Can a car insurance claim be rejected based on the driving licence? Know the truth...

If your vehicle is involved in an accident and the insurance company rejects the claim citing issues with the driving license, it does not automatically absolve the company of its liability. A similar situation arose in a recent ruling by the West Bengal State Consumer Disputes Redressal Commission. Dismissing the insurance company's appeal, the Commission ordered it to pay ₹3.5 lakh to the policyholder. Additionally, the company was directed to pay ₹1 lakh as compensation for mental agony.

This order was issued on July 8, 2026. In this case, HDFC General Insurance Company had rejected the policyholder's motor insurance claim. The company contended that the person driving the car at the time of the accident did not possess a valid driving license. The driver held a second license as well, which the company alleged was fake.

What was the case about?
The policyholder owned a Skoda New Laura Ambiente 1.8 TSI car, insured at an Insured Declared Value (IDV) of ₹6.95 lakh. The policy was valid from March 9, 2014, to March 9, 2015, with a premium payment of ₹11,233. The car met with an accident on October 12, 2014. It was taken to a Skoda service center, where the estimated repair cost was approximately ₹5.28 lakh. Subsequently, the policyholder filed a claim with the insurance company, but the company refused to settle it. It argued that the driver lacked a valid license and possessed a second license issued in Nagaland, citing this as a violation of Section 6 of the Motor Vehicles Act.

Possessing two licenses did not absolve the company of liability.
The Consumer Commission observed that while holding more than one driving license might constitute a violation of the Motor Vehicles Act—and could even attract legal penalties—the insurance company cannot reject the policyholder's claim solely on this ground. The Commission clarified that a driver's fault and a violation of the car owner's insurance policy terms are two separate issues. While legal action can be taken against a driver for violating rules, this does not automatically absolve the insurance company of its liability.

How much must the insurance company pay?
The Commission has ordered the insurance company to pay ₹3.5 lakh to the policyholder. Interest at the rate of 6% per annum is payable on this amount, calculated from September 7, 2016. If payment is not made within 45 days, the interest rate will increase to 9% per annum. Additionally, the policyholder will receive ₹1 lakh as compensation for mental agony. However, the Commission did not order the payment of the full IDV (Insured Declared Value) amount of ₹6.95 lakh claimed by the policyholder.

What is the takeaway for policyholders?
The key lesson from this verdict is that a motor insurance claim cannot be rejected solely because the driver's license was found to be fake or invalid. Car owners should certainly check the driver's license and ensure the driver is competent to operate the vehicle. At the same time, if an insurance company rejects a claim, the policyholder should carefully examine the rejection letter and the surveyor's report.

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