The Bombay High Court has clarified a critical ambiguity in motor insurance law by affirming that comprehensive policies extend coverage to pillion riders, even when they are family members of the vehicle owner. This decision resolves longstanding confusion arising from the conflation of third-party liability under statutory policies with broader coverage under comprehensive policies.
Background & Facts
The Dispute
The dispute arose from a fatal motorcycle accident on 1 October 2017, in which Jignesh Mukadam, a 22-year-old, was killed while riding as a pillion passenger on his father’s motorcycle. The father, Vasant Mukadam, was the registered owner and driver. The deceased’s mother, Darshana Mukadam, filed a death claim petition before the Motor Accident Claims Tribunal seeking compensation.
Procedural History
- October 2017: Fatal accident occurred; police registered case for rash and negligent driving.
- 2017: Death claim petition filed before Motor Accident Claims Tribunal (MACP No. 586 of 2017).
- October 2021: Tribunal awarded Rs. 7,48,103/- with 7% interest and an additional 8% penal interest against the insurer and the owner jointly and severally.
- 2022: IFFCO-TOKIO General Insurance Co. Ltd. filed First Appeal No. 697 of 2022 challenging the award.
Relief Sought
The appellant insurer sought to set aside the compensation award, arguing that the deceased, being the son and pillion rider of the owner-driver, was not a third party and thus not covered under the policy. It also challenged the imposition of penal interest.
The Legal Issue
The central question was whether a comprehensive motor insurance policy excludes coverage for a pillion rider who is a family member of the owner-driver, and whether the Supreme Court’s ruling in New India Assurance Co. Ltd. v. Sadanand Mukhi applies to such policies.
Arguments Presented
For the Appellant
The insurer relied on New India Assurance Co. Ltd. v. Sadanand Mukhi to argue that the deceased, as the son of the owner-driver, could not be considered a third party under insurance law. It contended that the policy, even if comprehensive, was intended only to cover the owner-driver and did not extend to family members riding as pillion passengers. It further argued that the imposition of penal interest was illegal under New India Assurance Co. Ltd. v. Smt. Saira Imtiaz Lambe.
For the Respondents
The claimant countered that the policy in question was a comprehensive policy, not a statutory third-party liability policy. She relied on the Tariff Advisory Committee’s 1986 order, which explicitly mandates that comprehensive motorcycle policies must cover death or bodily injury to pillion riders, provided they are not carried for hire or reward. She submitted that the insurer had not disputed the policy’s nature or alleged any exclusion clause.
The Court's Analysis
The Court distinguished between statutory third-party liability policies and comprehensive policies. It held that the Supreme Court’s decision in Sadanand Mukhi was confined to the context of statutory policies under the Motor Vehicles Act, where the definition of third party excludes the owner and family members. However, in a comprehensive policy, the coverage is contractual and broader.
"Once the policy is not act policy, question of this Court going into the issue, as to whether the deceased was third party or not, does not arise."
The Court examined the Tariff Advisory Committee’s 1986 order, which amended the standard form of comprehensive motorcycle policies to include pillion riders as occupants. The order explicitly states: "Death or bodily injury to any person including person conveyed in or on the Motor Cycle provided such person is not carried for hire or reward." The insurer did not dispute that the deceased was not being carried for hire or reward.
The Court further noted that the insurer had admitted, in its written statement, that it had issued the policy and had not raised any exclusion based on familial relationship. The absence of any such clause in the policy document rendered the insurer’s argument legally untenable.
Regarding penal interest, the Court accepted the insurer’s challenge, citing its own Division Bench ruling in Smt. Saira Imtiaz Lambe, which held that penal interest cannot be awarded under Section 163A of the Motor Vehicles Act unless specifically authorized by statute.
The Verdict
The appellant insurer partially succeeded. The Bombay High Court upheld the compensation award of Rs. 7,48,103/- with 7% interest but set aside the 8% penal interest. The Court held that comprehensive insurance policies must cover pillion riders regardless of their familial relationship to the owner-driver, provided no hire or reward is involved.
What This Means For Similar Cases
Comprehensive Policies Override Third-Party Limitations
- Practitioners must now argue that coverage under comprehensive policies is contractual, not statutory, and therefore not bound by the third-party definition in Sadanand Mukhi.
- Insurers cannot deny claims on the basis of familial ties unless an explicit exclusion clause exists in the policy wording.
- Claimants should always produce the full policy document to establish coverage scope.
Tariff Advisory Committee Orders Are Binding
- The 1986 Tariff Advisory Committee order remains binding on all insurers issuing comprehensive motorcycle policies.
- Any policy issued after 1986 that omits pillion rider coverage is non-compliant with regulatory norms and may be deemed void for contravention of public policy.
- Legal arguments should cite the order verbatim and reference its inclusion in the Standard Form for Motor Cycle Comprehensive Policy (IMT Sheet 59).
Penal Interest Is Not Permissible in Motor Claims
- Penal interest under Section 163A is not statutorily authorized and cannot be awarded by Tribunals.
- Practitioners must now limit claims to statutory interest (7%) and avoid seeking punitive rates unless under specific contractual terms outside the Act.
- Appeals against penal interest should be routinely filed where awarded.
