Overloading Not a Fundamental Breach, but IDV Limits Payout: NCDRC Ruling.


22 October 2024 Civil Revision >> Civil & Consumer Law   |   Consumer Protection Act >> Consumer Rights   |   Insurance Claim/Money Rejected >> Insurance  

The National Consumer Disputes Redressal Commission (NCDRC) has recently resolved a revision petition filed by TATA AIG General Insurance, modifying concurrent orders issued by the District Consumer Disputes Redressal Forum, Hassan, and the Karnataka State Consumer Disputes Redressal Commission. The case, stemming from a motor vehicle insurance claim, centered on the discrepancy between the surveyor's assessed damage and the Insured Declared Value (IDV) of the vehicle.

The dispute originated from a motor vehicle accident in August 2012, involving a goods vehicle insured by TATA AIG. The vehicle, with a seating capacity of three, was carrying six passengers at the time of the accident. The surveyor assessed the damage to the vehicle at Rs. 9,37,097. The District Forum, in its order, directed the insurance company to pay the assessed damage amount, along with interest and costs, despite the vehicle carrying more passengers than its permitted capacity.


 

 

The insurance company appealed this decision to the State Commission, which upheld the District Forum's order, imposing additional costs. Subsequently, TATA AIG filed a revision petition before the NCDRC, arguing that the compensation awarded exceeded the vehicle's IDV, which was Rs. 5,14,861. They also contended that carrying excess passengers constituted a breach of policy terms.

The NCDRC, after hearing arguments from both parties and reviewing relevant Supreme Court judgments, acknowledged that while the breach of policy due to excess passengers was not a fundamental breach that could entirely negate the claim, the compensation awarded by the lower forums was erroneous.

The NCDRC referred to Supreme Court precedents, including B.V. Nagaraju Vs. Oriental Insurance Co. Ltd. Divisional Officer, Hassan, which addressed the issue of policy breaches, and Oriental Insurance Co Ltd. Vs. Sony Cheriyan, which emphasized that insurance contracts must be strictly construed, and the insured cannot claim more than what is covered by the policy.

Based on these rulings, the NCDRC modified the orders of the State Commission and the District Forum, directing TATA AIG to pay Rs. 5,14,861, the IDV of the vehicle, to the complainant, Rangaswamy. The NCDRC also awarded 8% interest per annum on the claim amount from one month after the submission of the surveyor's report until payment, with an enhanced interest rate of 12% per annum in case of delayed payment. Further, the insurance company was directed to pay Rs. 50,000 as litigation costs.

The NCDRC also directed that the insurance company could deduct the amount deposited with the state commision, and paid to the complainant, from the final amount. The interest calculated on the deposited amount would only be until the deposit date, and the remaining 14,861 rupees would have interest calculated from the date of respective deposits, until realization.

This decision underscores the importance of adhering to the terms and conditions of insurance policies and reaffirms the principle that compensation cannot exceed the agreed-upon IDV. It also highlights the NCDRC's role in ensuring that consumer disputes are resolved in accordance with established legal principles.


Section 21, Consumer Protection Act - 1986  

Consumer Protection Act, 1986