Insurers cannot deny payout over vehicle’s route deviation: SC’s big ruling on motor accident claims explained

The Supreme Court

has delivered a significant ruling, stating that insurance companies cannot deny compensation to accident victims solely because the vehicle involved deviated from its permitted route or violated its permit conditions.

A bench of Justices Sanjay Karol and Prashant Kumar Mishra emphasised that, in the context of motor accidents, the insurance policy’s primary purpose is to shield the owner or operator from direct liability when an unfortunate incident occurs.

“To deny the victim/dependents of the victim compensation simply because the accident took place outside the bounds of the permit and, therefore, is outside the purview of the insurance policy, would be offensive to the sense of justice, for the accident itself is for no fault of his.

Then, the insurance company most certainly ought to pay,” the bench said.

What is the case?

The top court made this observation while dismissing appeals filed by both the vehicle owner and the insurer, The New India Insurance Company Limited.

The matter stemmed from a fatal accident on October 7, 2014, where a motorcyclist was killed instantly after being hit by a vehicle driven in a rash and negligent manner.

The Motor Accident Claims Tribunal (MACT) subsequently awarded compensation of ₹18.86 lakh plus interest.

While the vehicle owner challenged the award amount, the insurance company contested the order based on the vehicle’s violation of policy conditions (deviation from route/permit).

The Karnataka High Court ultimately directed the insurer to first pay the full compensation to the victim’s family, but granted the insurer the right to recover the paid amount from the vehicle owner afterwards.

Both the insurer and the owner appealed the high court’s order on the recovery clause, leading to the Supreme Court’s definitive judgment on the scope of insurance liability in cases of route deviation.

Insurance is for risk management, cause of fire immaterial: SC

In a separate ruling, the Supreme Court on Thursday, 30 October 2025, observed that fire insurance is a “strategic tool” for risk management, asset protection and economic resilience.

It held that the cause of the blaze is immaterial unless triggered by the insured, and such incidents are covered under the insurance policies.

The top court upheld the claim of the company Orion Conmerx Pvt.

Ltd against PSU National Insurance Co Ltd.

“This court is of the opinion that once it is established that the loss is due to fire and there is no allegation/finding of fraud or that the insured is the instigator of the fire, the cause of fire is immaterial and it will have to be assumed and presumed that the fire is accidental and falls within the ambit and scope of fire policy,” a bench comprising Justices Dipankar Datta and Manmohan said.

The SC ruled that the fire that damaged the company’s premises in September 2010 was accidental and covered under its fire insurance policies.

“This court is of the view that fire insurance is a strategic tool for risk management, asset protection and economic resilience.

Fire insurance policy does not prevent fire – but it cushions the financial impact when it occurs.

Keeping in view the importance of the concept of fire insurance, it is important to outline the principles governing the same,” Justice Manmohan, who authored the judgment, said.