Insurance company can't deny motor claim over route permit: Chandigarh consumer panel

The District Consumer Disputes Redressal Commission-II, UT Chandigarh, has ruled that an insurance company cannot reject a motor insurance claim solely on the ground that the vehicle allegedly lacked a route permit for a specific territory, when the issue had no connection with the accident.

The Commission directed the insurer to reimburse Rs 3,07,790 along with interest at 9% per annum from July 1, 2020, until realisation, and to pay an additional Rs 25,000 towards compensation and litigation expenses.

The order came on a complaint filed by Sukhvir Singh, who stated that his truck, insured with United India Insurance Company Limited for the period August 18, 2018, to August 17, 2019, met with an accident on July 9, 2019, at Sector 25/38 (West), Chandigarh. The vehicle suffered substantial damage, and the authorised workshop raised a repair bill of Rs 3,07,790.

Despite appointing a surveyor and assessing the loss, the insurance company repudiated the claim via letter dated July 1, 2020, stating that the truck did not have a valid route permit for Chandigarh, even though it held a valid permit for Punjab.

Counsel for the complainant argued that the insurer had wrongly and arbitrarily rejected the claim on a hyper-technical ground, which had no connection with the accident.

After examining the records and hearing both parties, the Commission observed a clear distinction between absence of a route permit altogether and an alleged territorial irregularity when the vehicle otherwise held a valid permit. It concluded that the absence of a Chandigarh permit had no nexus with the accident or the damage caused.

Relying on precedents from the Punjab and Haryana High Court, the National Consumer Disputes Redressal Commission, and the Supreme Court, the Commission held that technical or minor irregularities that do not contribute to the cause of loss cannot be treated as fundamental breaches justifying repudiation of insurance claims.

The Commission stated that the purpose of obtaining an insurance policy is not for luxury, but to cover unforeseen eventuality. It noted that insurance companies often show customers all kinds of green pastures at the time of sale, and when it comes to payment of the insurance claim, they invent all sorts of excuses to deny it.

Declaring the repudiation unjustified and arbitrary, the Commission found the insurer guilty of deficiency in service and directed it to reimburse Rs 3,07,790 with interest, and pay Rs 25,000 in compensation and litigation costs.