Valid MVA Permit Extends Insurance Cover Beyond India: Supreme Court

The Supreme Court has held that the existence of a valid permit under the Motor Vehicles Act extends insurance coverage beyond India's territorial limits, rejecting Oriental Insurance Company's claim that its policy covered only accidents within India.

A Bench of Justices Sanjay Karol and Nongmeikapam Kotiswar Singh dismissed the insurer's appeal and upheld the Chhattisgarh High Court's order directing it to pay Rs 32.67 lakh with interest to the family of Harish Yadav, who died in a 2010 bus accident in Nepal during a religious tour.

Can an insurer deny coverage for an accident outside India?

Court answered this in the negative, holding that an insurance policy must be read as a whole and not by relying on isolated clauses.

"Different clauses of the contract have to be read harmoniously and one cannot cherry pick one clause to base their claim on it, while rejecting other clauses of the document," the Bench said.

While the policy's "Geographical Area" clause mentioned India, its "Limitations as to Use" clause covered vehicles operating under a valid permit. Since the bus was travelling to Nepal under a special permit issued under the Motor Vehicles Act, the insurer could not deny coverage merely because the accident occurred outside India, Court held.

The Bench observed that if the insurer intended to exclude accidents outside India even where the vehicle had a valid permit, it should have said so expressly in the policy.

"The insurer ought to have expressly mentioned that their policy would not cover any area outside India even with a permit. Sloppy drafting could cost you (insurer) something," Court said.

Court further stressed that ambiguities in standard-form insurance contracts must be interpreted in favour of the insured.

It clarified that the outcome would have been different had the bus not possessed the permit required under the Motor Vehicles Act. In such a situation, the insurer could have relied on the policy to deny coverage outside India. However, since the permit specifically authorised travel to Nepal, the "Limitations as to Use" clause applied and extended coverage.

Driver's licence valid in Nepal too

Court also rejected the insurer's argument that the driver was not authorised to drive in Nepal.

It noted that the driver's Indian licence had been verified by Nepalese authorities at the border and was recognised under the 1950 Treaty of Peace and Friendship between India and Nepal. Therefore, the insurer could not avoid liability on that ground either.

Supreme Court asks IRDAI to standardise cross-border insurance clauses

The Bench also highlighted a larger issue affecting motor accident claims, observing that vague policy language often leaves ordinary policyholders at a disadvantage.

It advised the Insurance Regulatory and Development Authority of India (IRDAI) to issue a master circular standardising cross-border coverage clauses across all motor insurance policies.

According to the Court, insurance policies should clearly state whether they provide coverage outside India. If cross-border coverage is excluded, the exclusion must be explicit, and policyholders should be informed that they need to obtain a separate endorsement before travelling across international borders.

The Bench added that insurers should proactively communicate this requirement, much like travellers are advised to purchase separate health insurance while travelling abroad, since an average consumer may not be aware of such legal requirements.

Court criticises tribunal orders for lack of reasoning

The Supreme Court also expressed concern over the quality of orders passed by Motor Accident Claims Tribunals (MACT).

It observed that although the tribunal in the present case had extensively recorded the parties' submissions and evidence, it failed to adequately correlate them with the facts and explain how they influenced the final outcome.

"The tone tenor and extent of the orders passed by the concerned Tribunals has caused us considerable disturbance," the Bench said.

Court emphasised that tribunals dealing with accident and death compensation claims must provide clear and well-reasoned decisions. It added that better-reasoned orders, consistent with Supreme Court precedents, would help reduce unnecessary appeals and shorten the time taken to resolve motor accident compensation claims.

Case Title: The Oriental Insurance Company Ltd Vs Durg Roadways Private Limited & Ors

Bench: Justices Sanjay Karol and N Kotiswar Singh 

Date of Judgment: July 20, 2026