Supreme Court Partially Allows Compensation in Luxury Car Insurance Dispute

The Supreme Court of India recently ruled in Bajaj Allianz General Insurance Co. Ltd. vs. Mukul Aggarwal & Ors., addressing a decade-long insurance dispute concerning the claim for a luxury BMW car. The Court modified the relief granted by the consumer commissions, holding that while the insurance company and BMW India Pvt. Ltd. were liable for compensation, the claimants were not entitled to an outright replacement of the damaged vehicle.

Background of the Case

The case arose from an insurance claim made by Mukul Aggarwal after his BMW 3 Series 320D car suffered irreparable damage in an accident near DLF Square, Gurgaon, on July 29, 2012. The vehicle was completely wrecked, and the owner sought compensation under two policies:

A standard motor insurance policy issued by Bajaj Allianz General Insurance Co. Ltd. with an Insured Declared Value (IDV) of ₹29,46,278.
A supplementary policy called BMW Secure Advance issued by BMW India Pvt. Ltd., which was marketed as offering full replacement of the car in the event of a total loss.

Following the accident, the owner filed a claim for the replacement of his damaged car. The insurance company, however, rejected the claim citing late intimation, discrepancies in accident details, and alleged suppression of material facts.

Consumer Commission Rulings

The State Consumer Disputes Redressal Commission, Delhi, ruled in favor of the complainant, directing Bajaj Allianz and BMW India to replace the damaged car with a new one or pay its replacement value. The National Consumer Disputes Redressal Commission upheld this ruling, leading to appeals by the insurance company and BMW India before the Supreme Court.

Arguments by the Petitioners (Bajaj Allianz & BMW India)

The insurance company and BMW India contended:

The insurance policy did not guarantee outright vehicle replacement but only covered the IDV minus the salvage value.
The insured failed to notify the company immediately after the accident, in violation of policy terms.
Bloodstains found in the vehicle and beer bottles raised concerns of non-disclosure of material facts.
The BMW Secure Advance policy only provided coverage for the difference between the IDV and the new car price, not a full replacement.

Arguments by the Respondent (Mukul Aggarwal)

The respondent countered these claims, arguing:

There was no unreasonable delay in reporting the accident, as he had promptly informed the authorities and the dealership.
The insurer had already accepted the claim, as evidenced by the surveyor’s report confirming a total loss.
BMW Secure Advance was marketed as a policy that ensured full replacement of a wrecked vehicle.
He had suffered undue financial and mental distress due to the wrongful rejection of the claim.

Supreme Court’s Observations

The Supreme Court reviewed the policy terms, the survey reports, and the justifications provided by the consumer commissions. Key observations included:

On the Insurance Policy Terms:
- The policy granted the insurer the option to either repair, reinstate, or pay the IDV minus salvage value. There was no absolute right to a vehicle replacement.
- The insurer’s obligation was limited to compensating the loss in accordance with the IDV.
On the BMW Secure Advance Policy:
- The policy covered the difference between the IDV and the new vehicle’s ex-showroom price, not an outright replacement.
- BMW India failed to prove that an exact model replacement was unavailable, warranting an adverse inference.
On the Delay and Allegations of Suppression:
- The accident had been documented in official records, and there was no intentional concealment by the insured.
- The insurer’s reliance on minor discrepancies was not sufficient to reject the claim entirely.

Key Excerpt from the Judgment

“The direction of the consumer commission to replace the car cannot be sustained. However, the insurer and BMW India Pvt. Ltd. are liable to compensate the insured in accordance with the policy terms.”

The Court emphasized that while the rejection of the claim was not justified, the relief granted by the consumer commissions was beyond the scope of the policy.

Final Judgment and Directions

The Supreme Court ruled:

The appeals were partially allowed. The order to replace the vehicle was set aside.
Bajaj Allianz was directed to pay ₹25,83,012 to the insured, covering the total loss under the standard motor insurance policy.
BMW India was directed to pay ₹7,00,000, representing the difference between the IDV and the new car price.
Both amounts were to be paid with 6% interest per annum from the date of the claim filing.
The total amount awarded was adjusted against sums already deposited by the companies in lower courts.

This ruling reinforces the principle that insurance claims must be honored as per the policy terms, without exaggerated expectations of coverage beyond contractual obligations.

Petitioner Name: Bajaj Allianz General Insurance Co. Ltd. & BMW India Pvt. Ltd..
Respondent Name: Mukul Aggarwal & Ors..
Judgment By: Justice Abhay S. Oka, Justice Rajesh Bindal.
Place Of Incident: Gurgaon, Haryana.
Judgment Date: 20-11-2023.

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