Synopsis

The insurer appealed against an award granting Rs.9,45,000/- to the legal heirs of the deceased driver of a tractor, who died when the vehicle turned turtle due to his own rash and negligent driving. No other vehicle was involved. The High Court held that a claim under Section 166 of the Motor Vehicles Act, 1988 is based on “fault liability” – the claimant must prove negligence of another party. Since the deceased driver himself was the sole tortfeasor, the claim was not maintainable. However, the insurance policy extended personal accident cover for the owner/driver (up to Rs.2 lakhs) and paid driver coverage (IMT 28). The deceased was not a paid driver of the insured owner (borrower’s driver) but could be treated as a driver for the purpose of personal accident cover. The insurance company was held liable only to the extent of Rs.2 lakhs (personal accident cover). The appeal was partly allowed; the award was modified to Rs.2 lakhs.

Court: High Court of Gujarat at Ahmedabad

Coram: Honourable Ms. Justice Nisha M. Thakore

Date of Judgment: 20th April 2026

Citation: First Appeal No. 1129 of 2015 (unreported)

Core Law: Motor Vehicles Act, 1988 – Section 166 (claim for compensation on fault liability), Section 163-A (structured formula for compensation); insurance policy – personal accident cover, paid driver coverage, legal liability; third party vs. own damage; negligence of deceased driver.

2. Legal Framework

Major laws and provisions involved

• Motor Vehicles Act, 1988 – Section 166 (claim for compensation in case of accident – fault liability); Section 163-A (structured compensation – no fault); Section 168 (award by Claims Tribunal)

• Insurance policy terms – personal accident cover (Section IV), paid driver/cleaner coverage (IMT 28), legal liability

• Indian Contract Act, 1872 – principles of indemnity

Key legal principles applied

Section 166 – fault liability requires negligence of another party: The claim under Section 166 is founded on the principle of “fault”. The claimant must prove that the accident was caused by the negligence of the driver/owner of another vehicle or some other party. If the deceased driver himself was solely responsible for the accident (e.g., losing control, turning turtle), and no other vehicle was involved, the legal heirs cannot maintain a claim under Section 166 against the insurer of the same vehicle. A person cannot be both the tortfeasor and the claimant.

Personal accident cover is contractual, not statutory: An insurance company may extend personal accident cover to the owner/driver of the insured vehicle by accepting additional premium. This is a contractual liability, not a statutory liability under the Motor Vehicles Act. In such cases, the insurer is liable only up to the sum insured (typically Rs.1 lakh or Rs.2 lakhs) as per the policy terms, not the full compensation computed under the Act.

Paid driver coverage (IMT 28): If the policy extends coverage to a “paid driver”, the driver must be employed by the insured owner for remuneration. A driver engaged by a bailee (borrower) of the vehicle is not a paid driver of the insured owner, and the insurer is not liable under that head unless the policy permits.

Burden of proving breach of policy conditions (driving licence): The insurer must prove that the driver did not hold a valid driving licence. Mere suspicion or ignorance of the owner is insufficient. However, if the insurer cannot prove that the driver was not licensed, the defence fails.

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