In Civil Appeal No.1544 of 2023 -SC- Supreme Court directs BMW & Bajaj General Insurance to pay Rs. 22 lakhs to owner of BMW 3 series car damaged in accident
Justice Abhay S. Oka & Justice Rajesh Bindal [20-11-1989]

Read Order: Bajaj Allianz General Insurance Co.Ltd.  v. Ors. V. Mukul Aggarwal & Ors.

Chahat Varma

New Delhi, November 20, 2023: The Supreme Court has ordered luxury vehicles company BMW and Bajaj General Insurance to pay Rs. 22 lakhs to the owner of a BMW 3 Series 320D car that was damaged beyond repair in an accident.

The appeals stemmed from a claim by one Mukul Aggarwal concerning damage to his BMW car caused by an accident near DLF Square in Gurgaon on July 29, 2012. The impact rendered the car irreparable. At the time of the incident, the owner, a Director of Dassault Systems India Pvt. Ltd., Gurgaon, had sought a loan from Dassault for acquiring the BMW car for personal use. Dassault secured a loan of Rs. 26,92,229 for the car. On May 17, 2012, the owner purchased the car in the name of Dassault from M/s Bird Automotive Pvt. Ltd., an authorized BMW dealer.

Two protections were obtained during the car acquisition: a motor insurance policy from Bajaj General Insurance Company Ltd. and the BMW Secure Advance Policy from BMW. As per the owner's claim, a combined interpretation of the two policies indicated that if the car sustained damage exceeding 75% of the IDV, the insurer must provide a new car to the insured.

The State Commission determined that the insurer was obligated to indemnify the insured for Rs. 29,46,278 by replacing the car in accordance with the BMW Secure Advance. Consequently, the State Commission directed both the insurer and BMW to indemnify the owner by replacing the BMW 3 Series 320D car with a new one of the same make/model.

Aggrieved with the State Commission's judgment, BMW and the insurer separately appealed to the National Commission. The National Commission dismissed the appeals on their merits in the impugned judgment.

The division bench of Justice Abhay S. Oka and Justice Rajesh Bindal noted that as far as the interpretation of an insurance policy was concerned, an insured could not claim anything more than what was covered by the insurance policy. The terms of the contract had to be construed strictly without altering the nature of the contract. Moreover, the clauses of an insurance policy had to be read as they were. The terms of the insurance policy, which determined the liability of the insurance company, had to be read strictly.

The bench stated that, on a plain reading of clause (3), an option was available to the insurer to repair the vehicle or replace the vehicle. It was further provided that in case of the total loss of the vehicle or the constructive total loss of the vehicle, the insurer was liable to pay IDV less the value of the wreck. Thus, the bench ruled that it was not the right of the insured under the policy conditions to always claim the replacement of the car. It was at the option of the insurer.

The bench further noted that on a plain reading of the BMW Secure Certificate, it was apparent that what was mentioned therein could not be taken as the policy condition. The BMW Secure Certificate only gave information about the features of the policy, and lastly, it was specifically mentioned therein that the insured must spare a few minutes to go through the terms and conditions of the policy. This indicated that the terms and conditions of the policy had been separately provided. Though it was styled as a 'BMW Secure Certificate,' it only contained information about BMW Secure and not the terms of the policy.

The bench held that under the BMW Secure, there was no provision for the replacement of the vehicle by BMW in the event of complete loss or total constructive loss of the vehicle. The question of liability under the BMW Secure arose only when the liability of the insured under the new motor vehicle policy was established. Therefore, it had to be established that the insurer had accepted the case regarding the total loss of the insured vehicle. As per the policy of motor insurance issued by the insurer, in this case, the constructive total loss happened when the aggregate cost of repair of the vehicle exceeded 75% of IDV. Even under the BMW Secure, the same was the concept of the total loss. Therefore, BMW could be held liable under the BMW Secure when it was established that the insurer under the motor insurance policy had accepted the case of total loss or constructive total loss of the vehicle.

The bench observed that this was a case of constructive total loss of the vehicle. Therefore, the liability of BMW under the BMW Secure was to pay the actual difference between the Insured Declared Value (IDV) of the insured vehicle and the current ex-showroom price of a new vehicle of exactly the same make. If it was shown that such a vehicle was out of production, then the liability would be restricted to a maximum of 1% of IDV.

The bench noted that in BMW's reply to the complaint, there was no specific contention raised regarding the availability or non-availability of a similar car on the date of the accident. The bench further highlighted that BMW remained silent on crucial details within its special knowledge, and as a result, an adverse inference would be drawn against BMW. Consequently, the bench concluded that there was a deficiency in service rendered by both the insurer and BMW under Section 2(g) of the Consumer Protection Act, 1986. Therefore, the owner was held entitled to compensation from both of them.

Consequently, the owner was permitted to withdraw a sum of Rs.22,09,000 deposited by the insurer in this Court on 24th April 2023, along with interest accrued thereon.