Insurer Not Liable for Pillion Rider Without Extra Premium

In a judgment that sharply defines the extent of liability of insurance companies, the Supreme Court reiterated a foundational principle of insurance law that an insurer’s liability is circumscribed strictly by the terms of the insurance contract. This decision, rendered by a bench comprising Justice Vikram Nath and Justice Rajesh Bindal, realigns the axis of motor accident compensation law with contractual sanctity, offering renewed clarity in adjudicating insurer liability in road traffic accidents.

What's The Matter?

The factual matrix is relatively straightforward. The insured vehicle a motorcycle was involved in a fatal accident. The claim petition under Section 166 of the Motor Vehicles Act, 1988 was initiated by the legal representatives of the deceased, who was riding pillion.

While the Tribunal awarded compensation holding the insurer liable, the High Court upheld the same. The insurer approached the Supreme Court challenging the imposition of liability, asserting that the policy covered only the rider and not the pillion passenger.

The core of the insurer’s case rested on the policy document which explicitly excluded liability for pillion passengers under the given coverage type. In its incisive analysis, the Supreme Court highlighted that no extra premium had been paid for coverage of a pillion passenger.

The policy being a “package policy,” as opposed to a “comprehensive policy,” included only third-party liability and personal accident coverage for the owner-driver, with no inclusion of unnamed pillion passengers.

What Court Said?

The Court invoked Ningamma v. United India Insurance Co. Ltd. [(2009) 13 SCC 710], National Insurance Co. Ltd. v. Balakrishnan [(2013) 1 SCC 731], and Ramkhiladi v. United India Insurance Co. Ltd. [(2020) 2 SCC 550] to reiterate the principle that in absence of specific premium, an insurer cannot be made liable beyond the contract.

The judgment lucidly emphasizes that the statutory liability of an insurer under Section 147 of the Motor Vehicles Act does not extend to pillion passengers unless the policy explicitly includes them.

By absolving the insurance company of liability, the Court preserved the sanctity of contractual obligation. It reversed the concurrent findings of the Tribunal and the High Court and directed that the compensation amount,

if already paid by the insurer, be recovered from the owner of the vehicle.

The judgment serves not only as a reaffirmation of the insurer's statutory and contractual boundaries but also as a cautionary reminder to vehicle owners and policyholders. It calls for greater awareness and diligence while opting for insurance coverage, particularly regarding coverage of occupants, whether passengers or pillion riders.

This case thus marks another step in the Court’s ongoing project of reinforcing contractual discipline in motor vehicle insurance jurisprudence.

At a time when sympathy can often dilute the contours of statutory interpretation, the Supreme Court’s refusal to permit equitable considerations to override explicit contract terms is jurisprudentially significant. It places insurer liability back within the contours of law, not largesse.