While compensation under the Motor Vehicles Act is a statutory entitlement, a Mediclaim payout is a contractual benefit earned by paying insurance premiums.
Court further noted that the guiding principles behind Mediclaim and compensation under the Motor Vehicles Act are fundamentally different.
Under a Mediclaim policy, the insurer's liability is limited to the insured amount.
In contrast, compensation under the Motor Vehicles Act is governed by the principle of "just and fair compensation" and does not have a fixed monetary ceiling.
To equate these two amounts would either pull down the MVA or unnecessarily elevate the Mediclaim policy," the Bench said.
The Supreme Court has held that the amount received by a victim under a Mediclaim or medical insurance policy cannot be deducted from the compensation awarded by the Motor Accident Claims Tribunal (MACT), even if the claim includes medical expenses.
A Bench of Justices Sanjay Karol and Vipul M Pancholi said the compensation awarded under the Motor Vehicles Act and the amount received under a Mediclaim policy arise from two different sources. While compensation under the Motor Vehicles Act is a statutory entitlement, a Mediclaim payout is a contractual benefit earned by paying insurance premiums. Therefore, the two cannot be treated as a "double benefit".
However, Court clarified that there cannot be duplication of compensation for the same head of loss.
"A claimant cannot recover compensation twice for the same injury or loss, as that would amount to unjust enrichment. The unquestionable position is that compensation must be 'just compensation' which is meant to fairly make good the loss suffered, not to create a windfall," the Bench said.
It added that where two payments compensate for the very same loss in a motor accident claim, one of them should ordinarily be adjusted or deducted.
When can a payment be deducted from MACT compensation?
Court said the answer depends on the source and nature of the benefit. The key question is whether the payment substitutes the same loss or whether it is an independent entitlement.
If the payment is an independent benefit, it cannot be deducted. For example, employment-related benefits such as provident fund, gratuity and pension arise from the contract of employment and represent deferred earnings or accrued rights. Therefore, they are not deductible.
On the other hand, Court said that statutory compensation or ex gratia payment received from the State on account of a person's death may be deducted from compensation awarded under the Motor Vehicles Act, as both compensate for the same loss.
Why is a Mediclaim policy different from MACT compensation?
Explaining the distinction, Court said a Mediclaim policy is voluntarily purchased by a person to prepare for life's uncertainties and rising medical expenses.
"The human body is a coming together of intricate systems where there is always a possibility that something may go wrong or may need mending. In today's time when medical expenses are skyrocketing for a variety of reasons, the ability to meet such expenses, suddenly as and when they may arise, is not something that rests with all. It is, as such, a necessary facet of preparation that people undertake. It doesn't specifically deal with accidental coverage only," the Bench observed.
Court further noted that the guiding principles behind Mediclaim and compensation under the Motor Vehicles Act are fundamentally different.
Under a Mediclaim policy, the insurer's liability is limited to the insured amount. If medical expenses exceed the policy limit, the policyholder has to bear the remaining cost. In contrast, compensation under the Motor Vehicles Act is governed by the principle of "just and fair compensation" and does not have a fixed monetary ceiling.
"The amount received under MVA arises from a beneficial legislation and is guided by the principle of just compensation, which is intended to put the injured person, or the legal representatives of the deceased, as far as possible, in the same monetary position as if the accident had not occurred. Naturally, this stands on a higher pedestal. To equate these two amounts would either pull down the MVA or unnecessarily elevate the Mediclaim policy," the Bench said.
What was the case before the Supreme Court?
Court was hearing an appeal filed by New India Assurance Company Limited against a Bombay High Court judgment, which had held that the amount received by an injured claimant under his own Mediclaim policy cannot be deducted from the compensation payable by the MACT.
The insurer argued that allowing both payments would amount to a "double benefit". Court, however, noted that high courts across the country, and even different benches of the same high court, had taken conflicting views on the issue.
One line of decisions held that a Mediclaim payout is independent of a claim under Section 166 of the Motor Vehicles Act and therefore should not be deducted. The contrary view favoured deduction on the ground that the same medical expenses were being compensated from two sources.
"We are of the considered opinion that the answer to the question raised in this appeal is not a matter of Sherlockian deduction," the Bench remarked while resolving the conflict.
Court also observed that both the Bar and the Bench have a responsibility to minimise inconsistencies in judicial decisions and ensure greater certainty in the justice delivery system.
Accordingly, the Supreme Court dismissed the insurer's appeal and remanded the matter to the high court for fresh determination in line with its judgment.
Case Title: New India Assurance Company Limited Vs Dolly Satish Gandhi & Anr
Bench: Justices Sanjay Karol and Vipul M Pancholi
Date of Judgment: May 15, 2026
