Driver’s negligence can lead to owner’s claim rejection

Astha Cement, a private limited company, owned a truck. It was insured with Bajaj Allianz General Insurance for the period March 30, 2010, to March 29, 2011.

While on a trip on the night of December 29, 2010, the driver parked the truck outside a dhaba and went in for dinner. After finishing his meal, when he came out, he could not find the truck. So, he lodged a first information report (FIR) with the police. The insurer was also intimated about the missing vehicle.

The owners, Astha Cement (the insured), lodged a claim as the truck could not be traced.

The insurer appointed an investigator. During the investigation, it was found that the driver had not locked the truck and had left the keys in the ignition of the vehicle when he went for dinner. The insurer called for an explanation asking why the claim should not be repudiated as the driver had been negligent in safeguarding the vehicle. The owners explained that was it was an inadvertent lapse on the part of the driver. The insurer did not consider the explanation to be satisfactory and repudiated the claim.

The insured then filed a complaint before the District Forum. This was contested by the insurer. The Forum upheld the contention of the insurer and dismissed the complaint.

Astha Cement then filed an appeal with the Rajasthan State Commission, which set aside the Forum's order and directed the insurer to settle the claim by paying ~5,40,000, an interest of 9 per cent per annum, and ~20,000 towards litigation expenses.

Next, the insurer challenged this order in revision. The National Commission observed that the driver had acted in an irresponsible manner, firstly, by leaving the vehicle unlocked, which allowed the thief to gain entry into the driver's cabin; and secondly, by leaving the keys in the ignition which allowed the thief to start the vehicle and drive away with it. Besides, the truck was parked in such a way that it was not visible to the driver from inside the dhaba, otherwise he would have seen the thief drive away with it and would have raised an alarm.

The National Commission observed that there were a number of judgments by which the law was well settled that failure to safeguard the vehicle constitutes a fundamental breach of the terms and conditions governing the policy, and so the insurer would be absolved of any liability under the policy.

Accordingly, by its order of August 18, 2020, delivered by Justice V K Jain, the National Commission concluded that the insurer was justified in repudiating the claim on the ground that the loss suffered was due to the insured's own negligence. Hence it allowed the insurer's revision petition, set aside the liability attached to it, and dismissed the complaint.

Thus, even if the owner, as the insured, may not even be aware of the negligence of the driver, who is his employee, the owner will still be vicariously liable for any acts of omission or commission of the employee.

Failure to safeguard the vehicle constitutes a breach of the terms and conditions of the policy and absolves the insurer of liability to compensate