The judges made it clear that payments from a mediclaim policy come from a contractual agreement between the insured and the insurance company. Therefore, such payments should not reduce the statutory compensation an accident victim is entitled to receive.
MUMBAI: The Bombay High Court has ruled that any amount received by a person under a mediclaim or medical insurance policy cannot be deducted from the compensation awarded under the Motor Vehicles Act (MV Act).
The judges made it clear that payments from a mediclaim policy come from a contractual agreement between the insured and the insurance company. Therefore, such payments should not reduce the statutory compensation an accident victim is entitled to receive.
The Court stated:
“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.”
This judgment was in response to a reference made by a single-judge bench on whether mediclaim payouts should be subtracted from compensation granted under the MV Act.
Background
The case was filed by New India Assurance Company against Dolly Satish Gandhi, who had been awarded compensation by the Motor Accident Claims Tribunal (MACT) in Mumbai. The tribunal had granted her compensation for medical expenses incurred due to an accident.
The insurance company challenged this, arguing that since she had already received money from a mediclaim policy, the medical expense component of her compensation should be reduced accordingly.
The lawyer representing the insurance company argued that a mediclaim policy works on the principle of indemnity. This means the insured person is only compensated for the actual expenses they incurred, nothing extra. Since the claimant had already been reimbursed for her medical bills through mediclaim, granting additional compensation for the same expenses would be an unfair “double compensation” or “windfall.”
They also cited Karnataka High Court judgments where courts deducted mediclaim amounts from accident compensation.
The claimant’s lawyer countered that a medical insurance policy is a separate contract between the insured and their insurer, while compensation under the MV Act is a statutory right. He argued that a tortfeasor (the person responsible for the accident) should not benefit from the victim’s insurance policy.
The lawyer emphasized:
“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.”
The Bombay High Court referred to a Supreme Court judgment that held that amounts received under life insurance policies or other contracts should not be deducted from compensation under the MV Act.
The Court explained that accident compensation aims to restore the victim to the position they would have been in if the accident had not happened. Since a mediclaim payout results from a contractual agreement, the at-fault party or its insurer should not benefit from it.
It added:
“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 judges further clarified that Section 168 of the MV Act, which empowers tribunals to grant “just compensation,” does not support deductions for mediclaim payouts.
The Court observed:
“Such deductions would lead to unjust enrichment for the wrongdoer’s insurer, contrary to the fundamental principle of fairness in awarding compensation.”
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Following this ruling, the matter has been sent back to the single-judge bench for further consideration based on the case facts.
- For New India Assurance Company: Advocates Deelip R Mahadik and Devendra Joshi.
- For Claimant Dolly Satish Gandhi: Advocates TJ Mendon, TR Kale, Deepak S Kilaje, Navin Sheth, and RS Alange.
- For HDFC Ergo General Insurance Company Ltd: Senior Advocate Vineet B Naik and Advocate Sukand Kulkarni, instructed by Advocate Sarthak Diwan.
- Amicus Curiae: Senior Advocate Gautam Ankhad, assisted by Advocate Lodha and Advocate Minal Thakker.
Case Title: The New India Assurance Co. Ltd v. Dolly Gandhi
