Health Insurance: "Karnataka High Court Orders Insurer to Pay Interest on Future Earnings in Accident Compensation Case"
- M.R Mishra
- Aug 12, 2024
- 2 min read
The Karnataka High Court has ruled that insurance companies cannot avoid paying interest on amounts awarded under "future prospects," which refers to the potential earnings a victim could have had if they had survived, in cases involving accidents. The ruling came after a division bench consisting of Justices K. Somashekar and Chillakur Sumalatha rejected an appeal by Reliance General Insurance Company.
The case involved a highly skilled software developer specializing in finance, who tragically died in an accident on November 18, 2014, while returning from Sabarimala. The accident took place on the National Highway near Hosur Road when a truck made an abrupt right turn without signaling, leading to a collision. The developer, named Supreeth, was critically injured and later succumbed to his injuries in the hospital.
On June 17, 2019, the Motor Accident Claims Tribunal in Bengaluru awarded Rs 51.6 lakh as compensation to Supreeth’s family, with the insurance company being responsible for 95% of the payment.
The insurer contested the decision, claiming that the car driver was also negligent and that the compensation amount was excessive. They further argued that interest should not have been awarded on the compensation related to the loss of future prospects.
However, the division bench, after examining the evidence, concluded that the accident was solely due to the truck driver's negligence, as supported by the police investigation report.
The court highlighted that Supreeth, a 26-year-old MBA graduate, had a promising career ahead of him. The bench emphasized that the Motor Vehicle Act is designed to favor claimants, and insurance companies are expected to settle claims promptly.
The court further explained that compensation is a one-time award, and even if it is later determined that the deceased could have earned significantly more due to career advancements, the insurance company is not liable for additional payments.
The court held that insurance companies must pay the awarded amount, including compensation for future prospects, with interest at the prevailing bank rate. Additionally, the judge ordered the insurer to pay an extra Rs 40,000 to Supreeth’s family, along with 6% interest on the increased amount.
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