Private car used for ride-hailing: own damage and third-party claim fallout

Yes, the insurer has strong grounds to repudiate the own damage claim. A private car policy covers use for social, domestic and pleasure purposes and the insured's own business, not use for hire or reward. Carrying a fare-paying passenger through a ride-hailing app is commercial use and materially increases the risk. The policy also requires the vehicle to be driven by a person holding a valid driving licence; a learner's licence without a supervisor is a breach of the licence condition. For own damage, the insurer is not bound to pay where the insured or authorised driver has breached a condition going to the root of the contract. Kavita's lack of knowledge may be relevant to her good faith, but she lent the vehicle and is responsible for its permitted use. The insurer should still examine whether the policy had any endorsement permitting hire use, and whether the licence breach was causally connected to the accident; on these facts both breaches are substantial. Repudiation of own damage is therefore defensible.

Not altogether. Under Section 149 of the Motor Vehicles Act, 1988, a policy of insurance covering third-party risk must be issued, and the insurer is obliged to satisfy judgments obtained against the insured in respect of third-party injury or death, notwithstanding certain breaches. If the vehicle was used for hire or reward without a permit or contrary to the policy, or was driven by a person without a valid licence, the insurer may be entitled to avoid or cancel the policy as against the insured, but the statute protects the injured third party. The usual judicial approach is that the insurer must pay the award to the third party and then recover the amount from the insured or the person in breach. The insurer can raise the breach in defence, but it cannot leave the pillion rider unpaid merely because Kavita's cousin used a private car for ride-hailing. The insurer should pay the third-party award, preserve its right of recovery, and issue notice to the insured and driver. The ₹4 lakh claim will be assessed by the Motor Accident Claims Tribunal, not settled solely by the insurer's repudiation letter.

The agent should advise Kavita to cooperate with the insurer and the tribunal, disclose the FIR and the ride-hailing use, and not to sign a blank discharge. She should preserve the policy, licence, RC and repair estimate, and obtain the insurer's written repudiation so that the grounds are clear. For the third-party claim, she should inform the insurer immediately and attend the tribunal proceedings, because the insurer may pay and recover from her. For own damage, she should not expect full payment unless the insurer accepts that the hire use was unauthorised and not material, which is unlikely. Before lending, she should have checked that the borrower held a full licence, that the use remained private, and that any ride-hailing activity required a commercial vehicle permit and a commercial policy. If regular app-based use was intended, she needed a commercial vehicle policy and the correct permit, not a private car package policy. The agent should also record the advice in writing.