Insurance Cover Notes Hold Policy Validity Unless Proven Otherwise: Kerala High Court Upholds Compensation in Fatal Accident Case

Kerala High Court dismissed an appeal by United India Insurance Company Limited challenging a compensation order passed by the Employees Compensation Commissioner (ECC), Palakkad. The court upheld the ECC’s findings that a valid insurance policy covered the vehicle involved in the fatal accident of Firoz Babu, and affirmed the insurer's liability to pay compensation amounting to ₹2,74,938 with 12% annual interest and funeral expenses of ₹2,500.
The case arose from a claim by the dependents of Firoz Babu, a sales representative employed by the first opposite party, who died in a motorcycle accident on June 30, 2001. The claimants alleged the accident occurred during the course of employment, and the vehicle was owned by the employer and insured by United India Insurance. While the employer denied an employer-employee relationship and the vehicle’s ownership at the time of the accident, the insurance company disputed the existence of a valid insurance policy.
The ECC found that Firoz Babu was an employee of the first opposite party and was riding a vehicle covered under a valid insurance policy issued by United India Insurance. The court awarded compensation to the claimants, prompting the insurer to appeal.
Justice G. Girish reviewed evidence, including receipts, bills, and lodging records (Exts. A5, A7, and A8), that demonstrated Firoz Babu was a sales representative for the first opposite party. The court noted:
"The denial of employer-employee relationship by the first opposite party lacks bona fides and is contradicted by the evidence."
The ECC’s reliance on these documents was deemed justified, and the court found no grounds to overturn its findings.
The core issue was whether Ext. B1, the insurance cover note, constituted a valid insurance policy. The insurer argued the cover note lacked critical identifiers like engine and chassis numbers and had expired before the accident. However, the court emphasized the statutory definition under Section 145(b) of the Motor Vehicles Act, 1988:
"A cover note duly issued by an insurer is equivalent to a certificate of insurance, unless the insurer proves its termination or non-issuance of a policy."
The court found no evidence that the insurer had notified authorities about the non-issuance of a policy under Section 147(5) of the Motor Vehicles Act, which mandates such notification if no policy is issued within the cover note’s validity. It further highlighted:
"The appellant failed to terminate the cover note or refund the premium, indicating the subsistence of the policy at the time of the accident."
The court upheld the ECC’s finding that the vehicle was validly insured, relying on testimony and registration records confirming the policy's existence.
The court dismissed the insurer’s appeal, affirming the ECC’s compensation award. Justice G. Girish directed United India Insurance to:
"Make payment of the compensation ordered by the learned Employees Compensation Commissioner to the respondents with immediate effect."
The judgment reaffirms the principle that insurance cover notes are treated as valid insurance policies unless explicitly negated by statutory procedures. It underscores the liability of insurers in cases where procedural lapses, such as failure to notify authorities, occur.
Date of Decision: November 26, 2024