LAKHMI CHAND v. RELIANCE GENERAL INSURANCE INSC 15

Name- LAKHMI CHAND v. RELIANCE GENERAL INSURANCE

Year Decided- 2016

Facts- The appellant Lakshmi Chand owned a goods carrying vehicle insured with Reliance General Insurance. Severe damages were incurred when the vehicle met with an accident due to rash and negligent driving of another vehicle. The appellant filed a claim for Rs.1,64,033 which it incurred as repair cost, but the insurance company denied it based on an investigation which revealed the fact that the vehicle carried 5 passengers, which exceeded its permitted seating capacity of 1+1, violating the insurance policy's terms and conditions. A complaint with the District Consumer Forum was filed by Lakshmi Chand, where the ruling was in his favor, directing partial claim settlement. However the State Commission overturned this decision and the National Commission citing a policy breach, upheld the rejection. Lakshmi Chand filed an appeal in Supreme Court.

Issue- Whether it was possible for an insurance company to reject a claim based on a policy breach if the breach did not contribute to the cause of the accident?

Decision- The Supreme Court ruled in favor of Lakshmi Chand, upholding the order of District Forum

Majority opinion reasoning- It was held by the Supreme Court that a breach of the policy must be fundamental and directly contribute to the cause of the accident for the insurer to deny liability. It noted that the insurer failed to prove that overloading the vehicle caused the accident. The Supreme Court referred to precedents which included B.V.Nagaraju vs Oriental Insurance Co. Ltd emphasizing that minor policy breaches that does not affect the occurrence of the accident does not free the insurer of liability. The Supreme Court concluded that rejecting the claim based on overloading, without evidence linking it to the accident was not justified

Dissenting opinion reasoning- There was no dissenting opinion in this case.

Impact of the case- This case emphasizes that insurance claims cannot be denied solely on technical policy breaches unless the breach is fundamental and directly contribute to the loss It upholds the rights of consumer and places burden of proof for policy violations on the insurer, ensuring fairness in claim settlements.