The Hon’ble Supreme Court, on 4th March 2020, in the matter of Nirmala Kothari v. United India Insurance Co. Ltd. pronounced that if the employer finds the driver to be competent to drive the vehicle and the driver produces a licence which on the face of it looks genuine, the employer is not expected to further investigate into the authenticity of the licence unless there is cause to believe otherwise. The Insurance Company would not be absolved of liability on the ground that the licence of the driver of the car at the time of accident was invalid/fake .
Question before the Hon’ble Supreme Court
What is the extent of care/diligence expected of the employer/insured while employing a driver?
Breach of conditions under Section 149(2)(a) of the Motor Vehicles Act, 1988 absolves the insurer of its liability to the insured. Section 149(2)(a)(ii) deals with the conditions regarding driving licence. (Para 7)
In case the vehicle at the time of accident is driven by a person who is not duly licenced or by a person who has been disqualified from holding or obtaining a driving licence during the period of disqualification, the insurer is not liable for compensation. (Para 7)
While the insurer can certainly take the defence that the licence of the driver of the car at the time of accident was invalid/fake however the onus of proving that the insured did not take adequate care and caution to verify the genuineness of the licence or was guilty of willful breach of the conditions of the insurance policy or the contract of insurance lies on the insurer. (Para 9)
While hiring a driver the employer is expected to verify if the driver has a driving licence. If the driver produces a licence which on the face of it looks genuine, the employer is not expected to further investigate into the authenticity of the licence unless there is cause to believe otherwise. (Para 11)
If the employer finds the driver to be competent to drive the vehicle and has satisfied himself that the driver has a driving licence there would be no breach of Section 149(2)(a)(ii) and the Insurance Company would be liable under the policy. It would be unreasonable to place such a high onus on the insured to make enquiries with RTOs all over the country to ascertain the veracity of the driving licence. (Para 11)
However, if the Insurance Company is able to prove that the owner/insured was aware or had notice that the licence was fake or invalid and still permitted the person to drive, the insurance company would no longer continue to be liable. (Para 11)
Copy of judgement: Judgement_04-Mar-2020
-Adv. Tushar Kaushik