In accident cases, insurance companies must pay interest on amounts awarded under future prospects: Karnataka High Court

Bengaluru: The Karnataka High Court has said that in accident cases, the insurance companies cannot escape from the liability to pay interest on amounts awarded under future prospects. A division bench comprising Justice K Somashekar and Justice Chillakur Sumalatha observed this while dismissing the appeal filed by an insurance company.

In the instant case, a software engineer had died in an accident on Hosur Road in November 2014. The accident involved a truck and the car in which the deceased was traveling. In June 2019, a Motor Accident Claims Tribunal at Bengaluru awarded Rs 51.57 lakh compensation to the family members of the deceased and the insurer was told to pay 95% the awarded amount.

Challenging this order, the insurer argued that there was also negligence on the part of the car driver and hence the owner of the car is also liable to foot the compensation amount. It was further argued that the tribunal should not have awarded interest upon the amount awarded under loss of future prospects.

The division bench noted that as per the police investigation report, the accident had occurred solely owing to the negligence of the lorry driver. The bench said if the dependents are denied with the interest over the amount awarded under the head 'loss of future prospects', it would be most unjustifiable.

“The reasons are two-fold. Despite making stringent provisions for settlement of claims at the earliest date, it is taking years and decades for settlement of claims. In the interregnum period, the survival of claimants would be based on the available resources and the capability of getting debts. The insurance companies who are liable to pay the compensation as soon as possible as indicated under the Motor Vehicles Act, 1988 would be enjoying the principal amount and the fruits that accrued through the investment of the principal amount,” the court said.

The bench also observed that in the case at hand, the amount which the claimants are legally entitled to is being enjoyed by the insurance company for a long period of ten years. The court also noted that that the deceased was a MBA graduate and was a Team manager with Thomson Reuters aged 26 years at the relevant time.

“Even if in the future it is found that the deceased would have earned much more amount in the light of a hike in his position and global opportunities, the Tribunals will not order payment of any further amount and insurance companies will not be made liable on that count. Such being the case, this Court is of the view that the insurance companies are liable to pay the awarded amount including the amount awarded under the head future prospects together with banking rate of interest which is prevalent during relevant time,” the court said, directing the insurer to pay Rs 40,000 additional compensation together with 6% interest on the enhanced amount.