In a significant judgment clarifying liability in multi-vehicle or trailer-involved accidents, the Supreme Court has held that when a vehicle causes a chain reaction leading to damage or death, the liability extends to the insurer of the root-cause vehicle. The ruling came in Royal Sundaram Alliance Insurance Co. Ltd. vs Honnamma & Ors., where a tractor pulling an attached trailer caused the death of a labourer due to negligent driving.
A Bench comprising Justices Sudhanshu Dhulia and Ahsanuddin Amanullah upheld the Karnataka High Court’s direction fastening liability on the insurance company and rejected the insurer’s argument that the trailer was not insured separately.
Background
On 29 February 2012, the deceased Nagarajappa was travelling as a labourer in a tractor-trailer to unload soil. Due to the negligent driving of the tractor by Respondent No. 5, the vehicle toppled, resulting in fatal injuries. His wife and two minor daughters filed a claim before the MACT, Harihar, seeking ₹10 lakh compensation.
The MACT awarded ₹9.5 lakh but did not fasten liability on the insurer, Royal Sundaram, as the trailer was not insured. The High Court later enhanced the compensation to ₹13,28,940 and imposed liability on the insurer, prompting the appeal.
Key Legal Question
The central legal issue was whether an insurer is liable when the insured vehicle (tractor) pulls an uninsured trailer and the accident occurs due to the movement of the insured tractor.
Supreme Court’s Observations and Reasoning
The Court held that:
“It is not the case that only because of some fault on the part of the trailer stand-alone, the accident happened. The accident was caused by the tractor, as during the course of being driven/pulled by the tractor, the accident occurred.”
In a key clarification on chain accidents, the Court observed:
“If an insured vehicle hits another vehicle which in turn hits a third vehicle, then for the entire chain of accidents, the liability would pass on to the vehicle which was the root cause of the accident because it is the result of the action in the same chain of events which cannot be segregated or compartmentalized.”
Rejecting the insurer’s reliance on technical objections, the Court underlined:
“This Court is duty-bound to be mindful of the ground realities of our nation and cannot let practicality be overshadowed by technicality.”
Distinction from Other Cases
The appellant cited Dhondubai v. Hanmantappa Bandappa Gandigude, where the Court had absolved the insurer from liability when the trailer was not insured. But the Supreme Court held that:
“The learned Judges in Dhondubai (supra) did not lay down an absolute principle of law…”
Instead, the Court referred to Koduru Bhagyamma, a 2007 Andhra Pradesh High Court decision, noting:
“When the trailer is attached to the tractor which is insured, it becomes the part of the tractor… under the Motor Vehicles Act, no separate insurance is contemplated for the trailer.”
Policy Terms and Limits
The Court examined the insurance policy, noting that under Section II-1(i), it covers liability “as is necessary to meet the requirements of the Motor Vehicles Act, 1988” and that “legal liability to coolies” was included under IMT-39.
Reiterating principles from C.M. Jaya v. New India Assurance Co. Ltd. (2002), the Court observed:
“The liability could be statutory or contractual. A statutory liability cannot be more than what is required under the statute itself… In the absence of such a term or clause in the policy… a limited statutory liability cannot be expanded to make it unlimited.”
Decision and Directions
The Court upheld the High Court’s order and held:
“We do not find any infirmity in the Impugned Order, either with regard to the quantum of compensation awarded or fixation of liability on the insurer-Appellant for the accident.”
It directed the insurer to pay the amount within two months, after adjusting prior payments. However, the Court allowed recovery of the excess amount beyond policy limits from the owner:
“Liberty is granted to the Appellant to recover the differential amount… from the Respondent No.4-owner.”
