This Supreme Court judgment reaffirms that an insurance company is not liable to indemnify for accidents involving fare-paying passengers in a goods vehicle, as it constitutes a fundamental breach of policy terms. The Supreme Court declined to apply the “pay and recover” principle in such scenarios, absolving the insurer of the liability to pay compensation.
Facts Of The Case:
The case originated from a fatal accident where the deceased was a passenger traveling in a three-wheeler goods vehicle after paying a fare. The legal heirs of the deceased (the petitioners) filed a claim before the Motor Accidents Claims Tribunal. The Tribunal awarded compensation and directed the insurer, HDFC Ergo, to pay the amount, dismissing its contention that covering a fare-paying passenger in a goods vehicle was a policy breach. The insurer appealed to the High Court, which upheld the compensation quantum but set aside the “pay and recover” directive, absolving the insurance company of liability. The claimants then approached the Supreme Court, arguing for the restoration of the “pay and recover” principle to ensure they received the awarded amount, citing precedents where this measure was used to alleviate hardship for victims. The core legal dispute was whether the insurer could be compelled to pay first and later recover from the vehicle owner despite a fundamental policy breach.
Procedural History:
The case commenced with the petitioners filing a claim before the Motor Accidents Claims Tribunal, which awarded compensation and directed the insurance company to fulfill the award under the “pay and recover” principle. The insurer successfully appealed to the High Court, which, while confirming the compensation quantum, set aside the “pay and recover” direction, thereby absolving the insurer of any liability to pay the claimants. Aggrieved by this decision, the claimants filed the present Special Leave Petition before the Supreme Court, which culminated in this judgment dismissing the petition and upholding the High Court’s decision to exonerate the insurance company.
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Court Observation:
The Supreme Court observed that there was a fundamental breach of the insurance policy as the deceased was a fare-paying passenger in a goods vehicle, which is expressly prohibited. The Court noted that the insurance company’s liability to indemnify the owner is absolved in such scenarios. It distinguished the precedents cited by the petitioners, clarifying that the “pay and recover” principle is not applicable in cases of such a fundamental statutory breach where the vehicle was never meant to carry passengers for hire. The Court emphasized that this was not a mere procedural violation but a core breach going to the root of the contract, and thus, no direction for the insurer to pay and later recover from the owner could be issued.
Final Decision & Judgement:
The Supreme Court dismissed the Special Leave Petition, thereby upholding the impugned judgment of the High Court. The final ruling absolved HDFC Ergo General Insurance Company from any liability to pay the compensation awarded for the death of the fare-paying passenger. The Court explicitly refused to apply the “pay and recover” principle in this case, concluding that the claimants must recover the awarded amount directly from the owner of the offending goods vehicle, as the insurer was not liable to indemnify the owner for such a fundamental breach of the policy conditions.
Case Details:
Case Title: Amudhavalli & Ors. vs. HDFC Ergo General Insurance Company Ltd. & Ors. Criminal/Civil Appeal No.: Special Leave Petition (Civil) No. 6117 of 2020 Date of Judgement: September 26, 2025 Judges/Justice Name: Justice K. Vinod Chandran and Justice N. V. Anjaria
Download The Judgement Here