Kerala HC : No Notice Needed If Insurance Policy Cancelled Immediately | Insurer Not Liable In Fatal Accident As Policy Was Never Issued
Sanchayita Lahkar
The High Court of Kerala Single Bench of Justice C. Pratheep Kumar set aside the direction of the Motor Accidents Claims Tribunal, Irinjalakuda, which had held the insurer liable for compensation in a fatal accident claim. The Court found that no valid insurance policy had been issued to the offending vehicle due to non-payment of premium. Holding that the insurer could not be made liable under such circumstances, the Court directed the registered owner of the vehicle to pay the awarded compensation to the claimants.
The matter arose from an accident that occurred on 23.03.2010, in which one Mohameed Aneefa sustained fatal injuries. At the time of the incident, the deceased was riding a motorcycle when a car bearing registration No. KL-45-B-70, allegedly driven carelessly, came to a stop, and a passenger seated at the rear opened the car’s back door abruptly. The door hit the deceased’s motorcycle, causing him to fall and sustain serious injuries that led to his death the same day.
The legal representatives of the deceased—his wife, minor children, and mother—filed a claim petition before the Motor Accidents Claims Tribunal, Irinjalakuda. The parties to the claim included the driver, the registered owner, the passenger who opened the car door, and the additional 4th respondent, the insurer.
While respondents 1 and 2 (the driver and RC owner) remained ex parte, the 3rd respondent (passenger) denied negligence. The insurer filed a written statement asserting that no valid insurance policy existed at the time of the accident, as the policy had been cancelled due to non-payment of premium. It also disputed any negligence on the part of the driver or the passenger.
The Tribunal found the 3rd respondent negligent and awarded a compensation of ₹42,34,589/- to the claimants. It directed the additional 4th respondent, HDFC Ergo General Insurance Company Ltd., to satisfy the award. Challenging this finding, the insurer preferred an appeal before the High Court.
In support of its appeal, the insurer relied on Ext.B1, a proposal form cum cover note. It claimed that although Ext.B1 was prepared, it was cancelled immediately due to non-payment of premium by the insured. RW1, a representative of the insurer, testified that the policy was never issued or handed over to the insured for this reason. The insurer contended that since Ext.B1 never reached the insured, there was no requirement to issue a cancellation notice.
The counsel for the claimants and other respondents contended that Ext.B1 was a valid policy document executed by both parties, and in the absence of notice regarding cancellation, it remained binding. They cited decisions including the Division Bench ruling in Oriental Insurance Co. Ltd. v. Raveendran, 2015 (2) KLT 958, and the Supreme Court's ruling in United India Insurance Co. Ltd. v. Laxmamma & Ors., (2012) 5 SCC 234, in support of the proposition that cancellation without notice was ineffective against third parties.
The dispute before the High Court thus turned on the status of the insurance policy and whether the absence of a cancellation notice to the insured was fatal in the specific circumstances of the case.
The Court noted that in the present case, the owner of the offending vehicle did not present a consistent version regarding the payment of premium for Ext.B1.
The learned counsel appearing for the second respondent, who is the registered owner, was unable to convince the Court that the premium had actually been paid for the cover note or policy marked as Ext.B1—whether by cheque, in cash, or through any other method.
The Court observed that if the premium had indeed been paid in cash, as was then submitted by the learned counsel, there would have been no reason or necessity for the cancellation of Ext.B1.
Based on the testimony of RW1, it was revealed that although Ext.B1 had been prepared, it was cancelled immediately because the premium was not paid. As a result, the document was never handed over to the second respondent.
The Court recorded that if Ext.B1 had been formally issued to the owner, the original document would have been in the owner’s possession. However, the second respondent did not offer any explanation as to how the original of Ext.B1, along with all four copies—namely, customer copy-1, customer copy-2, the insurer’s copy, and the office use copy—were in the possession of the Insurance Company.
In the absence of any such explanation, the Court held that the only logical presumption based on the evidence on record was that Ext.B1 had never reached the hands of the second respondent.
It further noted that although the Tribunal, in its Award, had observed that the Insurance Company might have subsequently received the original cover note from the registered owner, there was no material whatsoever before the Court to support such a conclusion.
The Court found that since Ext.B1 had been cancelled immediately after its preparation and execution—due to non-payment of premium—and had been retained by the Insurance Company itself, it must be held that the fact of cancellation was known to the owner of the vehicle at that very moment. In light of the particular facts and circumstances of the case, the Court held that there was no need to issue any separate notice to the second respondent informing him about the cancellation of Ext.B1.
It clarified that a separate notice or intimation of cancellation is required only when a policy is cancelled after it has been executed and delivered to the insured. Since, in the instant case, Ext.B1 was cancelled immediately upon preparation and was retained by the insurer, the absence of a separate cancellation notice was not fatal. The Court concluded that this was a case where no insurance policy had been issued to the offending vehicle, and accordingly, the Tribunal’s direction fastening liability on the appellant-insurer was liable to be interfered with.
The Court, after evaluating the facts and evidence on record, concluded that this was a case in which no insurance policy had been issued to the offending vehicle.
It found that Ext.B1, the cover note, was cancelled immediately after its preparation due to non-payment of premium by the owner of the vehicle, and it was retained by the Insurance Company without being handed over to the insured. In such circumstances, the Court held that the cancellation of Ext.B1 was within the knowledge of the owner of the vehicle at the time of its preparation and execution.
Consequently, the Court held that there was no necessity to issue a separate notice to the second respondent (owner of the vehicle) informing him about the cancellation of Ext.B1. The Court further held that the issuance of a separate notice or intimation regarding cancellation of a policy is required only when the policy has been cancelled after its execution and delivery to the insured.
Since, in the present case, Ext.B1 was cancelled immediately and was never delivered, the absence of a separate notice of cancellation was not fatal to the insurer’s case.
In view of these findings, the Court allowed the appeal. The impugned Award of the Tribunal was set aside to the extent it imposed liability on the additional fourth respondent, the insurer.
The Court held that the second respondent, being the registered owner of the offending vehicle, was liable to pay the compensation amount awarded by the Tribunal to the petitioners.
The quantum of compensation as determined by the Tribunal was not challenged before the Court and, accordingly, was left undisturbed.
Advocates Representing the Parties
For the Petitioners: Sri. N. Ajith
For the Respondents: Sri. Nireesh Mathew, Sri. N.L. Bitto
For the Appellant: Sri. George Cherian (Senior Counsel), Smt. Latha Susan Cherian (Standing Counsel), Smt. K.S. Santhi
Case Title: HDFC ERGO General Insurance Company Ltd. v. Zeenath & Others
Neutral Citation: 2025:KER:36824
Case Number: MACA No. 285 of 2017
Bench: Justice C. Pratheep Kumar
[Read/Download order]
