Chapter-1

Introduction
India is the 5th largest insurance market in Asia owing to its $30 billion insurance industry.
Moreover, with the growing economy leading to higher disposable incomes and savings and
increasing urbanization and awareness, the insurance is expected to grow radically in the near
future. Motor insurance is the largest business segment in the insurance sector in India as it
constitutes 44% of the total product mix which includes fire, marine and health insurance.
Motor insurance industry in India offers two kinds of coverage: comprehensive insurance and
third party insurance.

The entire road traffic in India, the registration of all types of vehicles plying on the roads,
the regulation of the drivers, road accidents, claims made by the victims of accidents and
their wards etc are all depend upon a single piece of legislation known as the Motor Vehicles
Act.

Originally enacted in the year 1939, during the British rule in India, the Motor Vehicles Act
has undergone a sea of changes between 1939 and 1988. The act has been amended
comprehensively in the year 1988 in tune with the welfare State ideals of India and in order
to meet the growing demands of its people. Almost all the states in India have enacted Motor
Vehicles Rules, to regulate the registration of vehicles and the issue of permits to the owners
of the vehicles and issue of license to the drivers.

The Motor Vehicles Act can be hailed as welfare legislation since it deals with
comprehensively about the road accidents involving motor vehicles and also enabling the
victims to claim compensation. The Motor Vehicles Act, 1988, between sections 165 and 176
comprehensively provides for the establishment of claims tribunals by the state governments,
the procedure for applying compensation by the victims, procedure and powers of the claim
tribunals in making the awards, liability of the insurance companies, enabling the state
government to make rules, awarding interest on the compensation amount, providing for
appeals etc.

The Motor Vehicles Act, 1988 has also done away with the provisions of limitation period of
six months to file a claim application for a victim. Taking into account the difficulties of a

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victim or his legal heirs in procuring the documents pertaining to an accident, the limitation
provision has been deleted, which is definitely a step forward in the right direction.

The characteristic feature of the act is that it accepts and fixes the cases of road accident
victims as tortuous liability upon the culprits who cause the road accidents. The insurance
companies are burdened with vicarious liability in paying compensation amount to the
victims, though they may not be directly causing any accident.

Vicarious Liability:

The law of tort has been used for many centuries to protect personal interests such as
property, reputation, body etc. It ensures justice is done by looking into the claimant's need
for compensation, which is paid by the defendant who has committed a breach of duty. The
general rule in tort law is that liability is personal, i.e., liability is generally linked to a breach
of one’s own duty and a person is liable for the wrongs committed by him only. However, in
certain scenarios, the law makes one person being liable for the harm caused by another,
because of some legally relevant relationship between the two. This is known as the Doctrine
of vicarious liability.

The word 'vicarious' is derived from the Latin word for 'change' or ‘alteration’. Vicarious
liability is an aberration from the norm of holding the tortfeasor liable for damage caused by
their own tortuous liability. It is also referred to as imputed negligence. Legal relationships
that can lead to imputed negligence include the relationship between parent and child,
husband and wife, owner of a vehicle and driver, and employer and employee etc. The
persons who are held vicariously liable need not be personally connected to the tort or be in
anyway responsible. Thus vicarious liability is a form of strict liability.

Many reasons have been advanced to justify this departure from the fault principle. It is
commonly said that the reasons behind the doctrine of vicarious liability are first, that the
employer is in a better position to absorb the legal costs either by purchasing insurance or
increasing his prices. Secondly, that the imposition of liability should encourage the
employer to ensure the highest possible safety standards in running his business. The Latin
maxim ‘qui facit per alium facit per se’ that means he who acts through another shall deemed

2
to have acted on his own and ‘respondent superior’ (“let the master answer”) is commonly
used in employer-employee relationships.

In Bartonshill Coal Co. v McGuire, Lord Chelmsford LC said: ‘every act which is done by an
employee in the course of his duty is regarded as done by his employer’s orders, and
consequently is the same as if it were his employer’s own act.’ It is said that the doctrine of
vicarious liability has not grown from any very clear, logical or legal principle but from
social convenience and rough justice. Another justification for it is that since the employer
makes profit from the employee’s activities, it is only reasonable that the he bear any losses
caused by the same. The most common example of vicarious liability is the liability of an
employer for the torts of his employees committed in the course of employment.

It is not necessary in such circumstances for the employer to have breached any duty that
was owed to the injured party, and therefore it operates as strict or no-fault liability. The most
important element to establishing a case for vicarious liability is that the wrongdoer be acting
as an employee or employee, and that the wrong done be connected to the employee’s course
of employment.

Chapter-2
Vicarious Liability In Motor Vehicles Act:

Vicarious liability:

Generally, a person becomes liable for a tort committed by him. But there are keratin cases in
which one person becomes liable for the tort committed by another. Such liability is called
“vicarious liability”. For instance: if A, the driver of a lorry commits an accident for which
B, the owner is held liable, the liability is called as vicarious liability.
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Extent of Vicarious Liability

The master (or employer) is liable for the torts committed by his servant (or employee) only
when it committed during the course of employment. It is important to note that the vicarious
liability of the employer is additional to the ‘primary’ liability of the employee for
negligence. Both are liable-‘jointly and severally’, as it is put. The common law implies into
the contract of employment a term to the effect that the employee will perform the contract
with reasonable care. On the basis of this term, the employer is entitled to recover from the
employee a contribution to any damages which the employer is liable to pay to the person
injured or killed.

If the employer was not negligent at all, it will be entitled to be fully indemnified by the
employee. There are three basic requirements to attribute liability to the employer. Firstly, it
must be established that the tort was committed by the employee; secondly, the relationship
between the master and employee should be established; thirdly, the tort must have been
committed in the course of employment.

Course of Employment

An employer will only be liable for torts which the employee commits in the course of
employment. Although this is a question of fact in each case, there is little consistency in the
decisions. It is therefore extremely difficult to state the law simply. Course of employment is
legal consideration of all circumstances which may occur in the performance of a person's
job, especially during a period of time where specific objectives are given by the employer to
the employee are being fulfilled. The course of employment encompasses the actual period of
employment and the period during which the employee, while on the employer's premises,
prepares to commence or to depart from work, such as by changing clothes. Employer-
sponsored recreational activities are also considered part of the course of employment when
4
organized, encouraged, or supported by the employer for business purposes, such as the
promotion of efficiency.

For an act to be considered within the course of employment it must either be authorized or
be so connected with an authorized act that it can be considered a mode, though an improper
mode, of performing it. . In other words, an act can be said to be within the
realm of “course of employment” if it is either an authorized act or a wrongful way of
doing an authorized act.

If an employee expressly authorizes an unlawful act, he or she will be primarily liable. The
position is more difficult in cases in which the employer is said to have authorized a
wrongful act by implication. This 'implied authority' approach seems to have lost currency
but it was accepted in the early 20th century and it was even then probably little more than a
means of justifying the outcome which the courts desired.

An employer will usually be liable for acts which are wrongful ways of
doing something authorized by the employer, even if the acts themselves were
expressly forbidden by the employer.

The court should determine the fundamental question of whether the wrongful act is
sufficiently related to conduct authorized by the employer to justify the imposition of
vicarious liability. Where there is a significant connection between the creation or
enhancement of a risk and the wrong that occurs, the employer can be held vicariously liable.

To determine the sufficiency of the connection, the following factors should be considered:

1. The opportunity afforded for the employee to abuse his power;

2. The extent to which the act is furthered by the employer's aims;
3. The extent to which the act is related to friction, confrontation, or any other
kind of tort
4. The extent of the power of the employee over the victim; and,
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 5. The vulnerability of the potential victims.

Unauthorized mode of doing authorized acts:

When the servant performs the work entrusted by authorized mode, still the master is liable.
Following instances come under unauthorized mode of doing.
1. Carelessness of servant
2. Mistake of servant
3. Willful wrong of servant
4. Fraud of servant
5. Negligent delegation of authority by servant
6. Theft by servant
7. Express prohibition
8. Lending of servant.

Carelessness of servant:
if the servant acts carelessly in performing the work and commits a tort thereby, the master is
liable.
Century Insurance Co. Ltd v. Northern Ireland Road Transport Board (1942) – The
defendant’s servant struck a match to light a cigarette while transferring petrol from the lorry
to a underground tank and threw it on the floor carelessly. An explosion took place and the
plaintiff’s property was destroyed. The defendant was held liable for careless performance by
servant.
Mistake of servant:
If the servant commits a tort, while performing the work, by mistake, the master is liable as
the mistake of fact is no defence.
Bayley v. Manchester, Sheffield and Lincolnshire Rly. Co (1872) – the defendant’s servant, a
railway porter pulled the plaintiff a passenger out of a train under a mistaken impression that
he boarded on a wrong train, and the plaintiff was injured. The defendant railway Co was
6
held liable.
Willful wrong of servant:
Sometimes, master gives certain instructions to the servant to be observed while performing
the work. If the servant willfully disobeys such instructions and commits a tort, the Master is
liable.
Limpus v. London General Omnibus co. (1862): in this case the defendant company
instructed their servants not to race with or overtake other omnibuses. Contrary to such
instructions the defendant’s servant drove across the road to obstruct plaintiff’s bus and
committed an accident. The defendant was held liable.
Fraud of servant:
The master is also liable for fraudulent acts done by servant for his own benefit.
Negligent Delegation of Authority by servant
The expression “delegation of authority” literally means transfer of power or entrusting of
work of another. Sometimes the servant may negligently delegate this work to another;
thereby tort may be committed. Then, the master is liable.

Beharilal v. Surinder Singh (1965); the driver of the lorry handed over steering wheel to the
cleaner who drove negligently and committed an accident. The defendant was held liable.
Theft by servant:
Earlier, theft by the servant was regarded outside the course of employment and Master was
held not liable. Now the master is liable.
Express prohibition:
It means prohibition of certain acts while performing the work authorized by the master. If
express prohibition were to be a defence every employer would escape from liability.
Lending of servant:
Sometimes. The master may lend his servant to another for a specific purpose. In such cases,
if the servant commits a tort in the course of employment, the question that arises is, who is
to be held liable i.e, whether the original master or the person to whom the servant is lent.
This question is to be decided depending upon the circumstances of the case. To determine
the liability, the following matters are taken into consideration.
• Who pays the servant?
• Who has an opportunity to supervise the work of servant?
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 • Who has power to punish or dismiss the servant?
• What machinery is used?
If the original master withdraws the control and supervision over his servant at the time of
lending, the new master is liable for the tort committed by the servant.
Niranjanlal Ramachandra v. Ramaswamy Bhagwan Singh (1952): it was held that the hirer of
a motor vehicle was liable on the ground that the principal master had completely withdrawn
his control over the servant.

Exceptions: when master is not liable

The master is exempted from vicarious liability under the following circumstances:
1. Outside the course of employment: if the tort committed by the servant does not
come within the purview of “in the course of employment”, the master is not
liable.
2. Lending of servant: when the master to another and withdraws control over him
at the time of lending, then the original master is not liable, but the new master is
liable.
3. Employment under compulsion: a master is not liable for the tort committed by
the servant who was employed under compulsion and against his will, the master
is not liable, as he is has no power of selection or control over the servant.
4. Doctrine of common employment: according to this doctrine, if the wrong doer
and the injured party are the servants of the same master, the master is exempted
form liability.

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9
Vicarious Liability and Third Party insurance cover:

The concept of Vicarious Liability is based on the phrases respondent superior1 and qui facit per
alium facit per se2. The reasoning behind vicarious liability is that “the master is expected to be
in a far better position for paying the damages than the servant.” There is a similar reasoning
used to justify necessary third party insurance. It is assumed that if provisions, in form of
insurance, are made in advance by a car owner for the injuries he may cause to a third party then
the likelihood of claimant recovering the needed damages is higher. It has been held that the
owner will be liable for the negligent actions of the persons who he allows to drive his car. This
was the case in Pushpabai Purshottam Udeji v. Ranjit Ginning and Pressing Co. Pvt. Ltd3 where
“the car met with an accident because of the negligence of the manager in driving the car and
Purshottam (a third party) travelling with him, died.” As a result, the defendant company was
held responsible for the negligent driving of its manager.

It was further seen in Guru Govekar v. Miss Filomena F. Lobo and Others4. In this case
the Supreme Court held that “the owner and his insurer are liable to a third party for injuries
sustained by negligent driving of an employee of a garage owner to whom the vehicle has been
delivered for repairs5.”

Fault and No-fault liability in third party insurance:

The Motor Vehicles Act, 1988 states that an insured vehicle i.e. his insurance company will have
to pay compensation to the injured party without any consideration of whether injured was at
fault or not. This is explained in Section 140(1)6 of Motor Vehicles act. Due to this irrespective

1 Respondent Superior: Let the one in the superior position be responsible

2 Qui facit per alium facit per se: He who acts through another acts himself

3 (1977) 2 SCC 745

4 1988 AIR 1332, 1988 SCR Supl. (1) 170

5 Singh, Justice GP. Ratanlal and Dhirajlal's The Law Of Torts. New Delhi: LexisNexis
Butterworths Wadhwa Nagpur, 2009, p.650

6 Section 140 Liability to pay compensation in certain cases on the principle of no fault: (1)
Where death or permanent disablement of any person has resulted from an accident arising
out of the use of a motor vehicle or motor vehicles, the 1 owner of the vehicle shall, or, as
the case may be, the owners of the vehicles shall, I jointly and severally, be liable to pay
compensation in respect of such death or disablement in accordance with the provisions of
this section.

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of the insured’s fault the insurance company has to pay. This concept is derived from the concept
of Strict or Absolute Liability in tort law which is considered strict or absolute because “it
relieves the claimant of the burden of showing fault.7”(Rogers, Seventeenth Edition, 2006) This
clearly portrays India’s Motor Vehicles Act as pro-victim. This stance is justified by stating that
“there is not injustice in awarding compensation against the person who caused the accident even
if he is not at fault, because, in most cases, he can get reimbursement from the insurer. The main
object of the law is to compensate the injured person and not to penalize the person causing the
accident.”8(India, 1972) In India 38% of the total motor insurance segment comprises of third
party insurance. However, 2/3 rd of the revenue of the industry is reserved for third party
segment. Moreover, in the fiscal year 2007-08, the overall loss ratio for third party insurance was
183%. This has made the insurance industry against giving third party only policies. However,
either permanent disablement or death needs to be proven before a victim can claim damages
under Section 140. The term permanent disablement has been defined in section 142 of the
Motor Vehicles Act, 1988 to constitute any of the following injuries:

• (a) Permanent privation of the sight of either eye or the hearing of either ear, or privation
of any member or joint; or

• (b) Destruction or permanent impairing of the powers of any member on joint; or

• (c) Permanent disfiguration of the head or face.

However, fault and no fault liability are differentiated by the upper cap on their damages. If the
fault of the driver is not proven then the claimant can claim up to Rs.50, 000 in case of death and
Rs.25, 000 in case of permanent disablement. (Motor Vehicles Act)However, in the case where
fault of the driver is proven the compensation amount under third party insurance can go up to
Rs.7, 50,000. The principle of no fault liability was first established in Gujarat State Road
Transport Corporation v. Ramanbhai Prabhatbhai in which the Supreme Court held that “Where
a pedestrian, without negligence on his part, is injured or killed by a motorist whether
negligently or not, he or his legal representatives, as the case may be, should be entitled to

7 WVH Rogers, Winfield & Jolowicz on Tort, Seventeenth Edition, Sweet and Maxwell Limited,
South Asian Edition, 2006,p.693

8 India, Law Commission of. 51st report on compensation for injuries caused by automobiles
in hit-and-run cases. New Delhi: Governement of India- Ministry of Law and Justice, 1972.

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recover damages if the principle of social justice should have any meaning at all.” (Gujarat State
Road Transport Corporation v. Ramanbhai Prabhatbhai) .

Negligence and Third party Insurance Cover:

“Negligence as a tort is a breach of duty to take care which results in damage to the claimant.”
(Rogers) Negligence has three ingredients: a legal duty to take care, breach of that duty and a
consequential damage to the claimant. Negligence has an important implication in third party
insurance. One of the most important functions of negligence in third party insurance is that it
helps in determining whether the principle of fault and no fault liability is to be applied. This
determination is vital as it can affect the amount of compensation received by the claimant.
Under Motor Vehicles Act, 1988 certain duties of care to be observed by the drivers of motor
vehicles are established. These are:

a) Duty to obey Driving regulations9

b) Duty to obey traffic signs10

c) Duty to drive vehicles with left hand control11

9 Section 118 Driving regulations: The Central Government may, by notification in the
Official Gazette, make regulations for the driving of motor vehicles.

10 Section 119 Duty to obey traffic signs: (1) Every driver of a motor vehicle shall drive the
vehicle in conformity with any indication given by mandatory traffic sign and in conformity
with the driving regulations made by the Central Government, and shall comply with all
directions given to him by any police officer for the time being engaged in the regulation of
traffic in any public place.(2) In this section "mandatory traffic sign" means a traffic sign
included in Part A of 1[The First Schedule], or any traffic sign of similar form (that is to say,
consisting of or including a circular disc displaying a device, word or figure and having a red
ground or border) placed or erected for the purpose of regulating motor vehicle traffic under
sub-section (1) of section 116.

11 Section120. Vehicles with left hand control: No person shall drive or cause or allow to be
driven in any public place any motor vehicle with a left-hand steering control unless it is
equipped with a mechanical or electrical signaling device of a prescribed nature and in
working order.

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d) Duty to observe safety measures for drivers and pillion riders12

e) Duty to produce license and certificate or registration13

f) Duty of driver to stop in certain cases14

g) Duty of driver in case of accident and injury to a person15

12 Section 128 Safety measures for drivers and pillion riders: (1) No driver of a two-wheeled
motor cycle shall carry more than one person in addition to himself on the motor cycle and
no such person shall be carried otherwise than sitting on a proper seat securely fixed to the
motor cycle behind the driver's seat with appropriate safety measures.(2) In addition to the
safety measures mentioned in sub-section (1), the Central Government may, prescribe other
safety measures for the drivers of two-wheeled motor cycles and pillion riders thereon.

13

Section 130 Duty to produce license and certificate of registration: (1) The driver of a motor
vehicle in any public place shall, on demand by any police officer in uniform, produce his
license for examination

14 Section132. Duty of driver to stop in certain cases: (1) The driver of a motor vehicle shall
cause the vehicle to stop and remain stationary so long as [may for such reasonable time as
may be necessary, but not exceeding twenty-four hours],-[(a) when required to do so by any
police officer not below the rank of a Sub-Inspector in uniform, in the event of the vehicle
being involved in the occurrence of an accident to a person, animal or vehicle or of damage
to property, or](b) when required to do so by any person in charge of an animal if such
person apprehends that the animal is, or being alarmed by the vehicle will become,
unmanageable.

15 Section 134 Duty of driver in case of accident and injury to a person: When any person
is injured or any property of a third party is damaged, as a result of an accident in which a
motor vehicle is involved, the driver of the vehicle or other person in charge of the vehicle
shall- (a) unless it is not practicable to do so on account of mob fury or any other reason
beyond his control, take all reasonable steps to secure medical attention for the injured
person,[by conveying him to the nearest medical practitioner or hospital, and it shall be the
duty of every registered medical practitioner or the doctor on the duty in the hospital
immediately to attend to the injured person and render medical aid or treatment without
waiting for any procedural formalities], unless the injured person or his guardian, in case he
is a minor, desires otherwise; (b) give on demand by a police officer any information
required by him, or, if no police officer is present, report the circumstances of the
occurrence, including the circumstances, if any, for not taking reasonable steps to secure
medical attention as required under clause (a), at the nearest police station as soon as

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h) Duty to allow inspection of vehicle involved in accident.16

If any of the above mentioned duties are breached and claimant suffers damages as a result of
that breach than the case can be qualified as one involving fault liability. An instance of such
liability is the case of Minu B. Mehta v. Balkrishna Ramchandra Nayan17 where the court
holding that the driver was liable for negligence said that the owners need to prove that “despite
taking all reasonable care a mechanical defect remained hidden” which caused the accident
otherwise it will assumed that the “accident took place due to rash and negligent driving18.” It
has been argued that the pro victim nature of tort law has increased the demand for third party
insurance because people know that during the occurrence of an accident if they cause an injury
they will be liable to pay damages. As a result of this they opt for insurance so that their
insurance company can cover these damages. However, because they know that their damages
are being covered by the insurance company their “incentive to exercise due care is reduced” and
this causes more negligence and thus more accidents. This is referred to as the moral hazard in
insurance.

possible, and in any case within twenty-four hours of the occurrence; (c) give the following
information in writing to the insurer, who has issued the certificates of insurance, about the
occurrence of the accident, namely:- (i) insurance policy number and period of its validity;
(ii) date, time and place of accident; (iii) particulars of the persons injured or killed in the
accident; (iv) name of the driver and the particulars of his driving license.

16 Section 136 Inspection of vehicle involved in accident: When any accident occurs in
which a motor vehicle is involved, any person authorized in this behalf by the State
Government may, on production if so required of his authority, inspect the vehicle and for
that purpose may enter at any reasonable time any premises where the vehicle may be, and
may remove the vehicle for examination:
Provided that the place to which the vehicle is so removed shall be intimated to the owner of
the vehicle and the vehicle shall be returned [after completion of the formalities to the
owner, driver or the person in charge of the vehicle within twenty-four hours].

17 (1977) 2 SCC 441

18 Kailasam J, Minu B. Mehta v. Balkrishna Ramchandra Nayan

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S. 140.- Liability to pay compensation in certain cases on the principle of no fault.

(1) Where the death or permanent disablement of any person has resulted from an accident
arising out of the use of a motor vehicle or motor vehicles, the owner of the vehicle shall, or, as
the case may be, the owners of the vehicles shall, jointly and severally, be liable to pay
compensation in respect of such death or disablement in accordance with the provisions of this
section.

(2) The amount of compensation which shall be payable under sub- section (1) in respect of the
death of any person shall be a fixed sum of fifty thousand rupees and the amount of
compensation payable under that sub- section in respect of the permanent disablement of any
person shall be a fixed sum of twenty five thousand hundred rupees.

(3) In any claim for compensation under sub- section (1), the claimant shall not be required to
plead and establish that the death or permanent disablement in respect of which the claim has
been made was due to any wrongful act, neglect or default of the owner or owners of the vehicle
or vehicles concerned or of any other person.

(4) A claim for compensation under sub- section (1) shall not be defeated by reason of any
wrongful act, neglect or default of the person in respect of whose death or permanent
disablement the claim has been made nor shall the quantum of compensation recoverable respect
of such death or permanent disablement be reduced on the of the share of such person in the
responsibility for such death or permanent disablement. 140B Provisions as to other right to
claim compensation for death or permanent disablement. (1) The right to claim compensation
under section 141 in respect of death or permanent disablement of any person shall be in addition
to any other right (hereafter in this section referred to as the right on the principle of fault) to
claim compensation in respect thereof under any other provision of this Act or of any other law
for the time being in force.

(2) A claim for compensation under section 141 in respect of, death or permanent disablement of
any person shall be disposed of as expeditiously as possible and where compensation is claimed
in' respect of such death or permanent disablement under section 141 and also in pursuance of
any right on the principle of fault, the claim for compensation under section 141 shall be
disposed of as aforesaid in the first place.

(3) Notwithstanding anything contained in sub- section (1), where in respect of the death or
permanent disablement of any person, the person liable to pay compensation under section 141 is

15
also liable to pay compensation in accordance with tile right oil the principle of fault, the person
so liable shall pay the first- mentioned compensation and-

(a) if the amount of the first- mentioned compensation is less than the amount of the second-
mentioned compensation, he shall be liable to pay (in addition to the first- mentioned
compensation) only so much of the second- mentioned compensation as is equal to the amount
by which it exceeds the first- mentioned compensation:

(b) If the amount of the first- mentioned compensation is equal to or less than the amount of the
second- mentioned compensation, he shall not be liable to pay the second- mentioned
compensation.

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 Chapter-3

Land Mark Cases on Vicarious Liability

New India Assurance Co. Ltd. v. Kaliathal And Ors. on 6/6/2000

This appeal has arisen in this way:

One Gopalsamy, aged about 44 years, died in a road accident on 25.2.92 involving a tractor. At
the relevant time Gopalsamy was walking on the road and the tractor hit him, as a result of which
Gopalsamy died. Gopalsamy happens to be the owner of the ill-fated tractor which was driven by
his own servant, namely, the driver. The legal representatives of Gopalsamy claimed Rs. 6,
00,000 as compensation.

The insurance company vehemently opposed the claim petition alleging that Gopalsamy was the
insured and the insurance policy covers only the third party's risk and not the risk to life of the
insured himself and, therefore, it is not liable.

The Tribunal, after inquiry, came to the conclusion that the accident was due to rash and
negligent driving of the tractor driver. It also concluded that though Gopalsamy was the insured,
since he was hit by the tractor while he was walking in the street, he should be construed as a
third party and accordingly, Tribunal awarded Rs. 1, 40,000 as compensation. Aggrieved by the
award, the insurance company has come forward with the instant civil miscellaneous appeal.

The only question that arises in this appeal is whether the legal representatives of the insured
can claim compensation from the insurer?

Vicarious liability is the liability of the master for the act of the servant done in the course of his
employment. In case of a motor accident, if negligence of the driver results in causing injury to a
third person, then the master is liable for damages to the third person who has sustained loss. By
a contract of insurance, a policy is issued to the owner under which the insurance company

17
undertakes to indemnify the owner for the amount of loss or damage he suffered as a result of his
servant's act.

As per the provisions of Section 147 of the Motor Vehicles Act, the insurer is liable to
indemnify any liability which may be incurred by the insured. It is needless to point out that
every liability is preferable to a corresponding right, but both the liability and right would not
vest in one and the same person. Of course a comprehensive policy entitles the owner to claim
reimbursement of the entire amount of loss or damage suffered by him due to the damage caused
to his vehicle. Section 147 of the Motor Vehicles Act reads as under:

147. Requirements of policies and limits of liability.-

(1) In order to comply with the requirements of this Chapter, a policy of insurance must be a
policy which,-

(a) Is issued by a person who is an authorized insurer; and

(b) Insures the person or classes of persons specified in the policy to the extent specified in Sub-
section (2),-

(i) against any liability which may be incurred by him in respect of the death of or bodily injury
to any person, including, owner of the goods or his authorized representative carried in the
vehicle or damage to any property of a third party caused by or arising out of the use of the
vehicle in a public place;

(ii) Against the death of or bodily injury to any passenger of a public service vehicle caused by
or arising out of the use of the vehicle in a public place:

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Provided that a policy shall not be required-

(i) to cover liability in respect of the death, arising out of and in the course of his employment, of
the employee of a person insured by the policy or in respect of bodily injury sustained by such an
employee arising out of and in the course of his employment other than a liability arising under
the Workmen's Compensation Act, 1923 (8 of 1923), in respect of the death of, or bodily injury
to, any such employee-

(a) Engaged in driving the vehicle; or

(b) If it is a public service vehicle engaged as a conductor of the vehicle or in examining tickets
on the vehicle; or

(c) If it is a goods carriage, being carried in the vehicle; or

(ii) To cover any contractual liability.

Explanation.-For the removal of doubts, it is hereby declared that the death of or bodily injury to
any person or damage to any property of a third party shall be deemed to have been caused by or
to have arisen out of, the use of a vehicle in a public place notwithstanding that the person who is
dead or injured or the property which is damaged was not in a public place at the time of the
accident, if the act or omission which led to the accident occurred in a public place.

Where a cover note issued by the insurer under the provisions of this Chapter or the rules made
there under is not followed by a policy of insurance within the prescribed time, the insurer shall,
within seven days of the expiry of the period of the validity of the cover note, notify the fact to
the registering authority in whose records the vehicle to which the cover note relates has been
registered or to such other authority as the State Government may prescribe.

Notwithstanding anything contained in any law for the time being in force, an insurer issuing a
policy of insurance under this section shall be liable to indemnify the person or classes of
persons specified in the policy in respect of any liability which the policy purports to cover in the
case of that person or those classes of persons.

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There is use of the words 'incurred by him'. The word 'him' refers to the insured. Therefore, the
insurer is liable to indemnify the liability of the owner. Any contract of indemnity would last till
the lifetime of either of the contracting parties. With the death of the owner, the policy comes to
an end and, therefore, the insurance company is not liable to compensate for the loss sustained by
the third person when the owner dies. Thus, when the insured is dead, then the question of
indemnifying liability of the deceased insured does not arise. Therefore, the liability does not
extend to the heirs of the deceased. It would thus appear that even in case of third party's claim,
once the insured dies in the same accident, the third party does not have a claim against the
insurance company, because the liability of the owner ceases.

Held that, Gopalsamy was a third party and, therefore, the insurance company is liable. The
Tribunal has forgotten for a moment that the liability of the insurance company came to a close
under the contract entered into between the deceased and the insurance company and, therefore,
the deceased cannot be treated as a third party, for his heirs to claim compensation.

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Haji zakaria v. Naoshir cama

AIR 1976 AP 171

In this case the deceased was hit by the car being driven by the heir of the person who owned the
car and when this car met with an accident with the scooter the person riding the scooter died
instantaneously. The family of the deceased person asked for a compensation of Rs. 453222. The
respondents in this case are the insurance company and the person who was driving the car.

The insurance company took a standing that the insurance of the car was for one year
commencing from 10-12-1966. According to it, however the policy automatically lapsed with the
death of the insured viz N.C. Cama. Consequently, it is not liable to any action for damages by
third parties for injuries caused by rash and negligent driving of the car on a date subsequent in
the death of the insured.

There is no cover in the policy by subsequent fresh insurance with the insurance company
covering the liability in favour of the 1st respondent and unless and until he enters into a fresh
agreement with the 1st respondent, its liability to pay the compensation does not continue after
the death of the insured. What was argued upon in the policy is only a personal indemnity to the
insured and on his death that has become void and inoperative.

It is found that the petitioners are the heirs and legal representatives of the deceased and that the
result of the criminal case acquitting the 1st respondent could not be ignored. However as there
was no adequate proof that the 1st respondent had rashly and negligently driving the car at the
time of the accident. On the question of the liability of the insurance company, the tribunal said
that as the policy was issued under the name of N.C. Cama who is dead and thus the policy will
not ensure benefits to the 1st respondent as the death put an end to the policy.

As a result of these findings the tribunal concludes that the petitioners have failed to prove that
the 1st respondent was liable for causing the death of the deceased and so, are not entitled to any
compensation. For that reason as well as for the reason that the policy had lapsed with the death
of the original owner, the insurance company is also not liable

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 Conclusion

We have seen the meaning of vicarious liability and its application under tort law under many
circumstances as mentioned above.

Vicarious liability is a legal concept which refers to one party being held liable for the injury or
damage sustained by another party, in spite of the fact that they had no active involvement in the
incident. The intent behind vicarious liability is to hold the proper party accountable when harm
is committed. The victim needs compensation and the law provides so by applying the principle
of ‘qui facit per alium facit per se’ that means he who acts through another shall deemed to have
acted on his own, the courts hold the employer or principal or partner responsible as per the
situation. We have looked at a variety of situations in which a party, including contractors,
parents and employers, may be charged with vicarious liability.

An employer is liable for the torts committed by his employees during the course
of employment. Several reasons have been advanced as a justification for the
imposition of vicarious liability. It is because the employer has better financial capacity to
compensate the victim. It encourages the employer to provide safe working conditions that are
accident free to the employees and most importantly, since the employer derives the benefits of
the actions of the employee, it is only fair that he bears the brunt if any loss has occurred due to
the same.

An employer can be held liable for the torts of the employee only if the following claims are
established. Firstly, a tort must be committed. Secondly, the tortfeasor must be an employee and
lastly, the tort must have been committed in the “course of employment”

Once the first claim is established, one has to prove that the worker was indeed
a servant/employee and not an independent contractor (employers are not liable for
torts committed by independent contractors). There are many tests suggested by many different
legal scholars to determine the same. Some of these tests are the control test, which checks
whether the employer had the control of determining the method of performance of the work of
the employee.

Another test is the hire and fire test which is used in modern times especially for torts committed
by professionals where there is no way to control the method of doing work. The other tests

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include the “integral part of business” test, indicia of employment etc. By these entire tests one
can determine if the worker is under a contract of service or contract for service, and the
employer is liable only if the first is proved.

Applicability of vicarious liability is possible only when “in the course of employment” criterion
is satisfied. Although essential, this criterion has expanded to the point of allowing claims for
vicarious liability in cases where liability would not have arguably been imposed. This criterion
is a question of fact, and it is immaterial whether the wrong committed by the employee was
authorized or not. Course of employment can be defined as the activities engaged in, the
circumstances that exist, and the events that occur that are normally part of an employee’s job,
especially those directly related to the work that the employee was hired to do. The time that the
employee takes to complete his or her assigned tasks also comes under this. It is important to
note that an employer cannot avoid liability if an employee acts in a way that could be described
as “incidental” to his employment and the duties to which he is entrusted with.

We saw instances where the master can be held liable for the careless and negligent actions of
the servant, thereby resulting in injury or damage to a third party. If this action of the servant was
committed during the course of employment, then the master is held accountable and has to pay
damages.

Thus, vicarious liability is a theory that is aimed at providing remedy to the sufferers of damage
in accordance with the principle of “justice, equity and good conscience”

BIBILOGRAPHY

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Law Commission of India. 51st report on compensation for injuries caused by automobiles in
hit-and-run cases. New Delhi: Governement of India- Ministry of Law and Justice, 1972.

Kannan, Justice K. "Motor Insurance: New Imperatives for Reforms." Halsbury's Law Monthly
July 2009.

"Motor Vehicles Act." 1988.

Lectures on Torts by Dr. Rega Surya Rao.

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