Insurer Ordered to Pay Despite Unauthorized Use, Court Enforces Non-Standard Claim Settlement with Interest Penalty.

The SC overturned the lower commissions' decisions, mandating the insurer to pay Rs. 2,50,000 to the appellant despite the vehicle's unauthorized hire use breaching policy terms. The Court emphasized settling claims on a non-standard basis in policy breach cases, with payment due in six weeks, incurring 9% interest if delayed.

---

---

Issues:
Interpretation of insurance policy terms regarding the use of the insured vehicle for hire and its impact on claim settlement.

Analysis:
The appellant had a comprehensive insurance policy for his private car, which was involved in an accident while being used by an employee of a bank on a hire basis. The insurance company denied the claim, stating that the use of the vehicle for hire was not permitted under the policy terms. The District, State, and National Consumer Disputes Redressal Commissions upheld the denial of the claim based on the hire usage of the vehicle.

The insurance company argued that even though no payment for hiring charges was proven, the vehicle was used on hire, breaching the policy terms. However, the Supreme Court referred to previous judgments emphasizing that in cases of policy condition violations, claims should be settled on a non-standard basis. The Court highlighted the importance of settling claims even in cases of policy breaches, as seen in previous decisions such as United India Insurance Company Limited v. Gian Singh and National Insurance Company Limited v. Nitin Khandelwal.

The Court also referred to a case involving New India Assurance Company Limited, where guidelines were provided for settling non-standard claims, including cases where policy conditions were breached. The Court concluded that based on these guidelines, the insurance company cannot entirely repudiate the claim in this case, despite the hire usage of the vehicle.

In light of the above analysis, the Supreme Court set aside the decisions of the lower fora and directed the insurance company to pay a consolidated sum of Rs. 2,50,000 to the appellant, even though the claimed compensation was Rs. 5,00,000. The payment was ordered to be made within six weeks, with an interest of 9% per annum applicable if the payment was delayed beyond the stipulated period.

Therefore, the appeal was allowed by the Supreme Court, granting relief to the appellant and emphasizing the obligation of the insurance company to settle claims even in cases of policy breaches, based on the principles established in previous judgments and guidelines provided by the National Commission.

---