Overloading Can't Be Fundamental Breach Of Insurance Policy, Insurer Liable to Pay 75% of Assessed Loss Amount: NCDRC
Pranav B Prem
The National Consumer Disputes Redressal Commission (NCDRC), comprising AVM J. Rajendra (Presiding Member) and Mr. Justice Anoop Kumar Mendiratta (Member), held that mere overloading of a goods vehicle does not constitute a fundamental breach of the insurance policy. The Tribunal ruled that the insurance company cannot avoid its liability entirely on this ground and must settle the claim on a non-standard basis by paying 75% of the assessed amount. The decision came while disposing of a revision petition filed by Bharti Axa General Insurance Company against an order of the Tamil Nadu State Consumer Disputes Redressal Commission.
Factual Background
The complainant, K. Subbulakshmi, is the owner of an Eicher Van registered under TN38W1708, covered by a comprehensive insurance policy issued by Bharti Axa General Insurance Company for the period 30.03.2010 to 29.03.2011. On 10.02.2011, during the subsistence of the policy, the vehicle met with an accident near Vellore and sustained substantial damages. The Motor Vehicle Inspector conducted an inspection and issued a report on 11.02.2011.
Following this, the complainant submitted a claim of ₹5,14,205/- to the insurer. However, the insurer repudiated the claim on 21.03.2011, contending that the vehicle carried an overload of 11.2 tonnes against the permitted capacity of 9.2 tonnes, thereby breaching policy conditions. Despite issuing a legal notice, the complainant received no relief and filed a consumer complaint before the District Consumer Disputes Redressal Forum, Coimbatore, seeking reimbursement of ₹4,04,205/- (after deducting salvage value), ₹50,000/- as compensation for mental agony, and litigation costs.
The insurer, while contesting the complaint, reiterated that the insured vehicle was overloaded by 2.68 tonnes—29% beyond its registered capacity—and that such breach amounted to a fundamental violation of the policy terms. The surveyor appointed by the insurer assessed the net loss at ₹2,51,723/-, but the company justified total repudiation, asserting the breach invalidated the policy coverage.
The District Forum upheld the insurer’s stand and dismissed the complaint, holding that the complainant violated the policy’s conditions by overloading the vehicle and thus was not entitled to claim compensation.
Dissatisfied, the complainant preferred an appeal before the State Commission, Tamil Nadu, which partly allowed the claim and directed the insurer to pay ₹2,51,723/- along with 9% interest per annum, holding that minor overloading does not amount to a fundamental breach of policy terms.
Contentions of the Parties
In the revision petition before NCDRC, the insurer contended that the State Commission’s order was erroneous and suffered from material irregularity. It argued that the insured vehicle was overloaded by a substantial margin of 29%, breaching not only the policy conditions but also statutory requirements under the Motor Vehicles Act, 1988. The insurer maintained that such overloading was not a trivial or technical lapse but a fundamental breach that justified repudiation of the entire claim. Reliance was placed on Supreme Court decisions such as United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal [2004 8SCC 644] and Oriental Insurance Co. Ltd. v. Sony Cheriyan [AIR 1999 SC 3252], which stress strict interpretation of policy terms.
On the other hand, the complainant asserted that the overloading was only 12% above the permitted limit and did not contribute to the accident. It was contended that no causal connection existed between the alleged overloading and the mishap. The complainant further argued that the insurer's approach to repudiate the entire claim was unfair and that the State Commission rightly awarded relief based on the principle that insurance contracts are meant to indemnify the insured and minor deviations cannot result in total denial of claims. The complainant relied on Supreme Court judgments such as Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan and B.V. Nagaraju v. Oriental Insurance Co. Ltd., where similar disputes were settled on non-standard terms.
Observations and Findings of NCDRC
The NCDRC examined the arguments and precedents carefully. It noted that the vehicle in question was duly registered, covered by a valid insurance policy, and driven by a person holding a valid driving license at the time of the accident. It was undisputed that the accident itself was genuine and that the insurer's sole ground for repudiation was the alleged overloading.
The Commission cited the Supreme Court’s judgment in Ashok Kumar v. New India Assurance Co. Ltd [2023], which clarified that a fundamental breach must be established to justify complete repudiation of claims. Mere technical or marginal breaches, such as minor overloading, cannot absolve the insurer of its liability unless they are the direct cause of the accident.
The Commission emphasized that no evidence was produced by the insurer to show that overloading had any nexus with the cause of the accident. It reiterated that in cases of overloading where no causal connection with the accident exists, the insurer is liable to settle the claim on a non-standard basis to the extent of 75% of the assessed loss, as per the guidelines laid down by the Supreme Court in Amalendu Sahoo and Nitin Khandelwal cases. Thus, the NCDRC concluded that the overloading in the present case did not constitute a fundamental breach and directed the insurer to settle the claim accordingly.
Verdict
In light of the above findings, the NCDRC dismissed the revision petition filed by Bharti Axa General Insurance Company. It directed the insurer to pay ₹1,88,792/- (i.e., 75% of ₹2,51,723/- assessed by the surveyor) to the complainant, along with simple interest at 7% per annum from the date of repudiation until realization. In case of delay in payment beyond two months from the date of the order, the interest rate would increase to 10% per annum for the entire period of delay. There was no order as to costs. Accordingly, the revision petition was disposed of.
Appearance
For Petitioner: Mr. S.M. Tripathi, Advocate
For Respondent: Mohd. Aman Alam, Proxy Counsel
Cause Title: M/s Bharti Axa General Insurance Co. Ltd. V. K. Subbulakshmi
Case No: Revision Petition No. 599 of 2019
Coram: Hon’ble AVM J. Rajendra, AVSM, VSM (Retd.) [Presiding Member], Hon’ble Mr. Justice Anoop Kumar Mendiratta [Member]
[Read/Download order]
