The Sunday Tribune

CONSUMER RIGHTS
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Pushpa Girimaji cites rulings to show that insurance companies are liable to pay even if the driver’s licence is fake

Whenever a driver is hired, two important checks are absolutely essential. One is his ability to drive. The other is whether he has a valid licence. Besides the fact that under the Motor Vehicles Act, any person driving a vehicle has to have a valid driving licence, the terms and conditions governing the vehicle insurance policy also demands this.

There have been instances where the driver’s licence has turned out to be a fake and on this ground, insurance companies have refused to indemnify losses incurred by the vehicle owner after an accident.

In the case of Raj Kumar Vs New India Assurance Company, where the owner of an Eisher Mitsubishi Canter incurred losses to the tune of over Rs 7 lakh following an accidental damage to the vehicle, the insurance company rejected the claim on the ground that the driver of the vehicle had a fake driving licence which was a breach of the policy condition.

Unfortunately, the apex consumer court at that time agreed with this decision of the insurance company and held that it was incumbent on the owner to ensure that the licence of the driver was genuine.

This was obviously unfair to the consumers as it is not possible for a vehicle owner to check whether the licence being held by a driver is genuine or fake.

However, in National Insurance Company Vs Sant Kumar Goyal, RP no 1570 of 2002, decided in December 2004, the National Consumer Disputes Redressal Commission quoted the Supreme Court in the case of United India Insurance Vs Lehru (JT 2003(2) SC 595) wherein the apex court had observed: "When an owner is hiring a driver, he will have to check whether the driver has a driving licence. If the driver produces a licence which on the face of it looks genuine, the owner is not expected to find out whether the licence has been issued by a competent authority or not...".

"The insurance company would not then be absolved of liability. If it ultimately turns out that the licence was fake the insurance company would continue to remain liable unless they prove that the owner/insured was aware or had noticed that the licence was fake and still permitted that person to drive. Even in such a case, the insurance company would remain liable to the innocent third party, but it may be able to recover from the insured…."

The apex consumer court clarified that:-

(a) An insurer cannot escape liability by merely showing that the licence was fake. To avoid its liability towards the vehicle owner or the insured, it has to prove that the owner was aware that the license was fake.

(b) The mere absence of a licence or a fake or an invalid driving licence or disqualification of the driver for driving at the relevant time are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards the insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in fulfilling the conditions of the policy regarding the use of vehicles by duly licensed driver or one who was not disqualified to drive at the relevant time.

(d) Even where the insurer is able to prove such a breach on part of the insured, the insurance company would not be allowed to avoid its liability towards the insured — unless such a breach is found to have contributed to the cause of the accident.