ISLAMABAD: The Supreme Court of Pakistan dismissed the appeal of an insurance company against the Peshawar High Court (PHC)’s verdict on pay compensation.
A two-judge bench comprising Justice Mansoor Ali Shah and Justice Munib Akhtar heard the appeal of the Universal Insurance Company.
According to the appellant, which had insured a car damaged considerably in an accident, in such a way such that it became a “total loss”.
The appellant sold off what it called, in technical term the “salvage” to a person named Karim Gul (respondent) for Rs130,000.
The respondent expended a substantial amount (Rs470,000) to repair the car and bring it into usable condition.
However, when he went to have its registration with the motor vehicle authority to transfer the car to his name, he was told that already another vehicle was registered with the same number and that the documents produced by him were not genuine.
The respondent was therefore unable to use the repaired vehicle. He filed a suit in the civil courts at Peshawar claiming damages in the sum of Rs10,00000.
The trial court on 30.04.2011 decreed the suit in his favour. The insurance company filed an appeal against the trial court order. The appellate court on 17.11.2012 dismissed the suit. The respondent filed a revision in the PHC, which on 25.03.2019 set aside the appellate court’s decision and restoring the decree.
The appellant challenged the PHC verdict before the Supreme Court.
His counsel submitted before the apex court that the vehicle had, as agreed between the parties, been sold off as a “total loss” and it therefore had no liability to the contesting respondent. It was entirely his own matter as to what he did, or could do, with the wreckage, and if he was unable to achieve his desired objective the consequences fell entirely on him.
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The lawyer for respondent on the other hand argued that the appellant was fully liable to his client. He prayed to dismiss the appeal.
The judgment noted that in the insurance business the thing insured can be declared to be a “total loss” in two different senses. One is of it being an “actual total loss”. The other is “constructive total loss”. This is the situation where the repair cost of the damaged insured property exceeds its market value, if the repairs were undertaken.
The Court said that in the contract, signed between the parties, the words “total loss” ought not to be construed in the sense of “actual total loss”, which would reduce that what was sold to mere wreckage. They should be taken to have the other technical meaning, i.e., “constructive total loss”.
The judgment said the car in question retained its character as such, and did not cease to be a thing of the kind that had been insured. It observed what was sold was not mere wreckage, which was no longer a car in any meaningful sense. Rather, it was a car, howsoever badly damaged it may have been and notwithstanding that the cost of the repairs may have exceeded the market value of the vehicle when repaired.
The Court said if what was sold was a car then the respondent had an enforceable expectation that he would be able to use it as such in a lawful manner, i.e., to have it registered in his own name. He was unable to do so and thus, clearly suffered loss. The burden of that loss must fall on the appellant. The apex court upheld the PHC verdict and dismissed the insurance company’s appeal.
Copyright Business Recorder, 2021
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