×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Renting out your car bought for private use is breach of contract

Renting out your car bought for private use is breach of contract
Comment E-mail Print Share
First Published: Sun, Mar 28 2010. 09 27 PM IST

Updated: Sun, Mar 28 2010. 09 27 PM IST
If you bought your car for private use, but hired it out later, you may not be eligible for a claim on your car insurance policy in case it meets with an accident while being driven by a third person.
The fine print in car insurance policies clearly mentions that a claim on your vehicle will be entertained only if the vehicle is in private use. If the vehicle is hired out to a third person or is used to cart goods in connection to trade or any business or is used for speed racing, the insurer is well within his rights to deny the claim.
Says N.K. Singh, general manager, Oriental Insurance Co. Ltd: “Motor insurance policies are priced according to their risk category and usage. So, a vehicle that is used for private use will have a lower premium than that of a vehicle meant for commercial use since the risk in the latter case is higher. To give a car on hire means that it is not used for private purposes and, hence, there has been a breach of contract. The contract becomes null and void under such circumstances.”
However, the Supreme Court, in a recent ruling, doled out some relief to a petitioner accused of breaching the contract, terming it a minor breach under the non-standard settlement clause.
While the state and the national consumer forums ruled in favour of the insurer, the Supreme Court has asked the insurer to settle the claim on a non-standard basis. A non-standard or substandard means a breach in contract that is not major and does not amount to a material loss.
Oriental Insurance has been directed not to refuse the claim entirely, but pay Rs2.5 lakh against the total claim of Rs5 lakh, after charging a penalty from the policyholder. The penalty is, typically, charged in the form of reduced claim amount.
Amalendu Sahoo’s car met with an accident while being driven by an employee of the Union Bank of India (UBI) and he was denied insurance claim by Oriental Insurance.
Sahoo’s plea was that he had rented out his property to UBI’s regional office and had given the car to a bank employee for some urgent work and had not charged any fee for the services of the car.
The insurer, on its part, said that it denied the claim on the grounds that the car was given on hire to a third party and, hence, there was a breach of contract.
deepti.bh@livemint.com
Comment E-mail Print Share
First Published: Sun, Mar 28 2010. 09 27 PM IST