TARLOK SINGH NAYAR & ANOTHER V. STERLING GENERAL INSURANCE COMPANY [1966] 1 EA 144.

 FACTS

The  defendant insurer issued a comprehensive motor  insurance policy  to the first plaintiff (called “the insured”) by  which it agreed to “indemnify  the Insured .  .  . against all sums  which  the  Insured  shall become  legally  liable to pay  .  .  .”  and  also,  for a further consideration, agreed to “indemnify  any Authorised Driver .  .  .”. The insured lent the  car  to  the  second  plaintiff, who was driving it as an authorised driver under the policy,  when  it  was  involved in an accident in which a passenger was injured. The  passenger  recovered damages and costs from  the second plaintiff, the insurers having taken over his defence. The insured and the second plaintiff sued the insurers claiming a declaration that the insurers were bound to indemnify  them  in respect  of  all  liability  they  were or may  be under to the passenger. The insurers defence was based on the absence of any  legal liability  incurred by  the insured and on the want of privity  of the second  plaintiff with the insurers under the policy.  The plaintiffs attemp ted to found an estoppel on the fact that the insurers conducted the second  plaintiff’s defence against the claims  of the injured passenger.  The insured gave evidence that he could have saved part of the premium  by  insuring the car for his personal use onl y.

HELD

(i) the insured, having entered into the contract  of  insurance on his own behalf and on behalf of the authorised driver, could sue on it either as a party  or as a trustee for the authorised driver; 

Williams v. Baltic Insurance Association , [1924]  2 K.B. 282: All E.R. Rep. 368 followed. 

Vandepitte v. Preferred Accident Insurance Corporation , [1933]  A.C. 70 distinguished.

(ii) the  second  plaintiff,  being  a  stranger to the contract, could not himself sue on it, although he could sue through the insured as his trustee or direct if the trustee refused, but  this  point  did  not arise because the insured/trustee was the first plaintiff; 

Kshirodebihari Datta v. Mangobinda Panda (iii)  (1934), 61 Cal. 841 disapproved.

(iii) the insurers’  conduct in taking over the second plaintiff’s defence amounted to  an  admission  on a point of law and could not found an estoppel in the present action. 

Declaration as prayed. Judgment for the plaintiffs as prayed.