Even if vehicle is rented, insurer liable to pay for accident: Supreme Court

By Express News Service
NEW DELHI:  The Supreme Court has ruled that when a transport corporation hires a vehicle for use from its registered owner, third-party insurance coverage will also deemed to be transferred along with the vehicle. The person in effective control and command of the vehicle will be regarded as the ‘owner’. Therefore, along with the vehicle, it must be deemed that the existing insurance policy also remains transferred for the period of hire.

Overturning a judgement of the Allahabad High Court, a bench of Justices S Abdul Naseer and Krishna Murari was deciding on the scenario that if an insured vehicle is plying under an agreement with the corporation and in case of any accident during that period, whether the insurance company would be liable to pay compensation or would it be the responsibility of the corporation or the owner.

The case pertains to the Uttar Pradesh State Road Transport Corporation that hired a bus which met with an accident resulting in the death of one person. Heirs of the deceased raised a claim petition before the Motor Accident Claim Tribunal wherein the corporation filed its written statement that the contract between the corporation and the bus owner as well as the factum of insurance was with the insurance company. 

The company filed its response admitting the existence of the policy with respect to the said bus. The Tribunal ruled that the insurance company is liable and directed it to pay a compensation of Rs 1,82,000. The insurance company challenged this order in Allahabad High Court challenging the order.

The high court held that insurance companies are not liable to pay compensation to third parties in the event of buses being operated under the control of the corporation. After that, the corporation filed an appeal in Supreme Court.

The top court held that effective control and command is the real test of ownership. Thereby under a hire agreement, the insurance policy is deemed to be transferred along with the vehicle. “It will be deemed that the vehicle was transferred along with the insurance policy in existence to the corporation and thus insurance company would not be able to escape its liability to pay the amount of compensation.”