Medical insurance payouts not deductible from Motor Vehicles Act compensation: Bombay High Court

The Bombay High Court on Friday ruled that amounts received by a claimant under a mediclaim policy or medical insurance policy cannot be deducted from the compensation awarded under the Motor Vehicles Act (MV Act). [The New India Assurance Co. Ltd v Dolly Gandhi].A three-judge bench of Justices AS Chandurkar, Milind Jadhav and Gauri Godse emphasised that such payments are based on contractual agreements and should not be used to reduce the statutory compensation owed to accident victims.“Any amount received by a claimant under a mediclaim policy or under a medical insurance policy is not liable to be deducted from the amount of compensation payable to a claimant under the head ‘medical expenses’ in proceedings under Section 166 of the MV Act,” the Court said.The Court was deciding a reference by a single-judge on the issue.. The case arose from a dispute between New India Assurance Company and one Dolly Satish Gandhi, who had been awarded compensation by the Motor Accident Claims Tribunal (MACT) in Mumbai for medical expenses incurred due to an accident. The insurance company challenged the tribunal's decision, contending that the compensation awarded for medical expenses should be reduced from the MACT compensation because the claimant had already received reimbursement for these expenses under the mediclaim policy. .During the hearing, the company's counsel contended that a mediclaim policy operates on the principle of indemnity, which compensates for losses incurred due to medical expenses following an accident. He argued that the claimant should not be compensated twice for the same accident. He explained that once the insurance company paid out the medical expenses under the mediclaim policy, the claimant was already indemnified for those expenses. Any further compensation for the same would be a "windfall" or "double compensation" and would amount to an unjust enrichment. He also cited judgments from the Karnataka High Court where mediclaim amounts were deducted from the compensation..On the other hand, counsel representing the claimant, argued that a medical insurance policy is a contractual arrangement between the insured and the insurer, and the compensation under the MV Act is statutory. He emphasised that the statutory right to compensation under Section 166 of the MV Act cannot be reduced by the amount the claimant receives under a separate contractual agreement with the insurer. He further contended that the tortfeasor (the party responsible for the accident) should not benefit from the compensation received under the mediclaim policy.The Court while deciding the reference relied on the Supreme Court ruling which established the principle that amounts received under life insurance policies or other contractual agreements should not be deducted from the compensation under the MV Act. .The Court further noted that the Act provides for "just compensation" and emphasised that the purpose of such compensation is to restore the claimant to the position they would have been in, had the accident not occurred.It observed that since insurance payout is a contractual obligation, the insurer company cannot take advantage of the foresight of the deceased, "From the aforesaid decisions, it is now clear that the amount received on account of insurance is due to the contractual obligations entered into by the insured with others. Having paid premium it was clear that the beneficial amount would accrue to the share of the deceased either on maturity of the policy or on death, whatever be the manner of death. The tortfeasor cannot take advantage of the foresight and wise financial investments made by the deceased. This is the settled position of law," the Court held.It further stated that Section 168 of the MV Act, which empowers the Claims Tribunal to award just compensation, does not contemplate any deductions for amounts received under contracts like mediclaim policies. .The Court also emphasised that such deductions would lead to unjust enrichment for the wrongdoer’s insurer, contrary to the fundamental principle of fairness in awarding compensation.The Court then directed that the matter be sent back to the single-judge for further consideration based on the facts of the case..Advocate Deelip R Mahadik with advocate Devendra Joshi appeared for the insurer, New India Assurance Company.Advocate TJ Mendon with advocates TR Kale, Deepak S Kilaje, Navin Sheth and RS Alange appeared for the claimant, Dolly Satish Gandhi.Senior Advocate Vineet B Naik with advocate Sukand Kulkarni instructed by advocate Sarthak Diwan appeared for HDFC Ergo General Insurance Company Ltd.Senior Advocate Gautam Ankhad appeared as Amicus Curiae assisted by advocate Lodha and advocate Minal Thakker.[Read Order]