to the disallowed portion of the claim?

9. Learned Counsel for the respondent No. 1 strenuously argued that since no premium was paid on 27.2.1988 and as the premium was paid subsequent to the accident, the cover note is not binding on the insurance company and the insurance company is not liable. He further submitted that fraud has been played on the insurance company and the insurance company cannot be held liable.

10. The learned Counsel for the claimants submitted that there was insurance cover note issued prior to the accident and so, it is surely covered under the insurance cover note and the insurance company is liable.

11. In the decision cited supra, it has been held that premium amount was paid to the Development Officer and the nonpayment of the premium amount by the Development Officer and non-encashment of cheques by the insurance company will not absolve the liability of the insurance company.

12. The case on hand is not like that. In fact, no premium was paid on the date of the cover note. Only cover note was issued on 27.2.1988 and the accident had occurred on 28.2.1988. The cheque was issued on 29.2.1988 by the owner of the lorry. So, no premium has been paid and there was no insurance cover note on the date of the accident.

13. The Supreme Court, in the case of United India Insurance Co. Ltd. v. Rajendra Singh, held that when the insurance company learnt that fraud has been played on the insurance company, the appellate court can interfere. It has been observed further that if fraud is played on the insurance company, the insurance company being a public company will have to suffer a lot which will lead to miscarriage of justice.

14. In the case on hand, there was no insurance coverage on the date of the accident and so, the respondent No. 1 insurance company is not liable. The Tribunal has correctly found and directed respondent No. 2, owner of the lorry to pay the compensation. I find no infirmity in the finding of the Tribunal in this aspect.