Supreme Court Clarifies “Under the Influence” in Insurance Claims: IFFCO Tokio vs. Pearl Beverages (2021)

Introduction

Date of the Judgment: 12 April 2021
Citation: [Not Available in Source]
Judges: Uday Umesh Lalit, Indira Banerjee, K.M. Joseph

What does it truly mean to be “under the influence” of alcohol when it comes to insurance claims? The Supreme Court of India recently tackled this crucial question in a case involving a damaged luxury car and a denied insurance claim. The core issue revolved around whether the insurance company could refuse to pay out because the driver of the vehicle was allegedly under the influence of alcohol at the time of the accident. This judgment clarifies what constitutes being “under the influence” within the context of insurance policies.

Case Background

The case involves an accident on 22 November 2007, where a Porsche belonging to Pearl Beverages Ltd. (the respondent) was completely damaged. The vehicle was insured with IFFCO Tokio General Insurance Company Ltd. (the appellant). The insurance company denied the claim, citing a clause in the insurance contract that excluded liability if the driver was under the influence of intoxicating liquor or drugs.

The accident occurred in the early morning hours around 2:25 AM. The car, driven by Mr. Aman Bangia, reportedly lost control, hit a footpath, an electric pole, and a wall, ultimately overturning and catching fire. A First Information Report (FIR) was filed, and a medico-legal case (MLC) was prepared, noting that the driver and the co-passenger had a smell of alcohol on their breath.

Timeline

Course of Proceedings

The State Consumer Disputes Redressal Commission initially rejected the respondent’s complaint, finding that the driver had consumed alcohol and was under its influence. However, the National Consumer Disputes Redressal Commission (NCDRC) overturned this decision, stating that there was no concrete evidence to prove the driver was “under the influence” as defined by the exclusion clause. The NCDRC emphasized that no medical test was conducted to ascertain the level of alcohol in the driver’s blood.

Legal Framework

The case hinges on the interpretation of Clause (2)(c) of the insurance contract, which states:

“(2)The Company shall not be liable to make any payment in respect of: (c) any accidental loss or damage suffered whilst the insured or any person driving the vehicle with the knowledge and consent of the insured is under the influence of intoxicating liquor or drugs.”

The Supreme Court also considered Section 185 of the Motor Vehicles Act, 1988, which defines the offense of driving under the influence of alcohol:

“185. Driving by a drunken person or by a person under the influence of drugs.—Whoever, while driving, or attempting to drive, a motor vehicle, — (a) has, in his blood, alcohol exceeding 30 mg. per 100 ml. of blood detected in a test by a breath analyser, or (b) is under the influence of a drug to such an extent as to be incapable of exercising proper control over the vehicle, shall be punishable…”

Arguments

Appellant’s Arguments (IFFCO Tokio):

• The appellant argued that the official records, including the FIR and MLC, established that the driver was under the influence of alcohol.
• The manner of the accident—high speed, hitting a pole, overturning, and catching fire—indicated reckless driving due to alcohol consumption.
• The appellant contended it was impossible for the insurer to prove the exact quantity of alcohol in the driver’s blood.
• The driver’s guilty plea under Section 279 of the Indian Penal Code (IPC) for rash and negligent driving, further supported the claim of influence of intoxicating liquor.

Respondent’s Arguments (Pearl Beverages):

• The respondent argued that the mere smell of alcohol does not prove that the driver was “under the influence.”
• They emphasized that no breathalyzer test or blood test was conducted to determine the alcohol level, which is required under Section 185 of the Motor Vehicles Act, 1988.
• The respondent contended that the conviction under Section 279 of the IPC was a result of plea bargaining and did not prove that the driver was under the influence of alcohol.
• The investigator had the opportunity to test the driver and failed to do so.

Issues Framed by the Supreme Court

The Supreme Court framed the following key issue:

1. Whether the NCDRC was correct in holding that the appellant (insurance company) was not entitled to invoke the shield of Clause (2c) of the Contract of Insurance, under which, it was not liable, if the person driving the vehicle, was under the influence of intoxicating liquor, or drugs?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered various authorities to interpret the term “under the influence of intoxicating liquor”.

Cases:

• Bachubhai Hassanalli Karyani v. State of Maharashtra, (1971) 3 SCC 930, Supreme Court of India: Discussed the degree of proof required in criminal vs. civil proceedings.
• V. Kishan Rao v. Nikhil Super Speciality Hospital and another, (2010) 5 SCC 513, Supreme Court of India: Addressed the applicability of the Evidence Act in consumer forums.
• Mair (Administratrix) v. Railway Passengers Assurance Co. (Limited), 1877 37 L.T. 356 DC, English Courts: Interpreted “under the influence” as disturbing the balance of mind.
• Louden v. British Merchants Insurance Company Limited, [1961] WLR 798 QB, English Courts: Reaffirmed the interpretation of “under the influence” as a disturbance of faculties.
• Kennedy v. Smith, 1975 S.C. 266; (1975) 6 WLUK 97, Inner Court of Session of Scotland: Held that mere consumption of alcohol does not automatically imply being “under the influence.”
• Webb v. Imperial Life Ins. Co., [Inc. 216 N.C. 10 (1939)], Supreme Court of North Carolina: Discussed that if the policy excludes liability if the insured had present in his body intoxicating liquor, it is not necessary to show that he was intoxicated or under the influence of intoxicating liquor.
• Heltsley v. Life & Casualty Ins. Co., [299 Ky. 396 t(1945)], Court of Appeal: Held that the provision that excludes liability if the insured had present in his body alcoholic or intoxicating liquors in any degree is not susceptible of double construction or of an interpretation that the extent or degree of intoxication is material.
• Standard Life & Acc. Ins. Co. v. Jones, 94 Ala. 434, Supreme Court of Alabama: Held that “under the influence of intoxicating drinks” has a legal significance, differing from the popular one, and implying such influence as in reality amounts to intoxication.
• State through PS Lodhi Colony v. Sanjeev Nanda, 2012 (8) SCC 450, Supreme Court of India: Discussed the use of breathalyzer tests and blood tests in drunken driving cases.
• Emperor vs. Rama Deoji, AIR 1928 BOM 231, Bombay High Court: Discussed the difference between being under the influence of liquor and being intoxicated.
• Syad Akbar v. State of Karnataka, (1980) 1 SCC 30, Supreme Court of India: Explained the principle of res ipsa loquitur.
• Shambu Nath Mehra v. State of Ajmer, AIR 1956 SC 404, Supreme Court of India: Discussed the burden of proof under Section 106 of the Evidence Act.
• Murlidhar and others v. State of Rajasthan, AIR 2005 SC 2345, Supreme Court of India: Discussed the burden of proof under Section 106 of the Evidence Act.
• Dr. J.J. Merchant (Dr) v. Shrinath Chaturvedi, (2002) 6 SCC 635, Supreme Court of India: Discussed the procedure for taking evidence in consumer cases.

Books and Articles:

• Modi’s Medical Jurisprudence and Toxicology, 26th Edition: Discussed the effects of alcohol on the human body and methods for calculating alcohol levels.
• Report to the Congress on ‘Driving under the influence and relating to alcohol limits’ by the Department of Transportation, National Highway Safety Administration, October, 1992: Discussed the effects of alcohol on driver performance and the relationship between BAC level and crashes.
• ‘The effects of low doses of alcohol on driving related skills, a review of the evidence’ by the U.S. Department of Transportation, July, 1998: Reviewed the effects of low doses of alcohol on driving-related skills.
• “Report of the Review of Drink and Drug Driving Law”, 2010, U.K.: Discussed the research findings on the effects of alcohol on driving and the proposal for lowering the blood alcohol limit.
• “Effect of Alcohol on Brain Development” by Farhin Patel and Palash Mandal: Discussed the absorption and effects of alcohol on the brain.
• “Police officers’ detection of breath odors from alcohol ingestion” by Herbert Moskowitz, Marcelline Burns and Susan Ferguson: Discussed the detectability of breath alcohol odor.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Bachubhai Hassanalli Karyani v. State of Maharashtra, (1971) 3 SCC 930, Supreme Court of India: The Court distinguished this case, noting that it was decided under a different provision of the Motor Vehicles Act, 1939.
• V. Kishan Rao v. Nikhil Super Speciality Hospital and another, (2010) 5 SCC 513, Supreme Court of India: The Court agreed that the Evidence Act does not strictly apply to consumer forums, but the principles of evidence, like Section 106 of the Evidence Act, can be applied.
• Mair (Administratrix) v. Railway Passengers Assurance Co. (Limited), 1877 37 L.T. 356 DC, English Courts: The Court adopted this interpretation, stating that “under the influence” means a disturbance of the mind’s balance due to alcohol.
• Louden v. British Merchants Insurance Company Limited, [1961] WLR 798 QB, English Courts: The Court reaffirmed that “under the influence” connotes a disturbance of the faculties.
• Kennedy v. Smith, 1975 S.C. 266; (1975) 6 WLUK 97, Inner Court of Session of Scotland: The Court noted the case, but distinguished it from the present case based on the facts.
• Webb v. Imperial Life Ins. Co., [Inc. 216 N.C. 10 (1939)], Supreme Court of North Carolina: The Court noted this case to show that in the United States, the insurance clause can be based on the mere presence of alcohol in the body.
• Heltsley v. Life & Casualty Ins. Co., [299 Ky. 396 t(1945)], Court of Appeal: The Court noted this case to show that in the United States, the insurance clause can be based on the mere presence of alcohol in the body.
• Standard Life & Acc. Ins. Co. v. Jones, 94 Ala. 434, Supreme Court of Alabama: The Court noted this case to show that in the United States, the insurance clause can be based on the mere presence of alcohol in the body.
• State through PS Lodhi Colony v. Sanjeev Nanda, 2012 (8) SCC 450, Supreme Court of India: The Court distinguished this case, noting that the accused escaped from the scene of the accident and hence, the breath analyser test could not be conducted.
• Emperor vs. Rama Deoji, AIR 1928 BOM 231, Bombay High Court: The Court noted this case to show that the word “intoxicated” corresponds with the word “drunk”.
• Syad Akbar v. State of Karnataka, (1980) 1 SCC 30, Supreme Court of India: The Court held that the principle of res ipsa loquitur is inapplicable in the present case.
• Shambu Nath Mehra v. State of Ajmer, AIR 1956 SC 404, Supreme Court of India: The Court applied the principle of Section 106 of the Evidence Act, which places the burden of proving facts within the special knowledge of a person.
• Murlidhar and others v. State of Rajasthan, AIR 2005 SC 2345, Supreme Court of India: The Court applied the principle of Section 106 of the Evidence Act, which places the burden of proving facts within the special knowledge of a person.
• Dr. J.J. Merchant (Dr) v. Shrinath Chaturvedi, (2002) 6 SCC 635, Supreme Court of India: The Court noted that in consumer cases, cross-examination can be done through interrogatories.

What Weighed in the Mind of the Court?

The Supreme Court’s decision was influenced by several factors, primarily focusing on the interpretation of the phrase “under the influence of intoxicating liquor” in the insurance contract. The Court emphasized that:

• The term “under the influence” does not require proof of a specific blood alcohol level, as required under Section 185 of the Motor Vehicles Act, 1988.
• It is sufficient to show that the driver’s faculties were disturbed due to alcohol consumption, leading to impaired driving.
• The manner of the accident, combined with the smell of alcohol and the driver’s lack of explanation, strongly indicated that the driver was under the influence of alcohol.

Logical Reasoning:

The Court rejected the argument that a specific blood alcohol level is required to prove a driver was under the influence of alcohol. Instead, it focused on the totality of the circumstances, including the manner of the accident, the smell of alcohol, and the driver’s lack of explanation for the accident.

The Court also rejected the argument that the insurer was required to prove the exact quantity of alcohol in the driver’s blood. The Court reasoned that the insurer only needed to prove that the driver was under the influence of alcohol, which could be inferred from the circumstances of the accident and the evidence available.

The Court emphasized that the exclusion clause in the insurance contract must be interpreted in a way that is consistent with its purpose, which is to exclude liability when the insured’s actions contribute to the loss. In this case, the Court found that the driver’s consumption of alcohol had contributed to the accident.

“…it must be shown that in the facts and circumstances of each case that the consumption of liquor had, if not caused the accident, which undoubtedly would bring the accident within t he mischief of the clause but at least contributed in a perceptible way to the causing of the accident.”

“To be under the influence of alcohol, in other words, must be understood as, a question going to the facts and a matter to be decided with reference to the impact of consumption of alcohol on the particular driver.”

“If in a case, without there being any blood test, circumstances, associated with effects of consumption of alcohol, are proved, it may certainly go to show that the person who drove the vehicle, had come under the influence of alcohol.”

Key Takeaways

• Insurance companies can deny claims if the driver was under the influence of alcohol, even if a specific blood alcohol level is not proven.
• The term “under the influence” means that the driver’s faculties were disturbed due to alcohol consumption, leading to impaired driving.
• The circumstances of the accident, the smell of alcohol, and the driver’s conduct can be used as evidence to prove that the driver was under the influence of alcohol.
• Policyholders must be aware of the exclusion clauses in their insurance contracts and avoid driving under the influence of alcohol.

Directions

The Supreme Court set aside the order of the NCDRC and allowed the appeal of the insurance company. The Court did not give any specific directions, other than setting aside the order of the NCDRC.

Development of Law

The Supreme Court clarified that the term “under the influence of intoxicating liquor” in insurance contracts does not require the same level of proof as the criminal offense of drunken driving under Section 185 of the Motor Vehicles Act, 1988. The Court held that the term should be interpreted in a practical sense, focusing on whether the driver’s faculties were impaired due to alcohol consumption. This judgment provides a more flexible approach for insurance companies to deny claims when the driver’s actions were influenced by alcohol, even in the absence of a specific blood alcohol test.

Conclusion

The Supreme Court’s judgment in IFFCO Tokio General Insurance Company Ltd. vs. Pearl Beverages Ltd. clarifies the interpretation of “under the influence of intoxicating liquor” in insurance contracts. The Court held that the term does not require a specific blood alcohol level to be proven, but rather, it focuses on whether the driver’s faculties were impaired due to alcohol consumption, leading to impaired driving. This ruling allows insurance companies to deny claims based on circumstantial evidence, such as the manner of the accident, the smell of alcohol, and the driver’s conduct, even without a specific blood alcohol test. This judgment has significant implications for both insurance policyholders and companies.