Motor Accident Claim: SC Says Future Prospects can’t be denied if deceased was Self-Employed

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February 09, 2018

Case name: Reliance General Insurance Co. Limited v. Shalu Sharma & Ors.

Date of Judgment: February 02, 2018

In this recent case, the Supreme Court has reiterated the legal proposition governing Motor Vehicle accident claims that even if the deceased was self-employed, future prospects could not be denied to him.

Also read Accident Claims – How to get compensation under Motor Vehicles Act

Brief Facts of the case: In the instant case, the appellant Insurance Company challenged the High Court’s order. In the case one Narinder Sharma died in an accident and the accident involved a motor vehicle which was insured against third party risks by the appellant Insurance Company. The dependents filed a claim for compensation before the MACT (Motor Accidents Claim Tribunal). The Tribunal held that the accident was caused due to the negligence of the driver of the offending vehicle and accordingly compensation was awarded and the Tribunal factored in a component of 30 per cent towards the loss of future prospects in assessing the compensation.

In appeal in High Court, the only concern sparked by the Appellant Insurance Company was with regard to the award of future prospects to the extent of 30 per cent. In the case, the deceased was self-employed and was 42 years old on the date of the accident. According to the appellant, the increase in his gross total income as shown in the income tax returns for 2010-11, 2011-12 and 2012-13 would not justify the award of future prospects, to the extent of 30%. The High Court negatived the submission of the insurer and held that having due regard to the progressive increase in the income of the deceased, the award of future prospects by the Tribunal could not be faulted.

Also read Motor Vehicle Act, 1988 – SC issues guidelines on Assessment of Compensation

Bench’s Verdict

In appeal the Supreme Court relying on its recent judgment in the case of National Insurance Company Limited v. Pranay Sethi held that the deceased was self-employed and in such a case, future prospects could not be denied and the compensation must be in accordance with the following principles wherein the deceased was self-employed or on a fixed salary:

  • Below age of 40 years- an addition of 40% of the established income
  • Between the age of 40 to 50 years- an addition of 25% of the established income
  • Between the age of 50 to 60 years- an addition of 10% of the established income

The established income means the income minus the tax component.

In view of the aforesaid, with reference to the instant case, the Supreme Court held that as the deceased was 42 years of age, an addition of 25% on the ground of future prospects would be warranted instead of 30% computed by the Tribunal.

Also read Landmark Judgments on Motor Vehicle Act in 2017