Ker HC | Liability of insurer to indemnify third parties subsists unless insurance coverage is cancelled and an intimation thereof has reached the insured

Kerala High Court: P.B. Suresh Kumar, J. allowed an appeal filed by the claimant against the insurer in which an award was passed exonerating the liability of the insurer to indemnify the owner.

 In the instant case, the claimant sustained injuries in a motor vehicle accident and claimed for indemnity by the insurer. The insurer stated that they were not liable to indemnify the owner as the cover note issued by them for the vehicle was cancelled when the cheque issued by the owner towards the premium of the policy was dishonored and therefore, at the time of the accident the vehicle was not insured. The owner stated that he was not aware of the dishonor of cheque and after the accident, he took a new policy. Moreover, he also stated that the cheque was issued with sufficient money in his account and no communication was made by the insurer about the cheque dishonor. The insurer, on the other hand, stated that communication about the cancellation of the cover note was done under the certificate of posting. The Motor Accident Claims Tribunal opined that as the owner took a new policy it meant that he was aware of the cancellation of the mentioned policy. It exonerated the insurer from the liability holding that the vehicle was not covered under the policy at the time of the accident. Thus, an appeal was made by the claimant against the decision of the Tribunal.

Learned counsel on behalf of the appellant,  K. Janardhanan contended that the policy was valid at the time of the accident and the Tribunal should not have exonerated insurer’s liability. He stated that the cancellation of the policy was not intimated to the owner of the vehicle.

Learned counsel, R. Ajith Kumar on behalf of the respondent contended that the award exonerating the liability of the insurer could only be challenged by the owner of the vehicle according to Section 173 of the Motor Vehicles Act, 1988 (MVA), so the appeal was not maintainable. He further contended that the owner did not establish that he did not receive any communication regarding policy cancellation. Also, the cancellation of the cover note was initiated by them by communication sent under certificate of posting.

At the outset, the Court opined that the appeal was maintainable as the expression ‘any person aggrieved by an award’ under Section 173 of MVA, covers both – owner as well as the claimant.

The Court held that it is settled that the liability of the insurer to indemnify third parties subsists unless the insurance coverage is cancelled by the insurer and intimation thereof has reached the insured and the registering authority. Reliance was placed on Green View Radio Service v. Laxmibai Ramji, (1990) 4 SCC 497  and it was opined that in case a postal article was sent by registered post, the argument that the owner did not receive the article, was a rebuttable presumption under Section 27 of General Clauses Act, 1897. In such a case, the burden shifts to the party who wants to rely on the presumption to satisfy the court by leading oral or documentary evidence to prove the service of such an article on the addressee.

It was opined that merely because the owner took a new policy after the accident, it would not mean that he was aware of the cancellation of the mentioned policy. Therefore the appeal was allowed and the award impugned in the appeal and the exoneration of the insurer’s liability to indemnify the owner was vacated.[Prasanna B. v. Kabeer P.K., 2019 SCC OnLine Ker 1793, decided on 21-05-2019]

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