SC: Owners risk clause won’t rescue hotel from liability of valet parked cars

The Hon’ble Supreme Court, on 14th November 2019, in the matter of Taj Mahal Hotel v.United India Insurance Company Ltd. & Ors. pronounced that where the hotel or its servants have actively connived against or acted negligently in safeguarding the vehicles delivered for valet parking, ‘owner’s risk’ clauses in the parking token will not come to the rescue of the hotel or its servants.

Question(s) before the Court / Court’s Observations:

Whether an insurer has locus standi to file a consumer complaint as a subrogee?

(Para 8) Even though a consumer complaint filed by an insurer in its own name is not maintainable, a complaint filed by the insurer acting as a subrogee is maintainable if it is filed by:

  1. i) the insurer in the name of the assured, wherein the insurer acts as the attorney holder of the assured; or
  2. ii) the insurer and the assured as co-complainants.

Whether a hotel can be held liable for the theft of a car taken for valet parking, under the laws of bailment or otherwise?

the crucial point to be considered is whether the custody or possession of the vehicle is purposefully handed over to the hotel (as is the case with valet parking) or whether the complainant is merely allowed to park his car in a parking space or facility. While the laws of bailment apply in the former case, the latter is only a licensor-licensee relationship where laws of bailment or the prima facie liability rule cannot be applied. (Para 18)

the concerned facility had only licensed out its premises for parking, and left it to the discretion of the vehicle owner as to where to park the car. In such instances, the manager of the premises does not undertake the safe return of the vehicle and there is no ‘parking service’ rendered by the parking facility operator as such. Rather, it is the owner’s responsibility to find a suitable parking spot, park the vehicle correctly, return, and take out the vehicle upon display of the parking token/slip. Hence, in such situations, it cannot be considered that possession has been handed over or that a relationship of bailment has been created. (Para 18.2)

In a situation where the hotel actively undertakes to park the vehicle for the owner, keep it in safe custody and return it upon presentation of a parking slip in a manner such that the parking of the vehicle is beyond the control of the owner, a contract of bailment exists. Thus, the hotel would be liable as a bailee for returning the vehicle in the condition in which it was delivered. (Para 18.3)

In a scenario where possession of the vehicle is handed over to a hotel employee for valet parking, it can be said that ‘delivery’ of the vehicle has been made for the purposes of Section 148 and 149. Consequently, a relationship of bailment is created. The parking token so handed over to the bailor is evidence of a contract, by which the bailee (hotel) undertakes to park the car and return it in a suitable condition when the vehicle owner so directs. (Para 18.3)

the Appellant-hotel cannot refute the existence of bailment by contending that its valet parking service was purely complimentary in nature and that the consumer (bailor) had not paid for the same. In other words, the existence of a bailment relationship is clear. (Para 18.8)

If hotel is liable for the theft of a car taken for valet parking, under the laws of bailment, then what is the degree of care required to be taken by the Hotel ?

Given the existence of a bailment relationship, the failure of the Appellant to deliver the car to Respondent No. 2 (car-owner), raises a prima facie case of negligence against it. Thus, the burden of proof is on the hotel (bailee) to show that efforts were undertaken by it to take reasonable care of the vehicle bailed, and that the theft did not occur due to its neglect or misconduct. (Para 19)

This would mean that it is not sufficient for the hotel to merely appoint an attendant or security guard who takes the responsibility of parking the vehicle and keeping the car keys in his custody until the vehicle owner is inside the hotel premises. The hotel must take additional steps to guard against situations which may result in wrongful loss or damage to the car. This includes, for example, ensuring that the car keys are kept out of reach of outsiders, that the valet parks the car in a safe location, that parking spaces which are in the vicinity of the hotel are well- guarded, that parking spaces inside the hotel (if any) are reasonably well-maintained and CCTV cameras are installed there for detecting any suspicious activity, that the car is handed over only to those who present the parking slip and so on. Needless to say this is only an illustrative, and not an exhaustive list. (Para 20.2)

it is irrelevant as to how much parking fee was paid by the consumer, or whether any parking fee was paid at all, as the duty of care required to be taken by the hotel will be the same in all circumstances. However, this is not a strict liability standard insofar as Section 152 excludes the liability of a bailee for loss or damage of the bailed goods if he is able to show that he fulfilled the standard of reasonable care under Section 151. Whether or not such standard of reasonable care was fulfilled will depend upon the facts and circumstances of each case. (Para 20.3)

to meet the requisite standard of care, the hotel must go beyond appointing an attendant or security guard and take additional measures to guard against situations that may result in wrongful loss of or damage to the car of its guest. (Para 21)

…….On Section 152 of the Indian Contract Act, 1872

Though courts may have construed the phrase ‘in the absence of any special contract’ in Section 152 to mean that a bailee can reduce his liability under Section 151, such an interpretation is incorrect. The words ‘in the absence of any special contract’ in Section 152 clearly indicate that it is open to the bailee to accept a higher standard of liability than Section 151 under contract, and not otherwise. However, this does not mean that the hotel would be liable in all scenarios or that it cannot impose any exemption clause through a contract. There may be situations where the loss or damage may be caused due to the negligence of third parties, the bailor’s own negligence or unforeseen circumstances beyond the bailee’s control, which could not have been foreseen with ordinary diligence. (Para 28)

Hotels are at liberty to print clear contractual disclaimers notifying their guests that their liability is excluded for loss or damage to vehicles taken for valet parking which are occasioned by acts of a third party, contributory negligence or by force majeure events. However, as mentioned supra, this would always be subject to the hotel discharging its initial burden of proving that it fulfilled the standard of care imposed under Section 151 of the Contract Act. (Para 28)

Where the hotel or its servants have actively connived against or acted negligently in safeguarding the vehicles delivered for valet parking, ‘owner’s risk’ clauses in the parking token will not come to their rescue. (Para 28)

Where a valet or servant has been handed custody of the vehicle, and such a servant takes away the vehicle without authority, the hotel will be liable. This is because there will still be a prima facie assumption that the hotel has exercised laxity in supervising the actions of its servants. (Para 28)

However, the hotel will not liable where, in spite of due diligence, a servant or employee who was not entrusted with custody of the vehicle takes it without authority, as this would be similar to a case of theft by a third-party. (Para 28)

In a case of theft of a vehicle given for valet parking, the hotel cannot claim exemption from liability by arguing it was due to acts of third parties beyond their control, or that they are protected by an ‘owner’s risk’ clause, prior to fulfilling its burden as required under Section 151 and 152. (Para 29)

The hotel-owner cannot contract out of liability for its negligence or that of its servants in respect of a vehicle of its guest in any circumstance. Once possession of the vehicle is handed to the hotel staff or valet, there is an implied contractual obligation to return the vehicle in a safe condition upon the direction of the owner. (Para 30(i))

Even where there is a general or specific exemption clause, there remains a prima facie burden of proof on the hotel to explain that any loss or damage caused to the vehicles parked was not on account of its negligence or want of care per Sections 151 and 152 of the Contract Act. It is only after this burden of proof is discharged that the exemption clause can come into force. The burden of proving that such loss or damage was covered by the exemption clause will also be on the hotel. (Para 30(ii))

Copy of judgement: Judgement_14-Nov-2019

-Adv. Tushar Kaushik

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