Insurance claim be rightfully rejected if vehicle being used without valid registration- SC

The Apex Court, while setting aside NCDRC order, made an observation that rejection of insurance claim would be valid if the insured vehicle is found being used or driven without a valid registration. The bench made this observation as unavailability of valid registration would constitute fundamental breach of terms and conditions of the contract of insurance.

In the instant case, the policy-holder had purchased a vehicle with temporary registration. Even though the registration had expired, the policy-holder travelled outside his residence and parked his vehicle at a premises from where later the vehicle had been stolen.

Due to the incident, the policy-holder had claimed insurance but the same had been rejected on the ground that vehicle had not been registered. The policy-holder then approached DCDRC and claimed relief against insurer. However, the complaint had been dismissed.

On an appeal before SCDRC, it had been held that insurance claim could not be repudiated on petty, technical and frivolous grounds. The forum blamed the insurer for escaping from its liability to indemnify the policy-holder/complainant for the loss of his vehicle.

The revision petition preferred by the insurance company had also been rejected. Before the Supreme Court, the insurer contended that since the vehicle in question did not have permanent registration, which amounted to fundamental breach of policy, it had been entitled to reject the claim of policy-holder/respondent.

The counsel on behalf of complainant/respondent argued that the compensation had been sought on ground of accident and not theft, thus the policy could not be applied in the case of complainant.

The bench observed that in case of an insurable incident which bears the tendency of occurrence of liability, there should not be fundamental breach of terms and conditions provided in the contract of insurance.

The bench placed reliance on the case of Narinder Singh v New India Assurance Co. Ltd. and held that the instant case led to fundamental breach of contract and therefore, the insurer had been entitled to repudiate the policy.