The Karnataka High Court has clarified that insurers cannot evade contractual liability under a package policy merely because the claimant is the vehicle owner and not a third party. Where an additional premium is paid to cover the owner’s risk, and permanent disability results from an accident, the insurer remains liable to pay compensation up to the agreed limit, irrespective of statutory bar under Section 166 of the Motor Vehicles Act.
Background & Facts
The Dispute
The appellant, Sri Veerabhadrapappa Basavananneppa Girji, aged 68 years and an agriculturist, was the owner of vehicle no. KA-27/A-5594. On 28.10.2011 at approximately 04:30 p.m., while travelling from Ranebennur to Haveri, the vehicle met with an accident near Chatradurgamma Temple due to the rash and negligent driving of its driver. The appellant sustained grievous injuries in the accident.
Key Facts
- The appellant was the owner and not the driver of the vehicle at the time of the accident.
- The vehicle was covered under a ‘Package Policy’ issued by the respondent insurer, SRIRAM GENERAL INSURANCE CO. LTD.
- An additional premium of ₹100/- was paid by the appellant to cover the risk of the owner, as recorded in the policy document (Ex.R.1).
- The policy referenced GR36A-PA and IMT-21, IMT-22, and IMT-28, but the actual terms of these clauses were not printed on the policy document.
- The appellant was admitted as an inpatient for 39 days in a government hospital.
- Medical records and disability certificate (Ex.P.11) confirmed a fracture of both bones at the distal one-third of the left forearm.
- The disability assessment by Dr. Shivappa (PW2) indicated 21 - 24% permanent disability of the whole body and 33 - 40% disability of the affected limb.
- The appellant claimed an annual income of ₹3,00,000/- as an agriculturist, but no documentary proof was submitted.
Procedural History
- 28.10.2011: Accident occurred near Chatradurgamma Temple, Haveri.
- 23.11.2013: Senior Civil Judge and AMACT, Haveri, dismissed Claim Petition (MVC No. 223/2012) on grounds of non-maintainability and limited coverage.
- 10.01.2014: Notice of appeal filed.
- 29.04.2026: Miscellaneous First Appeal No. 100037 of 2014 heard and decided by the Karnataka High Court, Dharwad Bench.
The Parties' Positions
Appellant’s Position: The appellant argued that the policy was a ‘Package Policy’ and not an ‘Act Liability Only Policy’. The payment of ₹100/- as additional premium explicitly covered the owner’s risk up to ₹2,00,000/-. He relied on National Insurance Co. v. Ashalata Bhowmik and Divisional Manager v. Mohan to contend that contractual liability must be honoured even if statutory claim under Section 166 is barred.
Respondent’s Position: The insurer contended that the policy terms restricted coverage to death, loss of limbs, eyes, or permanent total disability. The appellant’s injury - a fracture of the forearm - did not meet this threshold. The insurer further argued that a vehicle owner cannot maintain a claim petition under Section 166 of the MV Act, as he is not a third party.
Relief Sought
The appellant sought enhancement of compensation, including:
- Compensation for pain and suffering
- Medical and incidental expenses
- Loss of earnings during hospitalization
- Future loss of earning capacity
- Loss of amenities
- Interest at appropriate rate
The Legal Issue
The central question was whether an insurer can deny contractual liability under a package policy to a vehicle owner who has sustained permanent physical disability, merely because the claimant is not a third party and the injury does not amount to ‘permanent total disability’ as defined in the policy’s IMT forms.
Arguments Presented
For the Appellant
The appellant’s counsel relied on National Insurance Company v. Ashalata Bhowmik to argue that when an insurer accepts additional premium to cover the owner’s risk, it creates a contractual obligation independent of Section 166. The court in Divisional Manager v. Mohan had similarly held that insurers must pay contractual compensation even if statutory claims are barred. The appellant’s injury, assessed at 21 - 24% permanent disability, was sufficient to trigger coverage under the policy’s intent, especially since the insurer failed to define the scope of GR36A-PA or IMT clauses in the policy document.
For the Respondent
The insurer’s counsel contended that the policy’s coverage was strictly limited to death, loss of limbs, eyes, or permanent total disability, as indicated by the reference to IMT-21, IMT-22, and IMT-28. The appellant’s fracture, though serious, did not meet these thresholds. The insurer further argued that the claim petition was non-maintainable under Section 166, as the claimant was not a third party, and that the tribunal correctly dismissed the petition on this ground.
The Court's Analysis
The Court acknowledged that while Section 166 of the Motor Vehicles Act bars a vehicle owner from claiming compensation from his own insurer as a third party, this does not extinguish contractual obligations arising from a package policy. The Court emphasized that the insurer had accepted an additional premium of ₹100/- specifically to cover the owner’s risk, thereby creating a distinct contractual liability.
"Perusal of Ex.R1 reveals that insurance policy is a ‘Package Policy’ and additional premium of ₹100/- is received towards p.a. cover of owner. Indeed there is mention of GR36A-PA, but IMT referred are 21, 22 and 28, without text of either GR36A-PA or IMT being printed on policy. RW1 in his deposition only deposed about claim petition by owner against his insurer being not tenable under provisions of MV Act and did not state about meaning of restriction of risk as per IMT 21, 22 and 28 or GR36A-PA."
The Court found the insurer’s failure to define the scope of coverage in the policy document to be fatal to its defence. The insurer could not rely on unprinted IMT forms or undefined clauses to limit liability. The tribunal’s assumption that coverage was restricted to ‘permanent total disability’ was unsupported by evidence.
The Court further held that the appellant’s injury - fracture of both bones of the forearm resulting in 21 - 24% permanent disability - constituted a significant and lasting impairment, especially for an agriculturist. The tribunal’s dismissal of the claim on technical grounds was unjustified in light of the contractual undertaking.
The Court applied principles of equity and contractual fairness, following the Supreme Court’s directive in Ashalata Bhowmik to avoid forcing claimants into redundant proceedings under the Consumer Protection Act. The insurer, having accepted premium for owner coverage, must honour its promise.
The Verdict
The appeal was allowed in part. The Court set aside the tribunal’s order dated 23.11.2013 and directed the insurer to pay total compensation of ₹1,39,000/- comprising: ₹40,000/- for pain and suffering, ₹25,000/- for incidental expenses, ₹36,000/- for future loss of income, ₹20,000/- for loss of amenities, and ₹18,000/- for loss of income during the 3-month layoff period. The insurer shall pay 6% interest on the entire amount from the date of filing the claim petition until actual deposit. The tribunal is directed to release the compensation upon deposit by the insurer.
What This Means For Similar Cases
Contractual Liability Overrides Technical Barriers
- Practitioners must argue that package policies create independent contractual obligations separate from statutory claims under Section 166.
- Insurers cannot rely on unprinted or undefined IMT clauses to deny claims when additional premium is paid for owner coverage.
- Courts will enforce the insurer’s promise where the policy language is ambiguous and the premium was accepted for specific risk coverage.
Permanent Disability Is Not Limited to Total Disablement
- A permanent partial disability of 20% or more, especially in a working-age individual, may trigger contractual liability under package policies.
- Medical assessments from treating physicians, even without formal disability certificates, are admissible to establish the nature and extent of injury.
- The burden shifts to the insurer to prove the exact scope of exclusion - silence in the policy document favours the claimant.
Policy Wording Must Be Clear and Accessible
- Insurers must print or annex all relevant IMT forms and policy conditions to the policy document.
- Failure to do so renders exclusionary clauses unenforceable.
- Courts will interpret ambiguous policy terms against the insurer under the doctrine of contra proferentem.
