Kerala High Court sets a clear threshold: Insurer must prove impairment and causal nexus to invoke “under the influence” exclusion in Group Personal Accident policies

Introduction

In National Insurance Co. Ltd. v. State of Kerala (2025 KER 52824), the Division Bench of the Kerala High Court (Sushrut Arvind Dharmadhikari, J. and Syam Kumar V.M., J.) dismissed a writ appeal filed by the insurer against an Insurance Ombudsman award, thereby affirming a principled approach to exclusion clauses in personal accident insurance. The judgment addresses a recurring controversy: whether a positive blood alcohol content (BAC) report is, by itself, sufficient for an insurer to deny coverage under an exclusion for accidents occurring “whilst under the influence of intoxicating liquor or drugs.”

The case arose out of a Group Personal Accident (GPA) policy covering government employees and teachers. Following the death of a government employee (a Lascar in the Irrigation Department) in a road accident, the insurer repudiated the claim citing the “under the influence” exclusion. The Insurance Ombudsman directed payment of the sum insured (Rs. 7,00,000); a learned Single Judge declined to interfere; and the Division Bench has now affirmed that result.

The central issues were:

• How should the exclusion “whilst under the influence of intoxicating liquor or drugs” be construed under a GPA policy?
• What is the insurer’s evidentiary burden to establish the exclusion?
• Does a chemical analysis report showing high BAC alone suffice to trigger the exclusion?
• What is the relevance of Section 185 of the Motor Vehicles Act, 1988 (drunken driving) to insurance exclusions?

Summary of the Judgment

The Division Bench dismissed the writ appeal and upheld the Ombudsman’s award and the Single Judge’s judgment. It held that:

• The insurer bears the onus to prove that the insured was “under the influence” of alcohol in the legal sense—i.e., that consumption resulted in actual impairment of faculties.
• Mere presence of alcohol in the blood, even at a high level reflected in a chemical analysis report, is not enough to trigger the exclusion.
• The policy phrase “whilst under the influence of intoxicating liquor” requires factual proof of impairment and, significantly, that the incident happened due to such intoxication.
• Reliance on Section 185 of the Motor Vehicles Act (which sets a penal threshold for drunken driving) is insufficient to establish the insurance exclusion, which must be proved on the policy’s own terms.

Consequently, the insurer’s repudiation failed; the appeal was dismissed without costs.

Factual Background

• The deceased, a government employee covered under a GPA policy issued by National Insurance Company Ltd., died on 19.05.2009 following a collision between his motorcycle and a tourist bus.
• The insurer repudiated the claim based on the policy exclusion for death/disablement “whilst under the influence of intoxicating liquor or drugs,” relying principally on a chemical analysis report showing ethyl alcohol at 154.79 mg/100 ml of blood.
• The Insurance Ombudsman (Kochi) allowed the complaint (03.01.2012) and directed payment of Rs. 7,00,000 to the nominee/widow.
• The insurer’s writ petition was dismissed by the learned Single Judge (14.10.2022). The present writ appeal (WA No. 476 of 2023) was heard and dismissed by the Division Bench on 17.07.2025.

The Policy Clause at the Heart of the Dispute

The exclusion provided that the company shall not be liable for “Payment of compensation in respect of Death or Disablement of the insured person … (b) Whilst under the influence of intoxicating liquor or drugs.”

The Memorandum of Understanding between the State and the insurer contained a corresponding clause.

Detailed Analysis

1. Precedents Cited and Their Role

• Iffco Tokio General Insurance Co. Ltd. v. Pearl Beverages Ltd. (2021) 7 SCC 704:
  The appellant itself relied on this Supreme Court decision to argue that to invoke an “under the influence” exclusion, the insurer must show that consumption of liquor either caused the incident or at least contributed to it in a perceptible way. This precedent therefore emphasizes a causal nexus between intoxication and the incident, not mere contemporaneous consumption. The Division Bench’s reasoning is consistent with this principle: it demanded proof of impairment and that the incident “happened due to intoxication.”
• General Assurance Society Ltd. v. Chandmull Jain (AIR 1966 SC 1644):
  A classic statement that courts must interpret insurance contracts according to the words used and cannot re-write the bargain. The appellant invoked this to insist on strict construction of the exclusion. The Division Bench’s approach remains faithful to Chandmull Jain; it reads “under the influence” by its natural meaning—requiring proof of impairment, not the mere biochemical presence of alcohol—while simultaneously reminding that exclusions must be established by the party asserting them.
• Babu K. v. Union Of India (2017 (4) KHC 137):
  Relied upon by the State, this decision clarifies that “intoxication” does not equate to mere consumption. There must be a qualitative effect—impairment of faculties—to constitute “intoxication.” The Division Bench aligns with this understanding in rejecting BAC-as-sufficient-proof.
• Sreedevi M. v. State of Kerala (2024 KHC OnLine 108) and National Insurance Co. Ltd. v. State of Kerala (2024 KHC OnLine 667):
  Cited by the insurer to bolster its position. The Division Bench, however, found those authorities inapplicable on the facts and language of the policy at hand, and emphasized the absence of evidence proving impairment and causal contribution.

2. Legal Reasoning Adopted by the Court

1. Onus of proof squarely on the insurer:
   The court emphasizes that an insurer seeking to avoid liability under an exclusion must prove the factual conditions that trigger the exclusion. Here, that meant proving the insured was “under the influence” rather than merely that alcohol was present in his bloodstream.
2. Meaning of “under the influence” requires impairment:
   The Bench interprets “under the influence” in its ordinary legal sense: the consumption must have impaired the insured’s faculties. A lab report quantifying BAC is insufficient without evidence that the insured’s mental/physical capacities were affected. The judgment expressly notes that intoxication “has to be proved unequivocally.”
3. Causal connection is necessary:
   Crucially, the Bench states that “it has to be proved … that the insured was intoxicated and that the incident happened due to intoxication.” This reads the exclusion as requiring not just impairment existing at the time but a causative or perceptible contribution to the accident—harmonizing with the Supreme Court’s formulation in Iffco Tokio v. Pearl Beverages.
4. Chemical analysis report is not conclusive on exclusion:
   The court rejects sole reliance on the chemical analysis report (Ext. P5). While it may show alcohol content, it does not, by itself, demonstrate impairment or causation. The insurer needed additional evidence “through a process known to law”—for example, witness testimony, medical records showing clinical signs of intoxication, accident reconstruction showing impaired control, or other corroborative circumstances.
5. Section 185 of the Motor Vehicles Act is not determinative for insurance exclusions:
   The insurer invoked Section 185 (drunken driving) and argued that the BAC was far above the statutory threshold. The Bench held that reliance on Section 185 may have penal consequences under the MV Act, but it does not ipso facto prove the policy exclusion. Insurance liability turns on the contract’s wording and the evidence satisfying those terms—particularly proof of impairment and causal link.
6. No basis to interfere with the Ombudsman or Single Judge:
   The Bench found no perversity or illegality. It affirmed the Single Judge’s conclusion that evidence beyond the BAC report was lacking and that the exclusion had not been made out.

3. What the Decision Does Not Decide

• The insurer had also contended that the Ombudsman lacked power to award interest. The Division Bench’s dismissal of the appeal was on the merits of the repudiation; it did not specifically pronounce on the Ombudsman’s power to award interest. Practitioners should therefore treat the interest-power issue as not conclusively addressed in this judgment.

4. Impact and Practical Implications

This decision has significant implications for accident insurance claims, especially under Group Personal Accident policies covering public servants and teachers in Kerala, and by persuasive force, more broadly.

• Narrow construction of exclusions reaffirmed:
  Exclusion clauses must be strictly proved by insurers. The phrase “under the influence” cannot be reduced to a biochemical threshold. Proof of real-world impairment and causal nexus is required.
• Evidentiary expectations for insurers:
  Insurers should not rely solely on laboratory reports. They should, wherever feasible, gather:
  • Clinical observations (e.g., treating doctor’s notes indicating slurred speech, loss of coordination, altered sensorium).
  • Witness statements about erratic driving or behavior.
  • Accident reconstruction evidence linking impairment to loss of control.
  • Chain of custody and procedural compliance regarding sample collection and analysis, to prevent evidentiary challenges.
• Distinction from MV Act enforcement:
  A statutory offense under Section 185 cannot be automatically transposed into an insurance exclusion. Policy liability must be determined by contractual language and proof meeting civil standards relevant to that language.
• Drafting implications for insurers:
  If insurers intend to exclude cover based on measurable BAC alone (regardless of impairment or causation), policy wording would need to be explicit (for instance, excluding liability when BAC exceeds a specified threshold). The present decision underscores that a generic “under the influence” formulation implies impairment and a causal contribution requirement.
• Strengthening of Ombudsman awards:
  The Court’s refusal to interfere lends weight to Ombudsman determinations applying a strict standard to exclusions. Claimants can cite this decision to resist repudiations based solely on BAC.
• Personal Accident vs. Motor Third-Party Regimes:
  The insurer’s argument that negligence concepts are “alien” to a personal accident policy was implicitly answered: while negligence per se need not be proven, the insurer must still demonstrate impairment and a causative contribution to the incident to attract the exclusion.

Complex Concepts Simplified

• Exclusion clause:
  A provision in an insurance policy stating circumstances in which the insurer will not pay. Because they limit coverage, courts construe them strictly against the insurer who drafted the policy.
• “Under the influence”:
  More than consumption; it denotes impairment of physical or mental faculties due to alcohol/drugs sufficient to affect behavior or performance—here, driving or road use. It carries a qualitative element, not just a quantitative one.
• Burden of proof:
  The insurer, seeking to avoid liability via an exclusion, must prove the facts that bring the case within the exclusion. Mere assertions or isolated lab metrics are insufficient without corroboration of the policy-triggering condition(s).
• Causal nexus:
  A link between the impairment and the incident. The court requires that intoxication must have contributed in a perceptible way to the accident, not merely co-existed in time.
• Section 185, Motor Vehicles Act:
  A penal provision for drunken driving with a statutory BAC limit. Violation may entail criminal/penal consequences but does not automatically dictate outcomes under private insurance contracts unless the policy explicitly makes that statutory threshold the trigger.
• Insurance Ombudsman:
  A statutory alternative grievance redressal forum for insurance disputes. Its awards, though amenable to judicial review, are treated with deference in the absence of perversity or legal error.
• Writ Petition and Writ Appeal:
  A writ petition challenges administrative or quasi-judicial actions in the High Court. A writ appeal lies to a Division Bench against certain Single Judge decisions. Here, the Division Bench affirmed the Single Judge and the Ombudsman.

How the Court Addressed the Parties’ Principal Contentions

• Insurer’s case:
  It argued for strict enforcement of policy terms and claimed that a high BAC sufficed to establish the exclusion; it also invoked Section 185 MV Act. The Court accepted the need for strict construction but clarified that strictness cuts both ways: the insurer must strictly prove “under the influence,” which entails impairment and causal contribution, not merely BAC.
• State’s (and Ombudsman’s) position:
  They maintained that mere consumption is not intoxication and that the insurer failed to discharge the burden of proving impairment. The Court agreed, pointing to the absence of evidence beyond the chemical analysis report.

Key Takeaways (Operative Rule of Law)

• Exclusion clauses must be strictly proved by the insurer; ambiguities or evidentiary gaps favor coverage.
• “Under the influence” means demonstrable impairment of faculties; BAC alone is insufficient.
• There must be a perceptible causal contribution of intoxication to the accident for the exclusion to apply.
• Section 185 MV Act thresholds cannot be mechanically imported into insurance exclusions unless the policy expressly says so.

Conclusion

The Kerala High Court’s decision in National Insurance Co. Ltd. v. State of Kerala crystallizes an important principle in personal accident insurance law: the “under the influence” exclusion is not triggered by chemistry alone. It demands proof—through admissible and cogent evidence—that the insured’s faculties were impaired and that intoxication contributed to the incident.

By rejecting a simplistic BAC-based approach and distinguishing penal thresholds under the Motor Vehicles Act from contractual exclusions, the Court ensures that policyholders are not denied coverage in the absence of a real causal link between intoxication and the accident. For insurers, the decision maps out a clear evidentiary pathway (and higher burden) if they seek to rely on the exclusion; for insureds and the Ombudsman, it provides a robust jurisprudential anchor to resist repudiations predicated solely on laboratory readings.

In sum, the judgment enhances doctrinal clarity, fairness in claims handling, and fidelity to the language of insurance contracts, while harmonizing Kerala’s approach with broader Supreme Court guidance on causation in “under the influence” exclusions.