SUPREME COURT RULES ON INSURER’S LIABILITY IN TRACTOR-TRAILER ACCIDENT CLAIM

The Judgment in the Case of The Royal Sundaram Alliance Insurance Company Limited v. Smt. Honnamma & Ors. (CIVIL APPEAL NO. OF 2025 [@ SPECIAL LEAVE PETITION (CIVIL) NO.2135 OF 2023] was delivered by a Division Bench of the Supreme Court of India, comprising Hon’ble Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah on 5th May 2025. This case concerns the liability of an insurance company to compensate the dependents of a deceased laborer who died in a tractor-trailer accident. In this Case the Supreme Court analyzed whether the insurer was liable despite the insurance policy not covering trailer passengers or employees.

Facts of the Case

On February 29, 2012, Nagarajappa was traveling in a tractor and trailer as a coolie, to unload soil from the trailer. Due to the rash and negligent driving of Respondent No. 5, which caused the tractor and trailer to topple over. Tragically, Nagarajappa sustained injuries from this accident, which ultimately led to his death.  Hence, Nagarajappa’s wife and two minor daughters (Respondents No. 1, 2, and 3) filed a claim Petition before the Motor Accident Claims Tribunal (MACT). The registered M.V.C. No. 121/2012, seeking compensation amounting to Rs. 10,00,000 (Rupees Ten Lakhs). During the proceedings before the MACT, the Claimants presented their case by examining Respondent No. 1, Nagarajappa’s wife, as PW1. They also submitted documentary evidence, which was marked as Exs. P1 to P10.   Conversely, the Appellant, the insurance company, defended its position by examining two witnesses (RW1 and RW2) and presenting documents marked as Exs. R1 to R7. These documents included the authority letter, policy schedule, charge-sheet, notice, agreement, and RC books.

After a thorough evaluation of the evidence and arguments presented, the MACT delivered its Award on April 2, 2014. The Tribunal partly allowed the claim and awarded a compensation of Rs. 9,50,000 (Rupees Nine Lakhs Fifty Thousand) to the Claimants. The MACT also directed that this amount should bear an interest rate of 6% per annum, calculated from the date of filing the Petition until its realization. In its decision, the MACT specifically held that the risk to the employee of the tractor and trailer was not statutorily covered under Section 147(1)(b) of the Motor Vehicles Act, 1988. Consequently, the liability to satisfy the awarded compensation was imposed on the owner (Respondent No. 4) and the driver (Respondent No. 5) of the vehicle.

Dissatisfied with the compensation awarded by the MACT, the Claimants filed an Appeal before the High Court, registered as MFA No. 3659 of 2014 (MV-D), seeking an enhancement of the compensation amount. The High Court, upon reviewing the case, issued its Impugned Order, partly allowing the Appeal. The High Court enhanced the compensation to Rs. 13,28,940 (Rupees Thirteen Lakhs Twenty-Eight Thousand Nine Hundred and Forty), with interest at 6% per annum from the date of the Petition until the deposit of the amount. Importantly, the High Court shifted the liability for the compensation to the Appellant, the insurance company.   This decision of the High Court aggrieved the Appellant, leading them to file the present Appeal before the Supreme Court.

Main Issues

1. Whether the insurer is liable to pay compensation when the insurance policy does not statutorily or contractually cover the deceased (a laborer on the trailer)
2. Whether the High Court erred in enhancing compensation and imposing liability on the insurer contrary to the MACT’s findings

Contentions by the Appellant (Insurance Company)

The Appellant argued that the insurance policy did not cover the trailer, any passenger in it, or any employee/laborer. The deceased fell into this excluded category, and the policyholder had not opted for additional coverage. They contended that the High Court wrongly reversed the MACT’s correct finding and that the compensation exceeded the amount originally claimed. They also asserted that the decision of the High Court violated the ratio laid down in Sarla Verma v. DTC (2009) 6 SCC 121 and New India Assurance Co. Ltd. v. C M Jaya (2002) 2 SCC 278 where compensation is confined to policy limits. 

Contentions by the Respondents (Claimants)

The Claimants did not appear before the Supreme Court despite service of notice. However, before the High Court, they had argued for enhanced compensation based on the deceased’s role as a breadwinner and highlighted the negligence of the driver. The High Court was convinced of their claim and ruled in their favor.

 

Supreme Court

The Supreme Court addressed the liability of an insurance company in an accident involving an insured tractor and an uninsured trailer, resulting in a fatality. The Court found that the insurance company was liable, clarifying that the tractor’s insurance extended to the accident involving the trailer, as the tractor was the primary cause. This was distinguished from situations where the trailer alone might cause an accident. While acknowledging the general requirement for separate insurance for both tractor and trailer, the Court emphasized the beneficial nature of the Motor Vehicles Act and the need to consider the chain of causation. The Supreme Court also defined the minimum amount the insurance company had to pay, ensuring that the victims received adequate compensation, while also allowing the insurer to seek reimbursement from the vehicle owner for any amount exceeding their strict liability.

Parichaya Reddy

Associate

The Indian Lawyer & Allied Services

 

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