EXECUTIVE SUMMARY

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 injuries 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)
injure who claims damages against you is the third party.

There are two quite different kinds of insurance involved in the damages
system. One is Third Party liability insurance, which is just called liability
insurance by insurance companies and the other one is first party insurance.

There are two quite different kinds of insurance involved in the damages
system. One is Third Party liability insurance, which is just called liability
insurance by insurance companies and the other one is first party insurance.

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 injuries 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)
injure who claims damages against you is the third party

1
OBJECTIVES OF THE STUDY

 To study the concept of Third Party Insurance

 To evaluate the sound Third Party Insurance
 To analyze the various principles and recommendations on improving
Third Party Insurance Business
 To know major players in Third Party Insurance
 To better understand consumer attitudes around their car insurance.

 The research project focused on uncovering attitudes towards car

insurance, with specific focus on potential exposure to financial loss.

 The purpose of this study is to analyze, find out and relate the various
benefits & Features of Third party Insurance Policy. Creating Awareness
on:
 Services Provided
 Draw Backs
 Benefits
 Conditions
 Claims etc.

LIMITATION OF THE STUDY

Even though every effort was made to complete all areas of the project, it
still has its own limitations.
 Due to time constraints the sample was restricted to 50 respondents

 The time factor was not in favor as the period of study was limited to
one month

 The respondents were willing to provide information. They were

free to share their information

 The tools used for analysis has its own limitations

2
RESEARCH METHODOLY

Sources Of data
 The two most important techniques are primary data collection and
secondary data collection .
 This projects is from purely from secondary data
 Secondary data will be collected with a help of books, newspaper
articles, magazines and the internet.

http://understandinsurance.com.au/assets/media/20140703_Understand_Car
%20Insurance_Report.pdf

3
INTRODUCTION

In India, under the provisions of the Motor Vehicles Act, 1988, it is

mandatory that every vehicle should have a valid Insurance to drive on the
road. Any vehicle used for social, domestic and pleasure purpose and for the
insurer's business motor purpose should be insured.

Insurance is a contract whereby one party, the insurer, undertakes in return

for a consideration, the premium , to pay the other, the insured or assured, a
sum of money in the event of the happening of a , or one of various
,specified uncertain events.

Insurance developed from the fourteenth century as a means of spreading

huge risks attendant on early maritime enterprises; life and fire insurance
developed later. The main classes of insurance are life and other personal
insurance, marine insurance, accident or property insurance and liability
insurance when the sum becomes payable when legal liability is incurred as
for personal injuries or professional negligence to another.

Motor third-party insurance or third-party liability cover, which is

sometimes also referred to as the 'act only' cover, is a statutory requirement
under the Motor Vehicles Act. It is referred to as a 'third-party' cover since
the beneficiary of the policy is someone other than the two parties involved
in the contract i.e. the insured and the insurance company. The policy does
not provide any benefit to the insured; however it covers the insured's legal
liability for death/disability of third party loss or damage to third party
property.

4
This paper is an endeavour to explain the relevance of third party insurance?
What is third party insurance? Who is a third party? Why third party
insurance is compulsory for all vehicles under the Motor Vehicles Act,
1988? What are the salient features of third party insurance? These aspects
of the third party insurance have been explained with the help of various
case laws.

5
MEANING AND DEFINITION OF THIRD PARTY
INSURANCE

An insurance policy purchased for protection against the actions of another

party. Third-party insurance is purchased by the insured (first party) from an
insurance company (second party) for protection against another party's
claims (third party).
There are two quite different kinds of insurance involved in the damages
system. One is Third Party liability insurance, which is just called liability
insurance by insurance companies and the other one is first party insurance.
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 injuries 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)
injure who claims damages against you is the third party.

What Motor Insurance is:

Motor insurance gives protection to the vehicle

owner against
(I). damages to his/her vehicle and
(ii). pays for any Third Party Liability determined as per law against the
owner of the vehicle. Third Party Insurance is a statutory requirement. The
owner of the vehicle is legally liable for any injury or damage to third party
life or property caused by or arising out of the use of the vehicle in a public
place. Driving a motor vehicle without insurance in a public place is
a punishable offence in terms of the Motor Vehicles Act, 1988.

6
HISTORICAL BACKGROUND OF THIRD PARTY
INSURANCE

Chapter VIII of the 1939 Act and Chapter XI of the 1988 Act have been
enacted on the pattern of several English statutes which is evident from the
report of ‘Motor Vehicles Insurance Committee,1936-1937’In order to find
out the real intention for enacting Ss.96 of the 1939 Act which corresponds
to Ss.149 of the 1988 Act, it is relevant to trace the historical development of
the law for compulsory third –party insurance in England. Prior to 1930,
there was no law of compulsory insurance in respect of third party rights in
England. As and when an accident took place an injured used to bring action
against the motorist for recovery of damages. But in many cases it was
found that the owner of the offending vehicle had no means to pay to the
injured or the dependant of the deceased and in such a situation the
claimants were unable to recover damages. It is under such circumstances
that various legislations were enacted. To meet the situation it is for the first
time ‘the Third Parties’ Rights Against Insurance Act,1930’ was enacted in
England. The provision of this Act found place in S.97 of the 1939 Act
which gave to the third party a right to sue insurer directly. Subsequently,
‘the road traffic Act,1930’ was enacted which provided for compulsory
insurance for Motor Vehicles. The provisions of this Act were engrafted in
S.95 of the 1939 Act and S.146 of the 1988 Act. It is relevant that under
S.38 of the English Act of 1930, certain conditions of insurance policy were
made ineffective so far as third parties were concerned .The object behind
the provision was that the third party should not suffer on account of failure
of the insured to comply with those terms of the insurance policy.

7
Subsequently in 1934, the second Road Traffic Act was enacted. The object
of this legislation was to satisfy the liability of the insured.

Under this enactment three actions were provided the first was to satisfy the
award passed against the insured. The second was that, in case the insurer
did not discharge its liability the claimant had the right to execute decree
against the insurer. However, in certain events, namely, what was provided
in section Ss.96(2)(a) which corresponds to section 149 (2)(a) of the 1988
Act, the insurer could defend his liability. The third action provided for was
contained in S.10(3) of the Road Traffic Act. Under this provision, the
insurer could defend his liability to satisfy decree on the ground that
insurance policy was obtained due to misrepresentation or fraud. This
provision also found place in S.149 (2)(b) of the 1988 Act. While enacting
the 1939 Act and the 1988 Act, all the three actions were engrafted in S.96
of the 1939 Act and Section 149 of the 1988 Act. However neither the 1939
Act, nor the 1988 Act conferred greater rights on the insurer than what had
been conferred in English Law. Thus, in common law, an insurer was not
permitted to contest a claim of a claimant on merits, i.e. offending vehicle
was not negligent or there was contributory negligence. The insurer could
contest the claim only on statutory defences specified for in the statute. Thus
while enacting Chapter VIII of the 1939 Act or Chapter XI of the 1988 Act,
the intention of the legislature was to protect third party rights and not the
insurers even though they may be nationalized companies.”

Prohibition on use of motor vehicles without statutory insurance policy,

object of is to enable the third party suffering injuries from use of the motor
vehicle to get damages irrespective of the financial capacity or solvency of
the driver or the own
8
SALIENT FEATURES OF THIRD PARTY INSURANCE

1.Third party insurance is compulsory for all motor vehicles. In G.Govindan

New India Assurance Co. Ltd.,Third party risks insurance is mandatory
under the statute .This provision cannot be overridden by any clause in the
insurance policy.

2.Third party insurance does not cover injuries to the insured himself but to
the rest of the world who is injured by the insured.

3. Beneficiary of third party insurance is the injured 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.

4.In third party policies the premiums do not vary with the value of what is
being insured because what is insured is the ‘legal liability’ and it is not
possible to know in advance what that liability will be.

5.Third party insurance is almost entirely fault-based.(means you have to

prove the fault of the insured first and also that injury occurred from the
fault of the insured to claim damages from him)

6. The third party insurance is unpopular with insurance companies as

compared to first party insurance, because they never know the maximum
amounts they will have to pay under third party policies.

9
PRINCIPLES OF THIRD PARTY INSURANCE
There are several general principles which apply to all insurance policy
contracts, including those relating to construction.
1. Utmost good faith:
Most commercial contracts are subject to the principle of caveat emptor
(let the buyer beware). Under these contracts, there is no need to disclose
information that is not asked for. Insurance contracts are different in that
they are based on facts which are within the knowledge of the insured, but
of which insurers will not generally be aware. As the insurer is at a
disadvantage, the law imposes a duty of ‘utmost good faith’.
The principle of utmost good faith requires anyone seeking insurance to
disclose all relevant facts. These are facts that would influence the
judgement of a prudent underwriter in fixing the premium or determining
whether they will take on the risk. Where material non-disclosure can be
proved, a contract can be voided.
2. Proximate cause:
An insurance policy will define the perils or insured events that cover is
provided for. For example, a building insurance policy will provide
various covers as standard – such as fire, lightning strikes and earthquakes
– and cover for additional risks, such as escape of water, storm or
accidental damage, can be requested.
All contracts are subject to terms and conditions that will exclude certain
causes of loss. Therefore, in the event of a claim, it is important to
ascertain the cause of the loss in order to determine if that cause is insured
or excluded.

10
There may be multiple elements involved in a claim, so it is the
‘proximate cause’ that is taken into account. The proximate cause is the
dominant cause that sets in play a chain of events. For example, if
lightning damaged a building and weakened a wall, following which the
weakened wall was blown down by high winds, lightning would be
considered the proximate cause.
3.Insurable Interest:
It is a fundamental requirement of an insurance contract that a person
entering in to it has an insurable interest in the subject-matter of that
insurance. For the purposes of construction or property insurance, if a
party has no interest or no prospect of an interest, the insurance cannot be
enforced.
The concept of insurable interest is dealt with by the Marine Insurance
Act 1906 which applies to marine and non-marine insurance contracts
including construction contracts.
Within construction and property insurance contracts a number of parties
will typically to be named or identified as insured on the face of the
policy, however, if any of the insured have no insurable interest at the
time of the loss they will have no cover under the policy.
4.Joint names insurance:
A common requirement of construction contracts is to take out insurance
in joint names. This means that the interests of the various parties are
covered under a single policy. Joint names insurance includes both joint
insurance and composite insurance - often referred to as co-insurance.
Joint insurance is insurance which covers under a single policy the

11
identical interests of two or more parties in the subject-matter of the
insurance- for example spouses interests in a marital home.
Composite insurance is insurance which covers under a single policy the
respective (and commonly differing) interests of multiple parties in the
subject-matter of the insurance for example contractor and subcontractor.
Many standard form construction contracts stipulate that a joint names
insurance policy should be executed, usually determining by whom, when
and for what purpose - for example see the JCT suite of contracts. These
types of policy are popular and they are often executed even where parties
are not compelled to do so by the particular contract because of their
convenience compared to individual policies, particularly where multiple
parties are covered under the one policy.
Under a joint names insurance policy, the insurer will have no right of
subrogation against any of the insured parties, even where an insured
party has caused the loss for which the insurer has had to pay out.

5. Anatomy of an insurance policy:

A construction insurance policy wording can differ quite considerably
depending on the nature of the works being undertaken, the parties
involved and their respective intentions. However, a typical construction
insurance policy will contain the following components somewhere
within the policy:
 The Recital Clause
 The Operative Clause
 The Schedule
 A Definitions section

12
  A Liability section
 A Consequential Loss section
 General Exclusions and Exceptions
 General Conditions

6. Double insurance:
Double insurance is where the same party is insured under two or more
policies in respect of the same subject-matter (whether that be property or
liability) against the same risks and covering the same interest The scope
of the two overlapping policies need not be exactly the same.
In order to combat the possibility of claims from other insurers many
insurers insert protection clauses in their policies. These can include:
 Rateable proportion clauses
 Escape clauses, both basic and with an excess provision
 Double insurance notification clauses
Complex construction projects which usually have a series of policies in
place at any one time often give rise to double insurance problems. If
more than one policy covers a particular loss, an insured will have to
decide which policy to claim under. In this situation, the insurer who has
to pay out will often look to the other insurer for a contribution.
7. Subrogration:In insurance law, subrogation is the name given to the
right of the insurer, on paying a claim (or agreeing to pay a claim), to be
put in the place of the insured to recover sums paid. The insurer is entitled
to pursue a claim (of any nature) which the insured is entitled to bring
against third parties who have caused its loss. The aim of subrogation is to

13
prevent the insured from being overcompensated by claiming from the
insurer and a third party wrongdoer.
In subrogation proceedings the claim will be made in the name of the
insured who will be obliged to comply with and take all necessary steps
that are required by a litigant in the course of litigation.
The rules of subrogation are different under joint names policies and this
is particularly relevant to construction contracts. In a joint names policy
an insurer cannot, in normal circumstances, exercise rights of subrogation
against an insured under a policy in which the insured has the benefit of
cover which protects it against the very same loss or damage which forms
the basis of the claim which insurers intend to pursue.
Waiver of subrogation clauses and cross liability clauses are common
clauses found in construction insurance provisions .

14
 COMPANY UNDER THIRD PARTY INSURANCE—
BAJAJ ALLIANZ
Motor Third- Party Insurance
Motor third-party insurance or third-party liability cover, which is
sometimes also referred to as the 'act only' cover, is a statutory
requirement under the Motor Vehicles Act.
It is referred to as a 'third-party' cover since the beneficiary of the policy
is someone other than the two parties involved in the contract that is, the
insured and the insurance company. The policy does not provide any
benefit to the insured; however it covers the insured's legal liability for
death/disability of third party loss or damage to third party property.
How Does it Work?
Third Party Car Insurance Policy
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 injuries or damage done to a third party. The insured is first party,
the insurance company is the second party, and the person the insured injure
or who claims damages is the third party.

What do We get?
With a Bajaj Allianz third party only car insurance policy you get:
 Cover for causing accidental injury or death to other people
 Cover for accidental damage to other people's property

15
What is not Covered?

Please remember that our third party only car insurance policy will not cover
the cost of any damage to your vehicle or belongings in the event of an
accident. It will also not cover you if your car or belongings are stolen or
destroyed.

16
Two wheeler Insurance - Long Term Policy
Long Term Two Wheeler Insurance Online

Our two wheeler insurance policy covers you against any damages that may occur to
your bike or scooter due to unforeseen events. You do not have to worry about
exceptionally high costs that may arise due to damage caused to your two-wheeler due to
natural disaster, accidents and so on.
We understand that you have a lot to remember and we don't want your two wheeler
insurance policy to be one of them. Hence, we have introduced a new long term policy
that will cover your two wheeler for upto three consecutive years. Apart from that, you
also stay unaffected by the premium changes during your long term policy period. Simply
insure with us once and stay worry free for 3 consecutive years.

Key Benefits of Two Wheeler Long Term Policy

 Insure once and stay insured for 3 years.

 No change in the third party premium during policy period.
 Additional benefits at the time of renewal.
 NCB reduces but does not become nil.
 Proportional refund provision even after claim during policy period.
Coverages

 Loss or damage to your two wheeler due tonatural calamities: Your bike insurance
policy covers damage due to fire, explosion, self-ignition or lightning, earthquake, flood,
typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide and
rockslide.
 Loss or damage to your two wheeler due to accidents: Burglary, theft, riot, strike,
malicious act, and accident by external means, terrorist activity, and any damage in
transit by road, rail, inland waterway, lift, elevator or air is covered by two wheeler
insurance.
 Personal Accident Cover: With bike insurance get coverage of Rs.1 lakh for the
individual owner/driver of the vehicle while driving or travelling and mounting or
dismounting from the two wheeler. Optional personal accident covers for pillion riders /
unnamed hirers are also available with our two wheeler insurance.
 Third Party Legal Liability: Protection against legal liability due to accidental damages
resulting in the permanent injury or death of a person, and damage caused to the
surrounding property.

Add-on covers
Our long term two wheeler policy comes with 24X7 Spot assistance add-on cover
offering you complete protection. They are as follows:-

 Flat battery
 Spare keys

17
  Flattyre

 Minor repairs
 Fuel assistance
 Taxi benefits

 Accommodation benefits
 Legal advice
 Towing facility, etc.

Plans available

Features 3 years Long Term Package Policy* 1 Year Package Policy

Renewal frequency Once in three years Every year
Coverage period Three years One year
Premium hikes No effect in the TP premium during policy period Every year TP premium
increases

NCB benefit Additional benefit at the time of renewal As per tariff

NCB benefit after a NCB gets reduced but does not become nil NCB become 0 after one
claim claim

Mid-term cancellation Proportional refund provision even after claim No refund in case of any
refund during policy period claim

Exclusions

 Normal wear and tear and general ageing of the vehicle.

 Mechanical/electrical breakdown.
 Vehicles being used otherwise than in accordance with limitations as to use.
 Damage to/by a person driving the vehicle without a valid license.
 Damage to/by a person driving the vehicle under the influence of drugs or liquor.
 Loss/damage due to war, mutiny or nuclear risk.
 Loss or damage to accessories due toburglary, house breaking or theft unless the vehicle
is stolen at the same time
 Wear and tear of consumables like tyres and tubes unless the vehicle is damaged at the
same time, in which case the liability of the company shall be limited to 50% of the cost
of replacement.

18
MOTOR VEHICLES ACTS, 1939 AND 1988

Motor Vehicles Act,1939 (4 of 1939) consolidates and amends the law

relating to motor vehicles. This has been amended several times to keep it up
to date.The need was, however felt that this Act should, now take into
account also changes in the road transport technology, pattern of passenger
and freight movements, development of the road network in the country and
particularly the improved techniques in the motor vehicles management.

The Motor Vehicles Act,1988 which came into force on 1st July,1988 and
which is divided into XIV Chapters, 217 Sections and two schedules, makes
it compulsory for every motor vehicle to be insured. Chapters X,XI and XII
of the 1988 Act deals with compensation provisions. Sections 140 to 144
deal with liability with out fault in certain cases. Chapter XI (Ss. 145 to 164)
deal with insurance of motor vehicles against third party risks.

Relevant Provisions of Motor Vehicles Act,1988

Chapter 11 (Section 145 to 164) provides for compulsory third party
insurance, which is required to be taken by every vehicle owner. It has been
specified in Section 146(1) that no person shall use or allow using a motor
vehicle in public place unless there is in force a policy of insurance
complying with the requirement of this chapter.[3] Contravention of the
provisions of section 146 is an offence and is punishable with imprisonment
which may extend to three months or with fine which may extend to one
thousand rupees or with both (section 196).Section 147 provides for the
requirement of policy and limit of liability. Every vehicle owner is required
to take a policy covering against any liability which may be incurred by him
in respect of death or bodily injury including owner of goods or his

19
authorized representative carried in the vehicle or damage to the property of
third party and also death or bodily injury to any passenger of a public
service vehicle. According to this section the policy not require covering the
liability of death or injuries arising to the employees in the course of
employment except to the extent of liability under Workmen Compensation
Act. Under Section 149 the insurer have been statutorily liable to satisfy the
judgment and award against the person insured in respect of third party risk.

Insurance Companies have been allowed no other defence except the

following: -
(1) Use of vehicle for hire and reward not permit to ply such vehicle.
(2) For organizing racing and speed testing;
(3) Use of transport vehicle not allowed by permit.
(4) Driver not holding valid driving license or have been disqualified for
holding such license.
(5) Policy taken is void as the same is obtained by non-disclosure of material
fact.

20
SECTION152. SETTLEMENT BETWEEN INSURERS AND
INSURED PERSONS

(1) No 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 (1) of section 147 shall be valid unless such third
party is a party to the settlement.

(2) Where 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 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.

21
LEGAL DEFENCE AVAILABLE TO THE INSURANCE
COMPANIES TOWARDS THIRD PARTY
The Insurance Company cannot avoid the liability except on the grounds and
not any other ground, which have been provided in Section 149(2). In recent
time, Supreme Court while dealing with the provisions of Motor Vehicle Act
has held that even if the defence has been pleaded and proved by the
Insurance Company, they are not absolve from liability to make 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 Section 149(2) but has to prove also that such act happens with the
connivance or knowledge of the owner. If knowledge or connivance has not
been proved, the Insurance Company shall remain liable even if defence is
available.

Driving License:
Earlier not holding a valid driving license was a good defence to the
Insurance Company to avoid liability. It was been held by the Supreme
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
learner's licence absolves the insurance Company from liability, but later
Supreme Court in order to give purposeful meaning to the Act have made
this defence very difficult. In Sohan Lal Passi's v. P. Sesh Reddy it has been
held for the first time by the Supreme Court that the breach of condition
should be with the knowledge of the owner. If owner's knowledge with
reference to fake driving licence held by driver is not proved by the

22
Insurance Company, such defence, which was otherwise available, can not
absolve insurer from the liability. Recently in a dynamic judgment in case of
Swaran Singh , the Supreme Court has almost taken away the said right by
holding;

(i) Proving breach of condition or not holding driving licence or holding

fake licence or carrying gratuitous passenger would not absolve the
Insurance Company until it is proved that the said breach was with the
knowledge of owner.
(ii) Learner's 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
Section 149(2) should be material one which must have been effect cause of
accident and thereby absolving requirement of driving licence to those
accidents with standing vehicle, fire or murder during the course of use of
vehicle.

This judgment has created a landmark history and is a message to the

Government to remove such defence from the legislation as the victim has to
be given compensation.

23
NATURE AND EXTENT OF INSURER’S LIABILITY
(SECTION 147)
According to the provisions of this section the policy of insurance must be
issued by an authorized insurer.It must be as per requirements as specified in
subsection (2).It must insure against liability in respect of death or bodily
injury or damage to property of a third party. “Third party” includes owner
of the goods or his authorized representative carried in the vehicle and any
passenger of a public service vehicle.

The policy of insurance must cover:

1.Liability under the Workmen’s compensation Act,1923 in respect of
death or bodily injury to any such employee
(a) engaged in driving the vehicle, or
(b) the conductor or ticket examiner if it is a public service vehicle ,or

2. Any contractual liability.

Section 147 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. Insurer's liability
commences as soon as the contract of insurance comes into force. The
liability remains in existence during the operation of the policy. If the
existing policy is renewed the risk is covered from the moment the renewal
of the policy comes into force. If the accident occurs before the renewal
comes into existence, 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

24
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. v. Inderjit Kaur ,

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 injury to certain persons or class of persons (other than

gratuitous passengers and pillion riders)

The policy under the Act covers only third party risks.Insurer is not liable
for any harm suffered by a passenger traveling in a private car neither for
hire nor for reward. Similar is the position of a pillion rider on a scooter.

K. Gopal Krishnan v. Sankara Narayanan

In this case Madras High Court observed that a scooter-owner is not bound
to take out a third party risk policy to cover the claim of the pillion rider that
is carried gratuitously. If he is injured , the insurance company would not be
liable unless policy covering such risk is obtained by the scooter-owner. A
private carrier registered as such with R.T.O. and also in insurance policy ,
cannot be used for carrying any passenger or goods for hire or reward.

25
INSURER’S LIABILITY TO VEHICLE-OWNER
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 make the insurer liable
the policy of insurance must be in the name of the owner of the vehicle.
Owner of the vehicle as defined in Section 2(30) 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 exercised his option to
purchase the vehicle or not.

Section 157(1) makes 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 favor 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 (2) the transferee has to apply within 14 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 “an 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

26
policy is not available to the transferee, without an express agreement with
the insurance company. When the insurance policy lapses it would not be
available to cover the liability of the purchaser of the vehicle.

S.Sudhakaran v. A.K.Francis,
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.

Liability in respect of damage to property

For damage to property of a third party under 1939 Act the limit of liability
is Rs 6000 in all, irrespective of the class of the vehicle. Under 1988 Act the
position as laid down by section 147 (2) in regard to liability is as under:
(i) For death or personal injury to a third party, the liability of the insurer is
the amount of liability incurred, i.e. for the whole amount of liability.
(ii) For damage to property of a third party the liability of the insurer is
limited to Rs. 6000 as was under the 1939 Act.

Liability of Insurer beyond the limits mentioned in the Act

Section 147 lays down the limits of liability of the insurer. However there is
no bar for the insurer undertaking 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.

27
Determining Fault At The Scene Of An Accident

Call The Police To The Scene Of The Accident To Make Sure There's An
Official Police Report. The Official Police Report Can Help Settle Any
Disputes Down The Road, And It'll Come In Handy When Insurers
Determine Who Was More Responsible For The Crash.

If You Live In An At-Fault State And The Other Driver Is Deemed At-Fault,
You Can File A Claim With The Other Driver's Car Insurance Company For
Any Accident-Related Property Damage And Medical Expenses. The Other
Driver's Liability Coverage Can Kick In To Help Pay For Your Expenses.

If You Live In A No-Fault State, You Can File A Claim For Property
Damage, But There Are Limitations To Filing Claims With The Other
Driver's Insurer For Medical Expenses. These Limitations Vary Widely By
State, But In General, Your Own Policy's Personal Injury Protection
Coverage Can Kick In To Help Cover Medical Expenses For You And Your
Passengers. (That Is Not The Case In Michigan, Which Plays By Its Own
Rules.)

Whenever You File A Claim Against The Other Driver, It's Called A Third-
Party Insurance Claim.

28
Filing The Claim

In General, You File Your Claim Directly Through The At-Fault Driver's
Insurer. Your Own Insurer Can Help Guide You Through The Process.

When You're Ready To Initiate The Third-Party Claim, Have The Following
Handy:

 The At-Fault Driver's Name And Insurance Policy Number.

 A Copy Of The Official Accident Report. You Can Request This
From The Responding Police Department.
 The Contact Info Of Any Injured Passengers.
 Photos Of All Damages. (Put Your Smartphone's Camera To Work
At
The Scene.)
 Your Repair Shop's Contact Info.
 Details Of Accident-Related Injuries — Including Dates Of
Hospital/Doctor Visits, Bills, Doctors' Findings, X-Rays, Etc. If You
Haven't Consulted A Doctor, Talk It Through With Your Claims Rep.

If You Don't Have All Of This Info, Don't Worry. Your Claims Rep Will
Help.

29
THE LIFE OF A THIRD-PARTY CLAIM

After The Third-Party Claim Is Filed, It Proceeds Like A Typical Claim

With Your Own Insurer. But There Are Some Added Complexities That Can
Cause Some Confusion. We'll Explain Some Causes For Concern.

When Nothing Seems To Be Happening

Before A Third-Party Settlement Is Paid, Most Insurance Companies

Contact Their Own Policyholders For Their Perspectives. It's Typically
Nothing To Worry About, But It Can Cause A Delay.

During This Claim Initiation Stage, A Company Representative Should Be

In Frequent Contact To Keep You Updated.

If You Need Immediate Repairs Or Payment For Medical Bills, Let The
Claims Rep From Your Own Insurance Company Know. You May Be Able
To File A Claim With Your Own Insurer, Who Will Then Start A Process
Called Subrogation Against The Other Driver's Insurance Provider For All
Expenses. The Downside: You'll Initially Pay Your Deductible Out Of
Pocket, And There's No Guarantee That Subrogation Will Work.

When The At-Fault Driver's Coverage Limits Are Too Low

If An At-Fault Driver's Insurance Can't Cover Your Accident-Related

Expenses, You Typically Have 2 Basic Options.

30
  File A Claim For The Excess Amount Through Your Policy's
Underinsured Motorist Coverage.
Your Claim Rep Can Walk You Through This Option If You
Have Underinsured Coverage On Your Policy.
 Take Legal Action.
If You Don't Have Underinsured Coverage Or You'd Rather Not File
A Claim With Your Own Insurer, You May Be Able To Seek
Restitution Through Legal Means.

When You Need To Pay Out-Of-Pocket Expenses

If An Accident Clearly Wasn't Your Fault, Paying For Your Own Repairs Or
Medical Bills Can Be Frustrating. But This Can Happen When The Other
Driver Disputes Fault Or When The Investigation Takes Longer Than
Expected And You'd Like To Get Your Car Into The Shop.

In Some Cases, Initial Expenses Can Be Reimbursed Through Subrogation.

If The Other Insurer Denies Your Claim For Any Reason (Like An Unclear
Police Report), You May Need To File A Claim Through Your Own Insurer.
Your Claims Rep from Your Own Insurance Company Will Help And
Explain What This Means For Your Personal Expenses.

31
WHAT ARE THIRD-PARTY COVERAGES
There are two types of third-party liability coverage: bodily injury
liability and property damage liability. The first covers people costs --
medical expenses, lost wages, and pain and suffering. The second covers the
cost of stuff -- such as somebody else's car, a telephone pole, or, heaven
forbid, somebody's living room window. Both include legal protection up to
the limits of your policy if the claimant files suit against you.
When it comes to these two third-party coverages, it's not hard to figure out
whether you need them. Do you own a car? If so, you need them. In fact, the
law requires that you carry these coverages in all but a few states.
Even if you live in a "no-fault" state, this liability coverage’s are important.

32
MOTOR INSURANCE AND FIRE AND ENGINEERING
INSURANCE

Motor Insurance
In case an unfortunate loss covered in the policy occurs we request you to
take the following steps to get prompt service
1. Contact the policy issuing Office of United India immediately or if the
accident takes place anywhere other than the City/ Town where policy
issuing Office is located contact the nearest Office of United India so that
survey is arranged. List of our Offices with addresses across the country
with Phone Numbers are available in our Company's web site for your ready
reference. Check our web site www.uiic.co.in for list of our Offices across
the country

2. In case of major accidents including fire/riot losses keep the vehicle at the
accident spot/ site until the spot surveyor comes to the place of accident and
inspects the same. However please note that spot survey is necessary in case
of accident to all commercial vehicles. Please keep the phone No. of the
agent/ policy issuing Office for quick response from our side.

3. Simultaneously if there are any third party injuries/ deaths make sure to
inform the nearest Police Station about the accident and also full details of
injuries/ deaths or damage to any Third Party Property as the case may be. In
case you provide treatment to any injured person/s in any Hospital the name
of the hospital and also Doctor's Name who has given the treatment may be
informed to us.

33
4. After completing the said formalities you may move/ tow the vehicle to
any authorized workshop of your choice and obtain estimate from them and
the same may be submitted to us together with completed claim form (this
can be obtained from any of our nearest office) for our arranging final
survey. You may also please submit to the surveyor copy of the complaint
lodged with the police station along with original FIR if immediately
available. However in case where TP injuries are involved FIR is
compulsory and the same must be submitted to the office.
5. It should be ensured that under no circumstances repair work is
commenced until the final surveyor verifies the damage and gives green
signal to proceed with the repairs
6. After the repairs are carried out for partial loss claims you have to submit
the cash bills for spare parts and labour and seek reimbursement if the claim
is admissible.

Fire and Engineering Insurance

In case an unfortunate loss as covered in the policy occurs, so as to get
prompt service we request you to take the following actions:
a. Immediately inform the office concerned over phone and in writing the
occurrence of the claim along with the correct policy number.

b. Obtain the claim form from the office concerned, fill up the same in all
respects and submit the same in our office.

c. n case the loss is very large, prompt intimation is required to send a

suitable surveyor to assist you in minimizing the loss and quick settlement of
claim which helps to restart the business activity. Our officer may also visit
the site of loss to have a firsthand information of the loss.
34
d. In order to help to prove your claim the surveyor or office may seek
documentary evidence. You may handover photocopies of necessary
documents and obtain acknowledgement.

e. Fully cooperate with the surveyors and insurance officials visiting the site
of loss to examine the cause of loss, to correctly estimate the extent of loss
and to work towards a quick settlement of the loss. They should be helped to
take photographs of the loss and obtain statements of witnesses.
f. Necessary information, as if you are an uninsured, should be given to the
local fire station, police authorities and other Civil authorities as per law and
local practice. Copies of their reports should be obtained and handed over to
the surveyor or office.
g. Surveyor may also be given copies of licenses, permits and certifications
etc. in force to ensure that the operations are conducted as per law and as per
the necessary safety standards.

h. A copy of the survey report may be handed over to you if you so wish for
your record so that you are aware of the assessment made.

For Reimbursement Claims

a. Written intimation about hospitalisation to be sent to TPA / our office (if

non TPA) immediately, and within 24 hours of hospitalisation in the case of
emergency hospitalisation.

b. Before leaving the hospital, Discharge Summary, Copy of investigation

report and other relevant documents may be obtained from the hospital
authorities. All the documents in original to be submitted to TPA / Office
within 7 days from date of discharge.
35
c. Documents include claim form issued by insurer, discharge summary of
hospital, doctor's certificates and prescriptions, final hospital bills,
laboratory and other investigation reports and bills, pharmacy bills and all
related documents.

d. Pre and post hospitalisation expenses can be claimed separately after

treatment. All documents in original to be submitted within 7 days after
completion of Post Hospitalisation treatment.

36
EXAMPLE:-

Three Year Third Party Insurance for Two Wheeler Vehicles:

Now the two-wheeler owners can also opt for the third party motor
insurance for a term of 3 years. This initiative by Insurance Regulatory and
Development Authority (IRDA) will allow the owners to get their vehicle
insured for 3 years instead of getting stuck in the hassle of yearly renewals.
IRDA is open to similar plans with own damage option as well.
According to a circular by IRDA, 3 year third party insurance is expected to
have thrice the annual third party premium for two-wheeler vehicle.
Irrespective of the circumstance, the premium will not be revised during the
policy period. The premium needs to be paid in one installment subjected to
the fulfillment of section 64VB of the Insurance Act 1938.
Except in the case where the vehicle is considered to be a total loss, insurer
cannot cancel the standalone third-party cover. In case of total loss, it is
mandatory for the insurer to refund the premiums to the customer for the full
unexpired years.
If offering three years cover, the insurer is required to submit a letter of
intent to IRDA. This will be considered as the submission under file and use
guidelines of the regulator. As per the IRDA note- the regulator understands
the need of a long-term comprehensive cover. It is happy to welcome 3 year
comprehensive policy for two wheelers as per the file-and- use guidelines.
Third party insurance is mandatory under the motor insurance law for
covering liability of third party. Insurers believe the 3 year tenure will
subsequently decreases the cost like issuing policies, administering them and
follow-ups for renewals. The savings done by the insurer could get passed

37
over to the customer in the form of lower premium. The non-life insurers do
not make any loss in the low-ticket sized two-wheeler insurance.
Under the Motor Vehicle Act, third party insurance is mandatory for every
vehicle that plies on the road. IRDA in April has increased the third party
cover for car, commercial vehicles and two –wheelers. For finalizing the
third-party motor insurance premium in April this year, Insurance
Information Bureau has provided data of underwriting years 2007-008 to
2012-13 for number of claims reported and cleared, number of policies up to
March 31, 2013.
For calculation of third party liability, IRDA had created a formula that
computes the pricing annually on the following factors-age of deceased,
wages, earning capacity etc.

38
CASE STUDY
Getting third-party insurance cover against road accidents tedious and
time-consuming:

KOLKATA: Bhaagavat, a meat merchant from Mangalore, was hit by a car

while he was riding pillion with his friend on a motorcycle in February
2002. He suffered heavy injuries and could not go to work for several
months. Two years hence, he filed a compensation case with the local Motor
Vehicles Tribunal. It took him almost seven years to settle his case and
receive compensation.
According to an Insurance Information Bureau (IIB) study, it takes two
years for an average individual who has suffered a road accident to intimate
the loss for claiming compensation under third-party cover. It takes another
four years to receive any sort of compensation from an insurer. The study on
trends of claims payments under third-party covers shows that the delay is
even more in case the victim has lost his/her life in the accident.
IIB is a body floated by the insurance regulator to compile and analyse data
received from insurers.
The study, which analysed data received from insurers over the past five
years, found that the process of intimation of road accidents takes two years
for 85% of all cases to be intimated with the insurers. In case of death, the
delay is around three years. However, it requires a total of nine years for all
the cases to be intimated with authorities.
On the claims payment front, insurers take four years to settle 85% of the
claims received for injuries and five years in case of death. To settle all the
cases, insurers take about nine years. Insurers also require around five years

39
to settle 85% of the claims from the time of accident to payment of claims.
In case of death, insurers take six years to settle 90% of the case. The study
also mentioned that in the case of death claims under private car portfolio,
the delay between intimation to payment is high in the time lag interval
between nine months and three years. High-time lags were observed
between nine months and four years from loss to payment.
"Accident victims are often unaware that they can file claims under third-
party cover. Under the Motor Vehicles Act, a victim can file his/her claims
even 10 years after the event. This at times results in victims filing claims
after a couple of years. Each of these claims is processed by the Motor
Accident Tribunal, a quasi-judicial body which rules on every case, and so,
is over burdened with the number of cases," a senior insurance official said
on condition of anonymity.
The government is planning to amend the Motor Vehicles Act and doing
away with the option of filing claims whenever possible – even after 10-15
years. The amended bill proposes to introduce a maximum time frame of
three years for filing a claim with the tribunal.

40
 years

16%
20%

18-25
25-30
30-40
40-50
24%
40%

41
42
SUGGESTIONS
 Third Party Insurance agents can work more efficiently.

 Third Party Insurance can make agents more loyal to their customers.

 Third Party Insurance can come with new schemes and policies for
their customers.

 They should make more and more use of modern techniques which
will make their work faster n convenient.

 Agents can avoid mistakes in the job. They can handle jobs with
confidence.

 Third Party Insurance can contribute to greater job satisfaction ,fewer

mistakes and lower employee turnover.

43
CONCLUSION

Thus we have studied and analysed the third party liability insurance under
the motor Vehicles Act, 1988.Third party insurance protects the interest of a
third party who becomes the victim of accident or injury caused by the fault
of the insured. So 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,1988. 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 judgments and awards against persons
insured in respect of third party risks. The insurance company is a ‘State’
within the meaning of article 12 of the Constitution. For this reason it cannot
deny , discriminate or refuse third party insurance cover to State run vehicles
because their actions are guided by Article 14 of the Constitution.

The compulsory nature of third party insurance is justifiable as it makes the

process more easy for the injured person to recover money from the insured.
The defendant or wrongdoer cannot be exempted on the ground that he has
become insolvent. If he owns a vehicle he bound to pay to the injured
directly or through his insurance company.

44
BIBLIOGRAPHY

https://www.hdfcergo.com/motor-insurance/liability-only-
policy.html

https://www.bajajallianz.com/Corp/motor-insurance/private-
car-liability.jsp

https://www.bajajallianz.com/Corp/motor-insurance/long-
term-two-wheeler-insurance.jsp

http://understandinsurance.com.au/assets/media/20140703_Un
derstand_Car%20Insurance

1.www.legalserviceindia.com
2.Motor Vehicles Act,1988
3.Motor Vehicles Act,1939

4.www.investopedia.com

5.economictimes.indiatimes.com

6. www.bajajallianz.com

45
46