ChatGPT said: Supreme Court on Insurance Liability in Route Deviation Cases.

Headnote:

The Supreme Court upheld the Karnataka High Court’s application of the “pay and recover” principle in a motor accident compensation case involving deviation from a permitted route. The Court held that while an insurer is not contractually bound to cover accidents occurring beyond the route authorized by the permit, victims of such accidents must not be deprived of compensation. Hence, the insurer must pay the compensation to the claimants first and later recover the same from the vehicle owner. The decision reinforces the balance between protecting accident victims and safeguarding insurers’ contractual rights.

Background:

• On 7 October 2014, the deceased Srinivasa alias Murthy died in a road accident caused by a bus operating in a rash and negligent manner at Channapatna City.

• The dependents of the deceased filed a claim petition seeking ₹50,00,000 compensation, asserting that the deceased earned ₹15,000 per month through business.

• The Motor Accident Claims Tribunal (MACT) awarded ₹18,86,000, fixing notional income at ₹8,000 per month.

• The claimants appealed for enhancement, while the Insurance Company contested liability, citing violation of permit conditions.

• The Karnataka High Court enhanced compensation to ₹31,84,000 and applied the pay and recover principle, allowing the insurer to recover the amount from the vehicle owner due to deviation from the permitted route.

Court’s Observations:

• The Supreme Court examined whether deviation from the authorized route affects the insurer’s liability under a motor vehicle insurance policy.

• The Court relied on precedents including National Insurance Co. Ltd. v. Swaran Singh (2004) 3 SCC 297, New India Assurance Co. v. Kamla (2001) 4 SCC 342, Parminder Singh v. New India Assurance Co. (2019) 7 SCC 217, and Amrit Paul v. TATA AIG General Insurance Co. (2018) 7 SCC 558.

• It held that using a vehicle outside its permitted route constitutes a breach of policy conditions, but victims’ rights must not be defeated due to such infractions.

• The insurer, having a statutory obligation to compensate third-party victims, can later recover the amount from the insured for policy violation.

• The High Court’s direction applying the pay and recover principle was found justified and equitable.

Legal Provisions Discussed:

• Section 149, Motor Vehicles Act, 1988 – Duty of insurers to satisfy judgments against insured in respect of third-party risks.

• Section 66, Motor Vehicles Act, 1988 – Necessity of permit for transport vehicles.

• Principle of Pay and Recover – Insurer pays compensation to third parties but retains the right to recover from the insured in case of breach of policy conditions.

Final Decision:

The Supreme Court dismissed the appeals, affirming the High Court’s judgment. The insurer must pay the compensation to the claimants and may recover the amount from the vehicle owner. No order as to costs.

Citation: 2025 INSC 1270

Case: K. Nagendra v. The New India Insurance Co. Ltd. & Ors.

Court: Supreme Court of India

Coram: Justice Sanjay Karol & Justice Prashant Kumar Mishra

Date of Decision: 29 October 2025

Civil Appeal Nos.: Arising out of SLP (C) Nos. 7139–7140 of 2023