Issue:
The key issue in this case is whether an insurance company is liable to pay compensation for an accident if, at the time of the accident, the vehicle was driven by an unlicensed driver, despite the insured (vehicle owner) having entrusted the vehicle to a duly licensed driver.
The insurance company contends that an exclusion clause in the insurance policy exempts it from liability if the person driving the vehicle was not duly licensed. The High Court, however, held the insurer liable without analyzing Section 96(2)(b)(ii) of the Motor Vehicles Act.
Judgment:
The court ultimately ruled in favor of the accident victims, holding that the insurance company cannot escape liability simply because the vehicle was driven by an unlicensed person at the time of the accident. The reasoning was:
- Legislative Intent & Public Policy – The primary objective of motor vehicle insurance laws is to protect victims of road accidents, not to safeguard insurers from liability. Courts should favor interpretations that serve this purpose.
- Doctrine of Reading Down – The exclusion clause should be interpreted in a way that does not defeat the primary purpose of the Motor Vehicles Act, which is to provide compensation to accident victims.
- Employer’s Due Diligence – If the owner had engaged a licensed driver in good faith, he should not be penalized for an unauthorized act of another person taking control of the vehicle without permission.
Thus, the court upheld the liability of the insurance company, ensuring that the accident victims or their dependents receive compensation. The court emphasized that when choosing between protecting accident victims and maximizing an insurer’s profits, the law must side with the victims.