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2021 DIGILAW 822 (KER)

Afsal K. A. , S/o. Abdalarim v. Roby Kuriakose

2021-09-15

C.S.DIAS

body2021
JUDGMENT : Will suppression of material fact or material particular render an insurance policy void, is the short question that arises for consideration in the appeal. 2. The appellant was the petitioner in OP(MV) 174/2007 of the Motor Accidents Claims Tribunal, Pala. The respondents in the appeal were the respondents before the Tribunal. 3. The appellant had filed the claim petition under Section 166 of the Motor Vehicles Act, 1988 (in short ‘Act’), claiming compensation on account of the injuries that he sustained in an accident. It was his case that, on 06.11.2006, while he was travelling in an auto rickshaw from Erattupetta to Poonjar, a jeep bearing registration No.KL-7/F 8082 (jeep) hit the auto rickshaw. The jeep was driven by the third respondent in a rash and negligent manner. The jeep was owned by the first respondent and insured with the second respondent. The appellant claimed a compensation of Rs.20,000/- from the respondents. 4. Another passenger who was travelling in the auto rickshaw filed OP (MV) 168/2007 before the same Tribunal. 5. The respondents 1 and 3 did not contest the proceeding and were set ex parte. 6. The second respondent ?insurer of the jeep?filed a written statement contending that the first respondent (the insured) had suppressed the material fact that the jeep was a contract carriage vehicle. Instead, the first respondent availed the insurance policy stating the jeep was a private vehicle. Therefore, the insurance policy was rendered void under Sec.149 (2) (b) of the Act. The second respondent prayed for total exoneration of liability. 7. The Tribunal consolidated and jointly tried the two claim petitions. The petitioners and the second respondent in the two claim petitions marked Exts.A1 to A11 and Exts.B1 to B3, respectively, in evidence. 8. The Tribunal allowed the captioned claim petition, by permitting the appellant to realise an amount of Rs.20,000/- as compensation from the first respondent. The second respondent was absolved of its liability, on the finding that Ext.B1 insurance policy was rendered void, in view of the suppression of material fact by the first respondent. 9. Aggrieved by the exoneration of the second respondent, the petitioner is in appeal. 10. Heard; Sri. S. Prasanth, the learned counsel appearing for the appellant/petitioner and Smt. K.S. Santhi, the learned counsel appearing for the second respondent – insurer. 11. Ext.B2 registration certificate establishes that the jeep was registered as a private car on 18.08.2005. 9. Aggrieved by the exoneration of the second respondent, the petitioner is in appeal. 10. Heard; Sri. S. Prasanth, the learned counsel appearing for the appellant/petitioner and Smt. K.S. Santhi, the learned counsel appearing for the second respondent – insurer. 11. Ext.B2 registration certificate establishes that the jeep was registered as a private car on 18.08.2005. Ext.B1 ‘Private Car Act Only Policy’, which was renewed and re-issued by the second respondent on 31.03.2006 for one year, also discloses that the jeep was a private car. However, Ext.B3 permit proves that the jeep was a contract carriage vehicle. Therefore, the first respondent had suppressed the material fact and particular that the jeep was a contract carriage vehicle. The first respondent, in order to save premium, had stated that the jeep was a private vehicle and availed Ext.B1 insurance policy. The first respondent has not contested the proceedings and controverted the pleadings and evidence let in by the second respondent. He has also not appeared before this Court. 12. Sec.149 (2) (b) of the Act, states in unequivocal terms that an insurance policy is void, if it is obtained by non-disclosure of material facts or by representation of fact which was false in some material particular. 13. He has also not appeared before this Court. 12. Sec.149 (2) (b) of the Act, states in unequivocal terms that an insurance policy is void, if it is obtained by non-disclosure of material facts or by representation of fact which was false in some material particular. 13. Sub-Sections (2) and (6) of Section 149 of the Motor Vehicles Act, 1988, which are germane for the consideration of the appeal, reads as follows: “(2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment or award unless, before the commencement of the proceedings in which the judgment or award is given the insurer had notice through the Court or, as the case may be, the Claims Tribunal of the bringing of the proceedings, or in respect of such judgment or award so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds namely:- (a) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely:- (i) a condition excluding the use of the vehicle-- (a) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or (b) for organized racing and speed testing; or (c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or (d) without side-car being attached where the vehicle is a motor cycle; or (ii) a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving license during the period of disqualification; or (iii) a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or (b) that the policy is void on the ground that it was obtained by the non disclosure of a material fact or by a representation of fact which was false in some material particular. xxx xxx xxx xxx (6) In this section the expression “material fact” and “material particular” means, respectively a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions, and the expression “liability covered by the terms of the policy” means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy”. 14. It is trite, that utmost good faith is one of the basic and general principles in a contract of insurance which is termed in Latin as “uberrimae fidei”, which means that each party is entitled to rely on the representations of the other and each party should have a reasonable expectation that the other is acting in good faith without attempts to conceal or deceive. 15. The learned author E.R Hardy Ivamy in the 4th Edition of his book on General Principles of Insurance Law, in the Chapter Non-Disclosure, has stated that, it is the duty of the assured to disclose all material facts relating to the insurance and his presumed knowledge, which he proposes to effect, but he must make no misrepresentation regarding such facts. Usually, however, these duties are modified by the terms of the contract. The burden of proving that there was a breach of duty on the part of the assured rests on the insurer. Various tests have been adopted by the Courts in order to ascertain what facts are to be regarded as material. The test which is usually adopted is whether the non-disclosure of the facts would influence a prudent insurer. The learned Author has classified the material facts as follows: Facts Normally material In general rule, it can be said that the following facts will usually be held to be material: (i). All facts suggesting that the subject-matter of insurance is exposed to more than ordinary danger from the peril insured against. (ii). All facts suggesting that the proposed assured is actuated by some special motive. (iii). All facts showing that the liability of the insurers might be greater than would normally be expected. (iv). All facts relating to the “moral hazard”. (v). (ii). All facts suggesting that the proposed assured is actuated by some special motive. (iii). All facts showing that the liability of the insurers might be greater than would normally be expected. (iv). All facts relating to the “moral hazard”. (v). All facts which to the knowledge of the proposed assured are regarded by the insurers as material. 16. In the instant case, the insurer has proved by Exts. B1 to B3 that the first respondent had availed the insurance policy from the second respondent, only by showing Ext B2 registration certificate. He had suppressed Ext B3 permit with the dishonest intention to save the differential amount in premium between a private vehicle and a contract vehicle. Therefore, the conduct of the first respondent clearly falls within illustrations (iii) and (v) extracted above, which is a material fact going to the root of the contract. Had the first respondent revealed the fact that the jeep was a contract carriage vehicle, the insurer would have levied higher premium from him, as the risk was higher. The first respondent had acted in bad faith. 17. This Court in Julian v. Peethambaran [ 1997 (2) KLT 763 ], interpreting Section 94 of the Motor Vehicles Act, 1939, the corresponding provision to Section 149 of the present Act, held that when an insurance policy is availed by the insured showing the vehicle as a private carriage, but it is used as contract carriage, the insurance policy stands repudiated and the insurer is not liable to pay the compensation. The same view has been reiterated by this Court in MACA Nos.979/2005 and 1766 of 2009. 18. In the light of the language in Section 149 (2) (b) and (6) of the Act; the law referred to above and the fact that the first respondent had suppressed the fact that the jeep was a contract carriage vehicle at the time of availing the insurance policy, I have no doubt in my mind that the first respondent had availed Ext.B1 insurance policy in utmost bad faith, which has rendered Ext.B1 contract for indemnification void. Since the insurance policy has become non-existent, the insurer stands exonerated and absolved even against third parties. I do not find any error or illegality in the conclusion arrived by the Tribunal in the impugned award. The appeal fails and is hence dismissed. The parties shall bear their respective costs. Since the insurance policy has become non-existent, the insurer stands exonerated and absolved even against third parties. I do not find any error or illegality in the conclusion arrived by the Tribunal in the impugned award. The appeal fails and is hence dismissed. The parties shall bear their respective costs. All pending Interlocutory Applications will stand closed.