Insurance companies are not liable to compensate all the passengers of an overloaded bus in case they die or get injured in an accident involving the vehicle, the Supreme Court has ruled. A division bench comprising Justice AK Mathur and Justice PK Balasubramanyan held that an insurance company stands liable only in respect of those limited passengers who are specified by the owner while he avails the insurance facility for his vehicle.
The judges said permitting of insurance of more number of passengers than permitted would be illegal because in that case the "manifest intention" would be legalizing overloading of vehicle, something not contemplated by law. They added that overloading of an insured vehicle invites a consequence which can be penal and allowing more than permitted passengers in a public vehicle amounts to breach of a contract between an insurer and the insured. "The insured is covered only to the extent of the passengers permitted to be insured or directed to be insured by the statute and actually covered by the contract," the court said.
While reversing the order of Himachal Pradesh high court, the judges allowed the plea of National Insurance Company Limited to pay compensation of 42 passengers of the 90 who either died or got injured during an accident in 1996. However, the judges said that as third party insurance serves social purpose, the compensation amount would be distributed equally among all the 90. The balance amount has to be recovered from the bus owner.
The bench also laid down the mechanism to compute the compensation amount. Stating that it was difficult to ascertain the 42 of 90 passengers who were authorized for the compensation, the court said the higher of the 42 awards should be considered. The court said the insurance company shall submit the total amount of the motor to the motor accident claim tribunal where the case got originally adjudicated.