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CHANAKYA CHANAKYA NATIONAL NATIONAL LAW UNIVERSITY, UNIVE RSITY, PATNA
LAWS LAWS GOVERNING MOTOR INSURANCE
Subject- Insuance La!
Faculty #$$ SHAIW # SHAI WAL SATHYARTI SATHYARTI -)t(
Subm Submit itte ted d by " Na%e - Sn&g'(a Sn&g' (a Se%este R*++ N* -
.
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ACKNOWLEGEMENT
It &s %/ geatest 0+easue t* be ab+e t* 0esent t(e 0*ject t*0&c 1LAWS 2OVERNIN2 #OTOR INSURANCE3 O4 INSURANCE LAW$ LAW$ I 4*un' &t 5e/ &nteest&ng t* !*6 *n t(&s 0*ject$
I !*u+' +&6e + &6e t* t(an6 %/ teac(e, M!" S#AIWAL SAT$#ARTI , 4* 0*5&'&ng %e !&t( suc( an &nteest&ng 0*ject t*0&c an' 4* (&s c*nstant su00*t an' gu&'ance$
I !*u+' a+s* +&6e t* t(an6 %/ +&ba&an 4* (e+0&ng %e &n gat(e&ng 'ata 4* t(e 0*ject$ Last, but n*t t(e +east, I !*u+' (eat&+/ t(an6 %/ 4a%&+/ an' 4&en's 4* t(e& un!a5e&ng su00*t !&t(*ut !(&c( t(&s !*6 !*u+' n*t (a5e been 0*ss&b+e$
I (*0e t(at t(e ea'es !&++ a00ec&ate t(&s 0*ject !*6$
S%i&d'a
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ACKNOWLEGEMENT
It &s %/ geatest 0+easue t* be ab+e t* 0esent t(e 0*ject t*0&c 1LAWS 2OVERNIN2 #OTOR INSURANCE3 O4 INSURANCE LAW$ LAW$ I 4*un' &t 5e/ &nteest&ng t* !*6 *n t(&s 0*ject$
I !*u+' +&6e + &6e t* t(an6 %/ teac(e, M!" S#AIWAL SAT$#ARTI , 4* 0*5&'&ng %e !&t( suc( an &nteest&ng 0*ject t*0&c an' 4* (&s c*nstant su00*t an' gu&'ance$
I !*u+' a+s* +&6e t* t(an6 %/ +&ba&an 4* (e+0&ng %e &n gat(e&ng 'ata 4* t(e 0*ject$ Last, but n*t t(e +east, I !*u+' (eat&+/ t(an6 %/ 4a%&+/ an' 4&en's 4* t(e& un!a5e&ng su00*t !&t(*ut !(&c( t(&s !*6 !*u+' n*t (a5e been 0*ss&b+e$
I (*0e t(at t(e ea'es !&++ a00ec&ate t(&s 0*ject !*6$
S%i&d'a
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RESEARC# MET#OOLOG$ Met')d )* Re+ea!c'
T(e eseac(e (as a'*0te' a 0ue+/ '*ct&na+ %et(*' *4 eseac($ T(e esea eseac(e c(e (as (as %a'e %a'e e7te e7tens& ns&5e 5e use use *4 t(e t(e +&ba +&ba/ / at t(e t(e C(an C(ana6 a6/a /a Nat&*na+ La! Un&5es&t/ an' a+s* t(e &ntenet s*uces$ Aim+ a%d Ob,ecti-e+.
T(e a&% *4 t(e 0*ject &s t* 0esent a 'eta&+e' stu'/ *4 t(e 1 LAW 2OVERNIN2 #OTOR INSURANCE3 S)u!ce+ )* ata.
T(e 4*++*!&ng sec*n'a/ s*uces *4 'ata 'ata (a5e been use' &n t(e 0*ject0*ject8 9**6s Webs&tes Met')d )* W!iti%&.
T(e %et(*' *4 !&t&ng 4*++*!e' &n t(e c*use *4 t(&s eseac( 0a0e &s 0&%a&+/ ana+/t&ca+$
M)de )* Citati)%.
T(e eseac(e (as 4*++*!e' a un&4*% %*'e *4 c&tat&*n t(*ug(*ut t(e c*use *4 t(&s eseac( 0a0e
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Chapterisation:
C#A0TERS
0AGE NO
1 EECUTIVE SUMMAR$
2 INTROUCTION
3 ( #ISTOR$ OF MOTOR INSURANCE
4 / W#$ O WE NEEE TO GO FOR MOTOR INSURANCE
5 0RINCI0LES OF INSURANCE AN ITS RELEVANCE WIT#
MOTOR VE#ICLE 16 7 MOTOR VE#ICLES ACT
1/ 3 T$0ES OF MOTOR VE#ICLES
14 4 LOK AALATS AN MACT
26
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5 T#IR 0ART$ INSURANCE
22 16 GENERAL REGULATIONS AS 0ER INIAN TARIFF ACT
(6 11 CONCLUSION AN ANAL$SIS
(2 8I8ILOGRA0#$
(
EXECUTIVE SUMMARY Currently, Motor Insurance is one of the most flourishing industries in India. The number of vehicles running on the Indian roads has grown manifold. Almost every month, a new car is being launched by top car manufacturers such as Hindustan Motors, Hyundai Motors India Limited, Mahindra and Mahindra, Maruti u!u"i, Tata Motors, and Toyota #irlos"ar Motors Ltd. Car insurance India companies offer comprehensive insurance cover for damages or losses created to the automobile m a result of man$made or natural events. %hen you purchase an insurance policy for your new or old car, it also protects you and your co$passengers by offering accidental coverage. Motor insurance in India is a mandatory re&uirement for all vehicle owners. %hether you use it for individual use or commercial purpose, you need to have an auto insurance policy in place. 'ehicle insurance policies in India have been devised to insure private cars, two wheelers, and commercial vehicles. The car insurance companies in India have associations with the top car manufacturers in the country. (ou can get instant car insurance &uotes by filling out a simple and online application form.
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The premium you need to pay to the car insurer after buying a car insurance policy is dependent on a number of factors. If you purchase a very costly car, your rate of premium will be e)orbitantly high. *n the other hand, if you purchase a cheap car, you will &ualify for a more reasonable rate of premium. The claims offered by the car insurance companies in India can be categori!ed into the following+ • • •
Accidental claims Theft or burglary claims Third party claims
%e have to submit particular documents for getting a claim, which include suitably completed and signed claim form, copy of driving license, copy of the registration certificate of the cm, copy of I- irst Information -eport/, and copy of policy agreement. Car Insurance Companies in India The top motor insurance companies in India are as follows+ • • • • • • • • •
ICICI Lombard 0eneral Insurance 1a2a2 Allian! H3C 4rgo IC0$To"io 0eneral Insurance Cholamandalam M 0eneral Insurance *riental Insurance -oyal undaram Alliance Tata AI0 o H1C India The 5ew India Assurance Company o 6nited India Insurance Company Ltd.
Coverage offered by car insurance companies in India Auto insurers in India offer the following coverage+ 3amage or loss as a result of an accident, lightning, fire, e)ternal e)plosion, self ignition, housebrea"ing or theft, burglary, or any other malicious operation. Liability for death or in2ury of third party, damage or loss to third party property and liability to paid driver *n payment of suitable e)tra premium, damage7loss to electronic7electrical appliances
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INTRODUCTION %hat is motor insurance8 The answer to this &uestion is very simple as it comprises two words i.e. motor 9 insurance and motor means a vehicle of any sort which is running on the road and Insurance means to provide cover for any unforeseen ris" which may occur in day to day life. Then another &uestion arises what is unforeseen ris"8 (ou are wal"ing on the road a car hits you from the bac", you get a fracture in your leg and while coming out you never thought that you will have an accident but it happened and this is unforeseen ris" i.e. a ris" of happening of an event which may happen or may not happen. o Motor Insurance as we all "now is the insurance for motor vehicles, there are various ris"s which are related with the loss of7 or damage to motor vehicles li"e theft fire or any accidental damage so as to provide coverage for this motor insurance is ta"en. 'ehicle insurance also "nown as, 0A: insurance, car insurance, or motor insurance/ is insurance purchased for cars, truc"s, motorcycles, and other road vehicles. Its primary use is to provide financial protection against physical damage and7or bodily in2ury resulting from traffic collisions and against liability that could also arise there from the specific terms of vehicle insurance vary with legal regulations in each region. To a lesser degree vehicle insurance may additionally offer financial protection against theft of the vehicle and possibly damage to the vehicle, sustained from things other than traffic collisions. Motor Insurance is one of the most flourishing industries in India. The number of vehicles running on the Indian roads has grown manifold. Almost every month, a new car is being
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launched by top car manufacturers such as Hindustan Motors, Hyundai Motors India Limited, Mahindra and Mahindra, Maruti u!u"i, Tata Motors, and Toyota #irlos"ar Motors Ltd. Motor insurance in India is a mandatory re&uirement for all vehicle owners. %hether you use it for individual use or commercial purpose, you need to have an auto insurance policy in place. 'ehicle insurance policies in India have been devised to insure private cars, two wheelers, and commercial vehicle
HISTORY OF MOTOR INSURANCE: If we see in real life, we can say that Motor Insurance is an important part of 0eneral Insurance. This type of insurance has come into e)istence from 6nited #ingdom in the early part of this century. Incidentally, the first Motorcar was introduced in 4ngland in ;<=>. The first motor policy to provide coverage for third party liability was came into e)istence in ;<=?. Third party liability includes third party and liability incurred towards third party. Third :arty means any party other then owner 7driver or the government, any liability occurring towards third party due to use of motor vehicle is third party liability. It can be in the form of bodily in2ury to third party or damage to third party property. o at the beginning, only third party insurance came into e)istence but later on, in 6.# they reali!ed the importance of insurance in terms of motor and with this an accidental comprehensive policy also came into e)istence and later on the lines of 6.#. we started using appro) the same policy. In ;=@ the Car and 0eneral Insurance Corporation limited was established mainly to transact motor insurance, after this company a lot many other companies has come into e)istence to transact this business. It has been reali!ed that after %orld %ar I, there was a considerable increase in the number of vehicles on the road and when we have the number of the vehicles on the road there is an increase in the number of accidents. As the concept of insurance was not that much in e)istence so lot of accidental damages were not at all recovered and the motorists faced a lot of problems for getting their treatments and damages to their vehicles. After reali!ing this introduction of compulsory third party insurance through the passing of
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the -oad Traffic Acts ;=@ and ;=> was done. Later on these Acts have been consolidated by the -oad Traffic Act ;=B@.
HOW THE CONCEPT OF MOTOR INSURANCE HAS COME INTO EXISTENCE? In ;==, India has also reali!ed the importance of Motor Insurance and Motor 'ehicle Act was passed and came into e)istence in ;==. 4arlier, only few people "new about motor insurance but later on compulsory third party insurance was introduced by the Act on ;st uly ;=>B. %e in India follow the same practice as that of 6.#.. As Motor 'ehicles Act laid the provisions in ;== and it re&uired some amendments that were implemented by the Motor 'ehicles Act ;=<< and it became effective from ;D uly ;=<= and thatEs how the insurance concept has come to India.
WHY ONE SHOULD GO FOR MOTOR INSURANCE? As you all "now in our country crores of vehicles are plying on the road and lot of accidents occurred daily, and due to these accidents damages to material and third party occurs. Third party is any person other then the owner. 1ut the &uestion arises how the loss is to be compensated8 After reali!ing all these problems it was made mandatory for all the vehicles which are plying on the road to have an insurance which can provide coverage to general public against the ris" of loss or damage to motor vehicles and with this the motor insurance concept has come into e)istence and Act made this insurance compulsory for everyone those who are driving the vehicle on the road so it become &uite popular among people and than
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motor insurance policies become available to provide a comprehensive cover and a third party liability cover.
PRINCIPLES OF INSURANCE & ITS RELEVANCE WITH MOTOR INSURANCE
6tmost 0ood aith Insurable Interest :rincipal of Indemnity :ro)imate cause
;/
6tmost 0ood aith +
Contract of insurance have all essential elements of nature of general contract. According to ;
Indian Contract Act, the valid contract must have the essential element of offer and
acceptance, considerations, legal parties, sound mind and free consent of the parties. Li"e every other contract the insurance Contract is the sort of contract it is approved by the Indian Contract Act. Contract of insurance comes in to an e)istence where there is an offer and the underwriter or proposal of one side and the insurer accepts it by issuing the policy. It has to satisfy all the essential elements of a simple contract. The contract of insurance must be entering into contract by the competent person in order to be a valid contract. The competent person may be who is the age of ma2ority according to law and who is of sound mind. :remium is the age consideration that must be given for starting the insurance contract. The 8 section Fh/ and section ;@/
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ob2ect of the contract should be lawful. 4very person entering into an insurance contract should enter into by their free consent. Contracts of motor insurance are governed by the doctrine of utmost good faith. It is one of the important principles of that implies to the contract of insurance It refers that both the parties involved in insurance contract insurance It refers that both the parties involved in insurance contract should ma"e the disclosure of all material facts and figures relating to the sub2ect matter of the insurance contract. If either party does not disclose the utmost good faith the other party may avoid the contract. The insuredEs duty to disclose all material facts "nown to him but un"nown to the insurer. imilarly the insuredEs duty of utmost good faith is disclosing the scope of insurance at the time of contract. Any concealment, misrepresentation, fraud or mista"e concerning the material facts to the ris" should be disclosed. 5o important material facts and figures must be concealed. Thus, responsibility of disclosure of both parties should be a reciprocal duty i.e. disclosure is absolute and positive. ome of the few e)amples of disclosure of material facts such as+ Life insurance+ Age, income, education, occupation, health, family si!e, etc. ire insurance+ Inflammable materials, nature and its uses, fire detection etc. Motor Insurance+ Type of car, value and details of driver, the driving history and traffic convictions of the driver, past loss e)perience, etc i.e. which vehicle he is using, in which area he will be driving the vehicle i.e. hilly area or plain area, bow good is the driver at driving the vehicle which can be "nown by his past record. Any past e)perience related to loss has to be informed to the insurer. In the conte)t of the principle of utmost good faith, it is pertinent to note the provisions of F
the Motor 'ehicles Act ;=<<. This section provides that+ it is compulsory to ta"e the
insurance policy if a vehicle is plying on the road and if a certificate of insurance is being issued then insurer can not cancel or avoid a third party liability under this policy In other words It means that any one who is driving a vehicle on the road can not drive the vehicle without an insurance policy it may be a comprehensive policy or only a third party liability policy.
F/ Insurable Interest+ Insurable Interest means the insured must have some legal right to insure the sub2ect matter. Insurable interest is an important and fundamental principle of insurance. Thus it is necessary ection ;>=
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for valid contract of insurance. According to the definition of insurable interest in the event of the legal right to insure arising out of a financial relationship should be recogni!ed under the law between the insured and the sub2ect matter of insurance. It means that insurable interest must be a pecuniary interest. The insured must have an insurable interest in the sub2ect matter of insurance. %ithout insurable interest the contract of insurance is void and unenforceable. A person said to have an insurable interest in the sub2ect matter has to have benefit from its e)istence and pre2udice by its destruction. Thus, insurable interest must be actual and real and not arising out of mere e)pectation. or e.g. if I own a car I can ta"e a insurance policy on my name but if my friend own a car then can I ta"e a policy on my name8 The answer is E5oE as we donEt have any right on otherEs property and no profit or loss will occur to me if a claim arises to this vehicle. The essentials of insurable interest are+$ i/ The e)istence of property e)posed to loss, damage or a potential liabilityG ii/ uch property or liability must be the sub2ect matter of insuranceG iii/ The insured must bear a legal relationship to the sub2ect matter whereby he stands to benefit by the safety of the property, right, interest or freedom from liability and stands to lose by and loss, damage, in2ury or creation of liability. In motor insurance, the vehicle is the property, which is e)posed to loss or damage. The insured also has a legal liability towards third partiesG he may suffer financial loss if he insures that liability through third party caused y negligent use of the vehicle. Therefore, the insured has insurable interest, which entitles him to insure the vehicle against damage and liability ris". urther, under M.'.Act ;=<<, no person shall allow any other person to use a vehicle in a public place unless the vehicle is covered by an insurance policy complying with the re&uirements of the Act. If a vehicle is purchased under a hire purchase agreement, the finance company has an insurable interest in the vehicle until all the installments are repaid. A clause included in the policy to protect the financierEs interest. This clause provides that in respect of loss or damage to the motor vehicle which loss or damage is not made good by repair or replacement/ the monies shall be payable to the owners, i.e. the financiers.
/ :rincipal of indemnity+
: ection ;>B
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Indemnity means to indemnify the loss or to put the insured bac" in same position as he was before the loss. The word DindemnityD implies that protection, security against damage or loss of security against legal responsibility. According to this principle the assured in the case of loss against the policy made shall be fully indemnified. Indemnity is one of the fundamental principles that e)cept life insurance, personal accident insurance, other contracts of insurance such as fire, marine and accident insurance are contracts of indemnity. There are two corollaries to indemnity, they are+ ;/ ubrogation F/ Contribution. The term EubrogationE means transfer of all the rights and remedies available to the insured in respect of sub2ect matter to the insured after indemnity has been affected. It is also referred as getting into the shoes of the others. It implies that the substitution of the insurer in place of the insured in respect of the latterEs of ubrogation. or e.g. If a vehicle has collided with another vehicle then the loss occurred to vehicle can be claimed from insurer but if it is due to other party and loss has occurred then it will come from other party, which means insurer may give the claim to you but they can get the amount of loss from the other party. This principle holds good only in the case of motor, fire marine insurance. Contribution in simple words means to contribute the amount. This is the one important principle essential for valid insurance contract. This doctrine of contribution also applies only to contracts of indemnity i.e., to fire and marine insurance. According to this principle, the case of double insurance, the insurers are to share the loss in proportion to the amount assured by each of them. In order to apply the right to contribution between two or more companies the following factors must e)ist+ ;a/ The sub2ect matter of insurance must be the same Fb/ The event insured must be the same c/ The insured must be the same. or e.g. If a car is insured by two insurers for -s. ;@@,@@@ from insurer A and for -s. F@@,@@@ from insurer 1. A loss occurs for ?,@@@ then the claim will come in proportion from both the insurerEs i.e. -s F?,@@@ from insurer A and -s. ?@,@@@ from insurer 1. It does not mean that if loss occurs and if a person has double insurance then he can claim the whole amount from both the insurers, this way he can ma"e profit out of these contracts. o for this purpose this contribution corollary has come into e)istence as insurance contracts are the contracts of indemnity and no body has to ma"e profit out of it.
>/ :ro)imate cause+
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It means the actual cause of the loss due to which a loss has occurred. Causa :ro)ima is necessary for a valid contract of insurance. It has been defined as DThe active efficient cause of that sets in motion a train of events which brings about a result, without the intervention of any force started and wor"ing actively from a new and independent sourceD. The doctrine of pro)imate cause applies to motor insurance as to other classes of insurance. The loss or damage to the vehicle is indemnified only if it is pro)imately caused by on of the insured perils. Insured perils means the perils covered by insurer under the policy. The doctrine also applies to third party claims. The third party in2ury or damage must be pro)imately caused by the negligence of the insured for which he is held legally liable to pay damages.
MOTOR VEHICLES ACT The Motor Vehicles Act 1939: Motor 'ehicles Act in actual sense came into e)istence in ;==. If we see the provisions of this we will reali!e that it provides for various matters relating to the use, maintenance and operation of motor vehicles. 1esides this it also ta"e into consideration the matters relating to licensing of drivers of motor vehicles, registration of motor vehicles, construction e&uipment and maintenance of motor vehicles, control of traffic etc. 6nder this Act Chapter 'II$ A and Chapter 'III of the Act provides for insurance of motor vehicles against third party ris"s. It was long time bac" in ;==, when this Motor 'ehicles Act has come into e)istence and properly came in force on ;st uly ;==. 1ut this did not include all the provisions where as Chapter 'III was brought in force on ;st uly ;=>B. The Motor 'ehicle Act, ;== 5o. > of ;==/ consolidated and amended the law relating to motor vehicles. This was amended a several times to "eep it up to date. A need was, however, felt that this law should now ta"e into account also the changes in the road transport technology, pattern of passenger and freight movements, development of road networ" and particularly the improved techni&ues in motor vehicles management. 'arious Committees li"e the 5ational Transport policy committee, national :olice Commission, -oad afety committee, Low powered Two$wheelers Committee, as also the law commission went into
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the different aspects of road transport. They recommended updating, simplification and rationali!ation of this law. Therefore a wor"ing group was constituted in anuary ;=<> to review the provisions of the Motor 'ehicles Act, ;== and to submit draft proposals for suitable legislation to replace the e)isting Act. In ;=
The Motor Vehicles Act, 1988: The Motor 'ehicles Act, ;=<< Act 5o. ?= of ;=<
P a g e | 17 No Fault Liailit!+ Motor 'ehicles Act, ;=<<> provides as follows+
D%here the death or permanent disablement of any person has resulted from an accident arising out of the use of a motor vehicle, the owner of the vehicle shall, or, as the case may be, the owners of the vehicle shall, 2ointly and severally, be liable to pay compensation n the respect of such death or disablement in accordance with the provisions of this section. The material change in the law is that the negligence of the owner of the owner or service of the motor vehicle is no longer relevant to decide the &uestion of liability. The provisions of the Act ?specifically provides when the claimants shall not be re&uires to plead and establish that the death or permanent disablement in respect of which the claim has been made due to any wrongful act, neglect or default of the owner, owners, of the vehicle, or vehicles concerned or any other person. This concept is "nown as 5o ault Liability. However the amount of compensation payable is restricted to -s.?@, @@@7$ in the case of death and -s.F?, @@@7$in the case of permanent disablement to motor vehicle act ;=<<. 4arlier, it was -s. F?,@@@7$ for death and -s. ;F,@@@7$for permanent disablement. :ermanent disablement is defined as any in2ury or in2uries involvingG a/ :ermanent privation of the sight of either eye or the hearing either ear, or privation of any member or 2ointG or b/ 3estruction or permanent impairing of the powers of any member on 2oint c/ :ermanent disfiguration of the head or face. Hit a"# Ru" A$$i#%"t+
Hit and run accident is Dan accident arising out of the use of a motor vehicle or motor vehicles the identity whereof cannot be ascertained in spite of reasonable efforts for the purpose.D
. ection ;>@;/ ; section ;>@ /
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The Act providesB that the central government may establish in fund "nown as olatium und to be utili!ed for paying compensation in respect of death or grievous hurt to persons resulting from Hit and -un Motor accidents. It is provided that grievous hurt shall have the same meaning as in the Indian :enal Code. According to the Indian :enal Code the following "inds of hurts are designed as grievous+ • • • • •
:ermanent :rivation of the vision of either eye. :ermanent :rivation of the hearing of either ear. :rivation of any member or 2oint. :ermanent disfiguration of the head or face. racture or dislocation of a bone or tooth.
Any hurt which endangers life or which causes the sufferer to be during the space of twenty days in severe bodily pain or unable to follow hi ordinary pursuits. The compensation payable form death claims is fi)ed at -s. F?,@@@7$ an in respect of Egrievous hurtE -s.;F, ?@@7$after the amendment to Motor 'ehicles Act ;=<<. 4arlier to amendment, it was -s.
It is the fund, which is, consists of contributions from the 0eneral Insurance Industry, the Central government, and the tate 0overnment aG decided by the Central government. A solatium fund is created so as to provide compensation for the victims of hit run cases. (ou must have seen a lot of accidents on road where a vehicle had hit the other vehicle c peddlers on the road, so for them this solatium fund is created to provide them compensation.
ection ;B < section F@
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TYPES OF MOTOR VEHICLES 34I5ITI*5 * M*T*- '4HICL4+ In simple words we can say a motor vehicle is that which runs with a motor, but in technical sense we can define a DMotor 'ehicleD as as any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an e)ternal source and includes a chassis to which a body has not been attached and a trailerG but does not include a vehicle running upon fi)ed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not e)ceeding F? cubic centimeters.< Types of Motor 'ehicles running on the road+ There are various motor vehicles plying on the road but for the purposes of insurance, the Indian Motor Tariff, which governs the Motor Insurance business in India, and revised with effect from ;st uly F@@F, classifies the motor vehicles broadly in categories+ ) ection F F
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:rivate Cars, Motori!ed Two %heelers And Commercial 'ehicles. I/
:rivate Cars+
These are+ a/ :rivate Car type vehicles are used for social, domestic and pleasure purposes and sometimes for professional purposes of the insured or used by the insuredEs employees for such purpose It e)cludes use for hire or reward, racing, pace ma"ing, reliability trial, speed testing and sue for any purpose in connection with the motor Trade. It also e)cludes carriage of goods other than samples. b/ Motori!ed three wheeled vehicles including motori!ed ric"shaws7 cabin body scooters/ are used for private purpose only. Trial, speed testing and used for any purpose in connection with the Motor Trade is e)cluded. c/ Three %heeled vehicles, which also includes motori!ed ric"shaw cabin scooters used for private purposes. F/ Two wheelers+ Motori!ed two wheelers can be with or without sidecar, which is used for social, domestic and pleasure purposes and also for professional purposes. It e)cludes carriage of goods other than samples of the insured or used by the insuredEs employees for such purposes but e)cluding use for hire or reward, racing, pace ma"ing, reliability trial, speed testing etc. / Commercial 'ehicles+ a/ 0oods carrying vehicles own goods/+ They are truc"s and trolleys which carry goods for their own purposes or for their private use. These are vehicles used under a :rivate CarrierEs permit within the meaning of the Motor 'ehicles Act ;==. The Act defines a Dprivate carrierD as Dan owner of a transport vehicle other than a public carrier who uses the vehicle solely for the carriage of goods which are his property or the carriage of goods which belong to him and is necessary for the purpose of business to carry the goods and not being a business of providing transportD. or e.g. I own AJC Co. Ltd at 3elhi and I have to send my own goods to my manufacturing unit at Meerut so for this purpose if I use my own truc" to carry my own goods, it means this vehicle is under the category of :rivate carrier vehicle. b/ 0oods carrying vehicles 0eneral Cartage/+ These are vehicles used under a :ublic CarrierEs permit within the meaning of the Motor 'ehicles Act ;==. The Act defines a Epublic carrierE as Dan owner of a transport vehicle who transports or underta"es to transport goods or
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any class of goods, for another person at any time and in any public place for hire or reward, whether in pursuance of the terms of a contract or agreement or otherwise.D %hen the Motor 'ehicles Act of ;=<
LO) ADALATS AND MALT Motor Accidents Claims Tribunal + 6nder the provisions of the Motor 'ehicle Act, ;==as amended/, Motor Accidents Claims tribunal are constituted by tate 0overnment to ad2udicate upon claims for compensation in respect of motor vehicles accidents involving death of or bodily in2ury to persons or damage to their property. These Tribunals were introduced with the ob2ect of providing facilities for less e)pensive and &uic" settlement of third party claims. MACT is formed so as to provide assistance to general public when any third party claim arises. In a way Tribunal has all the powers, which a Civil Court has and it is deemed to be a Civil Court at times but still the procedures of the Tribunal and a Civil Court are different. The procedures of this Tribunal is simpler then those of Civil Court, but still they were unable to settle the various disputes regarding third party damage 7 in2ury.
Lok Adalats:
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Lo" Adalats as the name says are the Adalats formed for the general public to settle their disputes regarding claim settlement. There are so many accidents that occur daily and claims arises due to accidents but when the settlement has to be done sometimes insured is not at all satisfied with the compensation provided to him as settlement of claim. If in reality we see there are lot of third party claims are still pending with MACT and to clear this bac"log and to provide a proper way for the settlement of claims the concept of Lo" Adalat also "nown as Lo" 5ayayalaya$peoples court/ was mooted by hri :.5 1hagwati, 4). Chief 2ustice of India. If in a general way we see Lo" Adalat sections are held at important centers in the country in lose liaison with the Legal Aid Committee of the state and the M.A.C.T or 3istrict and ession udge. It has been specified by 0IC that Claims up to certain limits from time to time are submitted to the Lo" Adalat and only pending cases are ta"en up for compromise settlement. Chapter JI of the Lo" 5yayalaya rules, ;==F/ of the Motor 'ehicle Act, ;=<
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a/ -etired 2udges of the upreme Court or High court or 3istrict Court or Motor 'ehicle as memberG b/ 0overnment pleaderG c/ enior Advocates having "nowledge about M.A.C.T mattersG d/ :rincipals or professors of law colleges, etc.
NECESSITY FOR THIRD PARTY INSURANCE AND ITS EXEMPTIONS
A third party insurance policy is a policy under which the insurance company agrees to indemnify the insured person, if he is sued or held legally liable for in2uries or damage done to a third party. The insured is one party, the insurance company is the second party, and the person you the insured/ in2ure who claims damages against you is the third party.= 5o person shall use, e)cept as a passenger, or cause or allow any other person to use, a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the = A t(&' 0at/ &nsuance 0*+&c/ &s a 0*+&c/ un'e !(&c( t(e &nsuance c*%0an/ agees t* &n'e%n&4/ t(e &nsue' 0es*n, &4 (e &s sue' * (e+' +ega++/ +&ab+e 4* &nju&es * 'a%age '*ne t* a t(&' 0at/$ T(e &nsue' &s *ne 0at/, t(e &nsuance c*%0an/ &s t(e sec*n' 0at/, an' t(e 0es*n /*u >t(e &nsue'? &njue !(* c+a&%s 'a%ages aga&nst /*u &s t(e t(&' 0at/
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re&uirements of this Chapter chapter JI/:rovided that in case of a vehicle carrying, or meant to carry, dangerous or ha!ardous goods, there shall also be a policy of insurance under the public liability insurance act, ;==;.ection ;>B see"s to protect members of public traveling in vehicles or using the roads public place/ from the financial liability caused by ris"s attendant upon the use of motor vehicles on the roads by ma"ing third party insurance compulsory for users of motor vehicle. This section embodies the compulsory nature of third party insurance for using a vehicle in a public place. Sali%"t F%atu*% o( T+i*# Pa*t! I"u*a"
%$;/ Third party insurance is compulsory for all motor vehicles. In 0. 0ovindan v. 5ew India Assurance Co. Ltd.;@,Third party ris"s insurance is mandatory under the statute .This provision cannot be overridden by any clause in the insurance policy. F/ Third party insurance does not cover in2uries to the insured himself but to the rest of the world who is in2ured by the insured. / 1eneficiary of third party insurance is the in2ured third party, the insured or the policy holder is only nominally the beneficiary of the policy. In practice the money is always paid direct by the insurance company to the third party or his solicitor/ and does not even pass through the hands of the insured person. >/ In third party policies the premiums do not vary with the value of what is being insured because what is insured is the Klegal liability and it is not possible to "now in advance what that liability will be. ?/ Third party insurance is almost entirely fault$based.means you have to prove the fault of the insured first and also that in2ury occurred from the fault of the insured to claim damages from him/ B/ Third party insurance involves lawyers aid / The third party insurance is unpopular with insurance companies as compared to first party insurance, because they never "now the ma)imum amounts they will have to pay under third party policies. 8@ AIR 8=== SC 8:=)
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4J4M:TI*5 The provisions relaying to compulsory third party insurance do not apply to any vehicle owned by the Central government or state government and used for 0overnment purposes unconnected with any commercial enterprise. However the government has been given power to grant e)emption for any vehicle owned by ;a/ The Central government or a state government if the vehicle is used for 0overnment purposes connected with any commercial enterpriseG Fb/ Any local authorityG c/ Any state transport underta"ing However, the above e)emption is made only if a fund is established and maintained by that authority for meeting any liability arising out of the use of any vehicle. The fund has to be established in accordance with the -ules framed under the Act. I"u*a"$% Co',a"i% +a-% %%" allo.%# "o ot+%* #%(%"$% %/$%,t t+% (ollo.i"0: 1
;/ 6se of vehicle for hire and reward not permit to ply such vehicle. F/ or organi!ing racing and speed testingG / 6se of transport vehicle not allowed by permit. >/ 3river not holding valid driving license or have been dis&ualified for holding such license. ?/ :olicy ta"en is void as the same is obtained by non$disclosure of material fact. S%$tio"2345 S%ttl%'%"t %t.%%" i"u*%* a"# i"u*%# ,%*o"5
;/ 5o settlement made by an insurer in respect of any claim which might be made by a third party in respect of any liability of the nature referred to in clause b/ of sub$section ;/ of section ;> shall be valid unless such third party is a party to the settlement. F/ %here a person who is insured under a policy issued for the purposes of this Chapter has become insolvent, or where, if such insured person is a company, a winding up order has been made or a resolution for a voluntary winding up has been passed with respect to the
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company, no agreement made between the insurer and the insured person after the liability has been incurred to a third party and after the commencement of the insolvency or winding up, as the case may be, nor any waiver, assignment or other disposition made by or payment made to the insured person after the commencement aforesaid shall be effective to defeat the rights transferred to the third party under this Chapter, but those rights shall be the same as if no such agreement, waiver, assignment or disposition or payment has been made. L%0al #%(%"$% a-ailal% to t+% I"u*a"$% Co',a"i% to.a*# t+i*# ,a*t!:
The Insurance Company cannot avoid the liability e)cept on the grounds and not any other ground, which have been provided in ection ;>=F/. In recent time, upreme Court while dealing with the provisions of Motor 'ehicle Act has held that even if the defence has been pleaded and proved by the Insurance Company, they are not absolve from liability to ma"e payment to the third party but can receive such amount from the owner insured. The courts one after one have held that the burden of proving availability of defence is on Insurance Company and Insurance Company has not only to lead evidence as to breach of condition of policy or violation of provisions of ection ;>=F/ but has to prove also that such act happens with the connivance or "nowledge of the owner. If "nowledge or connivance has not been proved, the Insurance Company shall remain liable even if defence is available. D*i-i"0Li$%"%:
4arlier not holding a valid driving license was a good defence to the Insurance Company to avoid liability. It was been held by the upreme Court that the Insurance Company is not liable for claim if driver is not holding effective valid driving licence. It has also been held that the learnerEs licence absolves the insurance Company from liability, but later upreme Court in order to give purposeful meaning to the Act have made this defence very difficult. In ohan Lal :assiEs v. :. esh -eddy>N it has been held for the first time by the upreme Court that the breach of condition should be with the "nowledge of the owner. If ownerEs "nowledge with reference to fa"e driving licence held by driver is not proved by the Insurance Company, such defence, which was otherwise available, can not absolve insurer from the liability. -ecently in a dynamic 2udgment in case of waran ingh ?N, the upreme Court has almost ta"en away the said right by holdingG
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i/ :roving breach of condition or not holding driving licence or holding fa"e licence or carrying gratuitous passenger would not absolve the Insurance Company until it is proved that
the
said
breach
was
with
the
"nowledge
of
owner.
ii/ LearnerEs licence is a licence and will not absolve Insurance Company from liability. iii/ The breach of the conditions of the policy even within the scope of ection ;>=F/ should be material one which must have been effect cause of accident and thereby absolving re&uirement of driving licence to those accidents with standing vehicle, fire or murder during the course of use of vehicle. This 2udgment has created a landmar" history and is a message to the 0overnment to remove such defence from the legislation as the victim has to be given compensation.
Natu*% a"# E/t%"t o( I"u*%*6 Liailit! 7%$tio" 289
According to the provisions of this section the policy of insurance must be issued by an authori!ed insurer.It must be as per re&uirements as specified in subsection F/.It must insure against liability in respect of death or bodily in2ury or damage to property of a third party. OThird partyP includes owner of the goods or his authori!ed representative carried in the vehicle and any passenger of a public service vehicle. The policy of insurance must cover: 2Liailit! u"#%* t+% Wo*;'%"6 $o',%"atio" A$t<2=4> i" *%,%$t o( #%at+ o* o#il! i"u*! to a"! u$+ %',lo!%%
a/ engaged in driving the vehicle, or b/ the conductor or tic"et e)aminer if it is a public service vehicle ,or 4A"! $o"t*a$tual liailit!:
ection ;> has to be given wider, effective and practical meaning so that it may benefit various categories of persons entitling them to claim compensation from the insurer or the insured or both. InsurerEs liability commences as soon as the contract of insurance comes into
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force. The liability remains in e)istence during the operation of the policy. If the e)isting policy is renewed the ris" is covered from the moment the renewal of the policy comes into force. If the accident occurs before the renewal comes into e)istence, the insurer cannot be made liable. It is the primary duty of the vehicle owner to prove that his vehicle was insured with a particular company. If he fails to comply with it he will have to pay the entire amount of compensation in the case. In case where there is a dispute in respect of the vehicle having been insured by an assurance company, the tribunal must give its finding in the matter, it is its duty to do so. After a certificate of insurance is issued it does not lie in the mouth of the insurer to deny his liability. If the insurer has been a victim of fraud he can recover the amount
from
the
insured
by
a
separate
action
against
him.
Oriental insurance Co. . !nder"eet #aur 11
If the insurer has issued a policy to cover the bus without receiving the premium therefore, he has to indemnify third parties in respect of the liability covered by the policy. He cannot avoid the liability arguing that he was entitled to avoid or cancel the contract. Liability for in2ury to certain persons or class of persons other than gratuitous passengers and pillion riders/ The policy under the Act covers only third party ris"s. Insurer is not liable for any harm suffered by a passenger traveling in a private car neither for hire nor for reward. imilar is the position of a pillion rider on a scooter. #. $o%al #rishna . &ankara 'ara(ana
In this case Madras High Court observed that a scooter$owner is not bound to ta"e out a third party ris" policy to cover the claim of the pillion rider that is carried gratuitously. If he is in2ured , the insurance company would not be liable unless policy covering such ris" is obtained by the scooter$owner. A private carrier registered as such with -.T.*. and also in insurance policy , cannot be used for carrying any passenger or goods for hire or reward. 88 AIR8==) SC ;))
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However if it is so used and the employees of a party hiring the private vehicle belonging to the insured are in2ured in an accident the insurance company will not be liable. I"u*%* liailit! to V%+i$l% O."%*
A contract of insurance is a personal contract between the insurer and the insured. It is for the purpose of indemnifying the insured for damage caused due to accident by the vehicle , to a third party. To ma"e the insurer liable the policy of insurance must be in the name of the owner of the vehicle.;F*wner of the vehicle as defined in ection F@/ is a person in whose name the motor vehicle stands registered. A person in possession of a vehicle under a hire$ purchase agreement or an agreement of lease or hypothecation is also covered by the definition, no matter he has e)ercised his option to purchase the vehicle or not. ection ;?;/ ma"es it clear that when the owner of a vehicle transfers the ownership of the vehicle , the policy of insurance and the certificate of insurance shall be deemed to have been transferred in favour of the purchaser of the vehicle with effect from the date of its transfer.This deemed transfer shall include transfer of rights and liabilities of the said certificate of insurance and policy of insurance. According to subsection F/ the transferee has to apply within ;> days from the date of transfer to the insurer for effecting necessary changes in the certificate and in the policy of insurance. If the certificate of insurance and the policy are not transferred , the insurer could not be made liable even though the vehicle is transferred. It is to be remembered that Oan insurance policy is a personal contract between the parties for indemnifying the insured in case of an accident covered under the policy. If the vehicle is transferred by an insured to another person, the insurance policy lapses upon the transfer. In such a case the benefit of the policy is not available to the transferee, without an e)press agreement with the insurance company. %hen the insurance policy lapses it would not be available to cover the liability of the purchaser of the vehicle. &. &udhakaan . A.#. )rancis 13
8 Raj C(*0a 5$ Sangaa S&ng(, 8=); AC @= >P B H?
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There was an agreement for sale of a vehicle. The owner did not comply with the statutory provisions regarding transfer of a vehicle. He, however ,allowed the vehicle to be used by the transferee .The owner had retained the insurance policy with him. HeldQ The insurance company was not liable to indemnify the owner. Liailit! i" *%,%$t o( #a'a0% to ,*o,%*t! @S528974
or damage to property of a third party under ;== Act the limit of liability is -s B@@@ in all, irrespective of the class of the vehicle. 6nder ;=<< Act the position as laid down by section ;> F/ in regard to liability is as under+ i/ or death or personal in2ury to a third party, the liability of the insurer is the amount of liability incurred, i.e. for the whole amount of liability. ii/ or damage to property of a third party the liability of the insurer is limited to -s. B@@@ as was under the ;== Act. Liailit! o( I"u*%* %!o"# t+% li'it '%"tio"%# i" t+% A$t
ection ;> lays down the limits of liability of the insurer. However there is no bar for the insurer underta"ing a higher liability i.e. liability for a greater amount than that mentioned in the Act. Thus the insured and the insurer can contract and can provide for a higher liability. Su''a*!:
In the above we have discussed about the Legal Aspects related to Third :arty -is"s, the necessity for Insurance against third party ris"s and its 4)emptions.
8: AIR 8==< Ke
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GENERAL REGULATIONS AS PER INDIAN MOTOR TARIFF ;/ Insurance not provided for+ It means no Motor insurance business can be transacted without the purview of India Tariff until permission is being ta"en from TAC. 6nder 0eneral regulations 0-/.;.of Indian Motor Tariff it is defined as+ Motor Insurance in India cannot be transacted outside the preview of the India motor Tariff unless specifically authori!ed by the TAC. or ris"s, which have not been provided in the tariff, references should be made to TAC for advice thereon. Motor Insurance includes :rivate Cars, motori!ed two wheelers and commercial vehicle e)cluding vehicles running on rails. F/ The e)tension of 0eographical Area+ 6nder Motor Insurance the e)tension of area is provided to ta"e a motor insurance policy. It can be e)tended to provide coverage to include 1angladesh, 1hutan, 5epal, :a"istan, and Maldives ri Lan"a. 6nder 0-.>. of Indian Motor Tariff it is defined as+ The 0eographical Area of Motor :olicies may be e)tended to include a/ 1angladesh b/ 1hutan c/ 5epal
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d/ :a"istan e/ ri Lan"a f/ Maldives as the case may be, by charging a flat additional premium, as stated below for the period not e)ceeding ;F months+ ;/ or pac"age policy. -s . ?@@7$ per vehicle, irrespective of the class of vehicle. F/ or policies other :ac"age policy than -s. ;@@7$ per vehicle, irrespective of the class of vehicle. or such e)tensions 4ndorsement IMT Q; is to be used. uch geographical e)tensions, However specifically e)clude cover for damage to the vehicle 7 in2ury to its occupants7 T: liability in respect of the vehicle during air passage 7 sea voyage for the purpose of ferrying the vehicle to the e)tended geographical Area. / 'alued policies+ These are the policies under which a sum is agreed upon and policy is ta"en for that amount. In case of loss that amount is given to the insured. 6nder 0-.. of Indian Motor Tariff it is defined as+ 6nder an agreed value :olicy a specified sum agreed as the insured value of the vehicle is paid as compensation in case of Total Loss7 Constructive total Loss of the vehicle without any deduction for depreciation. It is not permitted to issue to Agreed 'alue :olicies under this tariff e)cepting for policies covering vintage cars as defined under above. or such policies, 4ndorsement IMT Q F is to be used.
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CONCLUSION AND ANALYSIS In the past few decades, Indian Automobile industry has witnessed the launch of various cars by domestic as well as international manufacturers. The e)pansion in automobile sector has indirectly led to the growth in Car insurance segment of auto insurance industry. As per Indian law insuring your car is compulsory. There are number of auto insurance companies in India which offer various car insurance plans. Many insurance firms even have tie$ups with car producers to ma"e their coverage simple and trouble$free. Most of us are very passionate about our cars and we love ta"ing good care of it. Car insurance can be e)tremely useful in case any damage is caused to your car and the e)penses incurred in repairs are high. India with about F@@ million middle class household shows a huge untapped potential for players in the insurance industry. aturation of mar"ets in many developed economies has made the Indian mar"et even more attractive for global insurance ma2ors. The insurance sector in India has come to a position of very high potential and competitiveness in the
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mar"et. Indians, have always seen life insurance as a ta) saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice. Consumers remain the most important centre of the insurance sector. After the entry of the foreign players the industry is seeing a lot of competition and thus improvement of the customer service in the industry. Computerisation of operations and updating of technology has become imperative in the current scenario. oreign players are bringing in international best practices in service through use of latest technologies The insurance agents still remain the main source through which insurance products are sold. The concept is very well established in the country li"e India but still the increasing use of other sources is imperative. At present the distribution channels that are available in the mar"et are listed below. • • • • •
3irect selling Corporate agents 0roup selling 1ro"ers and cooperative societies 1ancassurance
Customers have tremendous choice from a large variety of products from pure term ris"/ insurance to unit$lin"ed investment products. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. More customers are buying products and services based on their true needs and not 2ust traditional moneybac" policies, which is not considered very appropriate for long$term protection and savings. There is lots of saving and investment plans in the mar"et. However, there are still some "ey new products yet to be introduced $ e.g. health products. The meal consumer is now e)hibiting an increasing propensity for insurance products. A research conducted e)hibited that the mral consumers are willing to dole out anything between -s ,?@@ and -s F,=@@ as premium each year. In the insurance the awareness level for life insurance is the highest in meal India, but the consumers are also aware about motor, accidents and cattle insurance. In a study conducted by MA-T the results showed that nearly one third said that they had purchased some "ind of insurance with the ma)imum penetration s"ewed in favour of life insurance. The study also pointed out the private companies have huge tas" to play in creating awareness and credibility among the meat populace. The perceived benefits of buying a life policy range from security of income bul" return in future,
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daughterEs marriage, childrenEs education and good return on savings, in that order, the study adds. Third party insurance concept under motor vehicle act protects the interest of a third party who becomes the victim of accident or in2ury caused by the fault of the insured. o any liability arising on the insured by the third party is mitigated by the insurance company. Third party insurance is compulsory under the motor vehicles Act,;=<<. As the third party insurance is mandatory so it cannot be overridden be any clause in the insurance policy. It is the duty of insurers to satisfy the 2udgments and awards against persons insured in respect of third party ris"s. The insurance company is a Ktate within the meaning of article ;F of the Constitution. or this reason it cannot deny , discriminate or refuse third party insurance cover to tate run vehicles because their actions are guided by Article ;> of the Constitution.;> The compulsory nature of third party insurance is 2ustifiable as it ma"es the process more easy for the in2ured person to recover money from the insured. The defendant or wrongdoer cannot be e)empted on the ground that he has become insolvent. If he owns a vehicle he bound to pay to the in2ured directly or through his insurance company.
8. A5ata S&ng(, La! *4 Insuance
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BIBILOGRAPHY: BOO)S REFFERED+ •
Law of Motor Insurance by Mer"in, -obert and Hird, 5orma and tuart$mith,
•
eremy Motor 'ehicles Laws+ A Comprehensive 4)amination of Motor 'ehicles Law with pecial ocus on Law -elating to Insurance by #annan Motor Insurance Theory :ractice Fnd 4d. Authur by Cannar, #. 1.M.0andhi,KLaw of Torts$ with Law of tatutory CompensationE, 4astern 1oo" Company, Fnd edi,;;$@ Avtar ingh, KLaw of InsuranceE 4astern 1oo" Company, first edition,;>$;=
WEBSITES REFFERED
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http+77www.ey.com7:ublication7vwL6Assets7MotorRInsurance7SIL47Motor$ Insurance.pdf
