Study Material (Motor TP)

Motor Third Party Insurance (TP Policy/Liability only policy/Act Policy) is issued under the provisions of Motor Vehicles Act, 1988. It is compulsory under law. It is designed to protect the interest of third parties. When a motor vehicle is in use in a public place, when running or stationery, it can accidentally cause harm to others. Members of public i.e. pedestrians, passengers in bus, people travelling in the opposite vehicle, cyclists, employees engaged in the commercial vehicle etc. may be injured or killed in accident. Property belonging to third party may be damaged. The object of motor third party insurance is to cover the risk of vehicle owner who is likely to incur liability for payment of compensation to third party.

Motor TP Insurance is different from other branches of insurance. It covers statutory liability which is unlimited, whereas other branches of insurance covers contractual liability limited to the sum insured. Financier has an interest in the other branches whereas no such term is there in third party policy.

Motor vehicles belonging to Central and State Government, any Local Authority, any State Transport Undertakings are exempted from the provision of compulsory insurance provided under Section 146(3) of Motor Vehicles Acts 1988, provided any such authority has to establish and maintain a fund to meet the liability arising out of the use of any vehicle belonging to such authority.

Motor TP Policies are governed by Motor Vehicles Act, WC Act, Legal Services Authority Act, Courts, Lok Adalat etc. The terms ‘Tort’, ‘Negligence’, ‘in course of employment’, ‘Vicarious liability’ are relevant for the purpose of dealing third party claims. Death/injury/property damage of third party is caused due to the fault of the driver. The vehicle owner being the master becomes vicariously liable for the fault committed by the servant (driver) under the law of Tort. Similarly employer is liable for the damage caused to employees connected to the vehicle in course of employment. It is necessary to understand the relevant sections of various Acts as mentioned below :

Relevant Sections of the Motor Vehicles Act, 1988

Section 133 - Duty of owner, driver or conductor to give all information relating to accident to police officer on demand.

1

Section 134 – Duty of driver to take all reasonable steps to secure all medical attention for the injured person.

Section 146 – Compulsory insurance against third party risk .

Section 147 – Requirements of policies and limits of liability.

Section 148 – Validity of policies of insurance issued in reciprocating countries .

Section 160- Registering authority or the Police officer shall furnish information if asked for relating to particulars of vehicle involved in accident

Section 158(6)-Statutory duty of Police to forward report about recording of any accident or completion of such report within thirty days to claims tribunal and concerned Insurer .

Section 170- Insurer to obtain permission to contest the claim on all or any of the grounds without prejudice to the provisions contained in Section 149(2).

Section-197-Taking Vehicle without authority.

Section-194- Driving Vehicle exceeding permissible weight.

Section-192- Using Vehicle without registration

Section- 192-A- Using vehicle without permit.

Section -184- Driving dangerously.

Section -185- Driving by a drunken person or by a person under the influence of drugs.

Section -183- Driving at excessive speed .

Section 3 & 4 read with Sec 181- No DL / Invalid DL / ineffective DL.

Section 163 A-

Special Provisions as to payment of compensation on structured formula basis-claimants need not prove negligence of driver –compensation to be assessed as per the schedule-Notional income of Rs.15,000/- p. a , in case of non earning person- claim not entertainable if annual income exceeds Rs.40,000/-

Section 149(2)-Deals with the statutory defenses of the Insurer—breach of a specified condition of the policy etc.

2

Section 140- No fault liability

Death –Rs.50,000/-

Permanent disability-Rs.25,000/-

Section 166-Application for compensation under fault liability –limitation removed for accidents occurred on or after 14/11/1994-Jurisdiction widened.

Section 167 – Option regarding claims for compensation either under MACT or under WC Court.

Section 169(2) - Power of the Claims Tribunals enforcing attendance of witnesses and for discovery and production of documents and material objects.

Section 174 read with Section 149(4)-Recovery from insured in Fake DL cases.

Section 173 - Appeal-90 days –Statutory Deposit.

Relevant sections of Employee’s Compensation Act, 2009 (Workmen’s Compensation(Amendment) Act,2009)

Section 2(dd)(ii)(c) – Employee under Motor policy means a person recruited as driver, helper, mechanic, cleaner or any other capacity engaged in connection with the motor vehicle.

Section 4 – Assessment of compensation by WC Commissioner – Formula to be adopted for calculation taking the relevant factor from Schedule IV.

Section 30-Appeal before High Court - Substantial question of law –Against penalty - scope to entertain appeal is limited.

Section 30-A - Prayer to be made before commissioner to withhold release of amount deposited till disposal of appeal.

The Legal Services Authorities (Amendment) Act, 2002

Object –To provide free and competent legal services to the weaker section of the society and to organize Lok Adalats to ensure speedy and inexpensive justice through conciliation

Section 19 (5)-To determine and to arrive at a compromise settlement between the parties to dispute in respect of:

a) any case pending before court; or

3

b) any case not filed in court, but falling within the jurisdiction of Lok Adalats.

Section 20 – Court to refer any case to Lok Adalat for settlement where both the parties agree or one of the parties make an application to the court for referring the case to the Lok Adalat for settlement and the court is primafacie satisfied that there are chances of settlement and the matter is fit for Lok Adalat settlement.

No case shall be referred without giving reasonable opportunity of being heard to the parties.

Section 22 - Permanent Lok Adalat –shall have the same powers vested in a civil court.

Section 22(E) - Award of permanent Lok Adalat shall be deemed to be a decree of Civil Court.

Award Passed by Lok Adalat is final and cannot be questioned in any court and not appealable.

Conciliatory Settlement/Lok Adalats

To settle cases on conciliation where quantum is the only dispute and liability of company is otherwise in order.

Various forums for compromise settlement

Lok Adalat organised from time to time ,

Permanent & continuous Lok Adalat

Conciliation meeting called by court

RICC & DICC

Common Mechanism Centre For Compromise Settlement Of Motor Third Party Claims (CMCSTPC)

Joint memo to be signed by both party after the amount is agreed by both party and consent order to be passed by Lok Adalat/Court.

Jalad Rahat Yojana (JRY) --Prelitigation settlement –Through conciliatory committee—Only injury cases of majors(non-minors) can be decided.

Documents Verification for Compromise/Settlement

Common Documents in Death & Injury Cases

4

FIR, Charge-sheet/ Final form, Seizure List, MVI report, site plan, claim form, Investigation report, DL, Permit etc.

Additional documents in Death cases.

Post Mortem Report with Dead body challan

Inquest Report/Spot Mahazar

Additional Documents in Injury Cases

Injury Report/Wound Certificate (Medical Examination on police requisition ),

Outdoor ticket /discharge certificate of initial and subsequent treatment, medical papers with bills, disability certificate if any, accident register at hospital.

Common Documents in case of Service holders/Students/IT assessee

Salary Certificate, Service record with date of birth, High School/School leaving certificate, Education/qualification /occupation proof, IT returns with assessment of IT authority, business proof etc.

Additional documents in TPPD

Extent of damage to property ,insurance details of TP vehicle if damaged .

IPC Sections relevant to MV Act

Section 279 - Rash and negligent driving or riding on a public way.

Section 337 - Causing Hurt by act endangering life or personal safety of

others.

Section 338 - Causing Grievous hurt.

Section 304(A) - Causing death by negligence.

TP Claim Investigation

Genuineness of Accident.Obtaining witness statement.Obtaining GR Records.Verification of age, income, occupation and dependency of victims. Verification of Medical records/expenses. Verification of vehicular documents i.e. DL, RC, Permit , Insurance policy etc.

5

CONTRACT OF INDEMNITY – INSURER PROMISES TO MEET THE LIABILITY SHOULD THE VEHICLE CAUSE DEATH OF OR BODILY INJURY TO ANY THIRD PERSON

Sec. 147 – Requirements of policies and limits of liability – concerned with the liability towards a third party

Expression ‘third party ‘ would mean any one and every one, except the insurer and the insured

Distinction between ‘passenger’ and ‘ third party’ – persons or classes of persons required to be covered by the policy of insurance u/s 147, would all fall under the broad genus of third party

Insurance with two insurers – effect – claimants can recover amount from either – paying insurer can settle its score with the other insurer – Ganga Ram Patel vs. Md. Jahid Khan, 2008 ACJ 2763 (MP) (DB)

Pillion rider – insurer not liable under ‘Act only’ policy – risk covered under ‘package policy’ as per TAC circular – UII vs. M Laxmi, 2009 ACJ 104 (SC)

Gratuitous passengers in goods vehicle- insurer not liable – CRPF jawan going on a goods carriage to join his duty along with a box, suitcase and bed holder – no liability –NIC vs. Phool singh, 2008 ACJ 58 (SC)

Occupants in private car – risk covered under ‘package’ policy – TAC circular dt. 17.03.1978 & IRDA circular dated 16.11.2009

Owner of goods and their representatives – policy covers the risk of owner of goods or his authorized representative accompanying the goods in the goods vehicle, provided the entire vehicle is hired by the goods owner and there is documentary proof of hiring.

Vehicle hired by deceased for transporting goods - Headload workers not treated as owner of goods – luggage or personal effects are not goods.

Passenger in goods vehicle – vehicle owner has no statutory responsibility to get his vehicle insured for covering any passenger travelling in the goods vehicle

Employees of insured – IMT 18 makes it clear that risk of driver, conductor, cleaner or person employed in loading or unloading are covered but not exceeding 7 (seven ) in number – liability restricted upto WC limit if no additional premium paid

6

Public place – Statute mandates the necessity for a valid policy in force if the vehicle is intended for use in a public place – Tribunal had jurisdiction to try an accident case occurring in a private place – package policy cover is not restricted for use of the vehicle in a public place

Difference between Sec.140, Sec.163A and Sec.166 of MV Act

The issue of negligence need not be touched under sec.140 and sec.163A of MV Act, 1988 whereas in case of sec.166 of MV Act proof of negligence of the driver of offending vehicle is an essential requirement. If there is prima facie proof of accident, the victim of the accident is entitled to get compensation under sec.140 and 163A of MV Act. In both these sections the claimant is not required to plead or establish negligence on the part of the driver of the offending vehicle. But in proceeding under sec.166 of MV Act burden lies on the claimants to prove rash and negligent driving on the part of the driver of the offending vehicle.

Negligence

Negligence means the omission to do something which a reasonable man would do or the doing of something which the reasonable and prudent man would not do. Thus, it is not only commission of an act but is also an omission to do something which a reasonable man would do or is obliged to do.

Negligence does not always mean absolute carelessness, but want of such a degree of care as is required in particular circumstances.

Negligence as a tort is the breach of a legal duty to exercise due care.

Res ipsa loquitur: It means “ accident speaks for itself”. Whenever the presumption of “Res ipsa loquitur” is raised, the claimant need not adduce any evidence to prove negligence, rather the burden shifts upon the respondents to explain the accident to rebut the negligence on the part of the driver.

Last opportunity rule: It means that as between the driver of the offending vehicle and the victim of the accident whether the driver had with him the last opportunity to avoid the accident. Thus, whoever had the last opportunity, he will be held responsible.

Defense available with the respondent : Against the plea of negligence, the driver/ respondent can take following defense:

(a) Act of God (Vis Major) : Accident caused due to natural causes directly and exclusively, without human intervention, and the same could not have been

7

prevented by any amount of foresight and pains and care reasonably expected from the driver.

(b)Victim, the wrongdoer: Own negligence of the victim- self negligence- claim not maintainable.

Classification of negligence

(a) Sole negligence

(b)Composite negligence

(c) Contributory negligence

DIFFERENCE BETWEEN COMPOSITE AND CONTRIBUTORY NEGLIGENCE :

SOLE NEGLIGENCE : Where in an accident two or more vehicles are involved but the accident has occurred due to negligence of one vehicle only, the driver of the offending vehicle is solely negligent.

COMPOSITE NEGLIGENCE : Where a person is injured or died as a result of negligence of two or more wrong doers, each wrongdoer is jointly and severally liable for payment of entire damages and the injured / LRs of the deceased have the choice of proceeding against all or any of wrongdoer

CONTRIBUTORY NEGLIGENCE : Where a person is injured or died as a result of partly due to negligence of another person/or persons, and partly by his own negligence, then negligence on the part of the injured/deceased is referred to as his contributory negligence.

DIFFERENCE BETWEEN HIRE AND REWARD :

‘Hire’ means availing the motor vehicle for use or service in exchange for payment whereas ‘Reward’ means something given or received in return for service or merit.

PAY AND RECOVER THEORY:

In case the driving license of the driver of the insured/ offending vehicle is found to be fake, the tribunal directs the insurer to pay the awarded amount to the third party and to recover the same from the insured by filing recovery petition under sec.174 r.w. 149(5) MV Act before the same MACT. The Tribunals are passing pay and recover awards following the decision of the Supreme Court in the case of National Insurance Co. Ltd. Vs. Swaran Singh (2004) ACJ 1.

8

Difference between fake, ineffective and invalid DL

Fake DL - On verification from the licensing authority if the DL is found to have been issued in some other name or the DL is not at all issued.

Ineffective DL - means with regard to the type of the vehicle i.e. DL issued for LMV but the driver was driving HGV.

Invalid DL - means with regard to the period of DL i.e. on the date of accident the DL was not in force.

Questions (MOTOR TP )

1. The provisions of Motor Vehicles Act, 1988 came into force with effect from a. 1st January 1988b. 1st January 1989c. 1st July 1989d. 1st July 1988

2. “Omnibus” means any Motor vehicle which can carrya. Six personsb. Twelve personsc. More than six persons excluding the driverd. Twelve persons including the driver

3. Motor cycle with engine capacity not exceeding 50cc can be driven in a public place by a person

a. Who has attained eighteen yearsb. Who is not below 16 yearsc. Who is not a minord. None of the above

4. Under section 6 of Motor Vehicle Act, 1988a. No person can hold DL for Heavy Goods Vehicle if he possess DL for

LMVb. No person can hold two licensesc. No person can be issued permanent DL unless he possess a Learner’s

licensed. No person can hold any other DL except a Learner’s license, while he

holds any DL for the time being in force.5. A driving license issued or renewed to drive a transport vehicle, be effective for a

period of a. Ten yearsb. Five yearsc. Three yearsd. None of the above

9

6. A transport vehicle shall not be deemed to be validly registered, unless it carriesa. Permitb. Pollution certificatec. Fitness certificated. All the three stated above

7. In case of death of the Permit holder, the permit may be used bya. Legal heirs of the permit holderb. Person succeeding to the possession of the vehicle covered by the

permitc. Permit cannot be usedd. Both (a) and (b)

8. Every person driving or riding on a motor cycle of any class or description should wear protective headgear u/s 129 of MV Act, 1988

a. Trueb. Falsec. Person sitting in the side car is not exemptedd. Only rider of motor cycle has to use

9. Under which section of MV Act, 1988, the owner, driver and conductor of the offending vehicle should give all information to the police officer on demand?

a. 139b. 145c. 133d. None of the above

10.In an accident on 15.10.1989, fixed sum of Rs.25,000/- is payable towards No Fault liability for

a. Deathb. Permanent partial disabilityc. Permanent disabilityd. Any injury

11.Under Section 142 of MV Act,1988, Permanent disfiguration of face isa. Grievous injuryb. Permanent total disabilityc. Permanent partial disabilityd. Permanent disability

12.No person shall use, except as a passenger, a motor vehicle in a public place, unless there is a policy of insurance in force as per MV Act, 1988

a. u/s 160b. u/s 139c. u/s 146d. u/s 145

13.As per Section 147 of MV Act, 1988, the policy of insurance with limited liability immediately before commencement of the Act, shall continue to be effective for a period of

a. One month10

b. Four monthsc. Till the date of expiry of policyd. Four months or date of expiry whichever is earlier

14.Breach of a specified condition of the policy is a defence available to insurera. u/s 147b. u/s 148c. u/s 149(2)d. None of the above

15.Liability of insurer in respect of Third party property damage is limited toa. Rs.2,000/-b. Rs 8,000/-c. Unlimitedd. Rs. 6,000/-

16.Non disclosure of material fact by insured amounts toa. Policy is voidableb. Policy is voidc. Not a defence availabled. Policy is valid unless cancellation notice is sent

17.The matter which influence the judgment of a prudent insurer in determining whether he will take the risk is called

a. Material fact b. Material fact and material particularc. Relevant factd. Proposal

18.Under which Section of MV Act, 1988, the judgment passed by a court in a reciprocating country is binding on the insurer in India

a. Section 147b. Section 150c. Section 149(1)d. Section 149(3)

19.As per Section 157 of MV Act, 1988 transfer of ownership of vehicle amounts toa. Policy becomes invalidb. Policy deemed to have been transferred to new ownerc. Policy is operative if transfer endorsement is issuedd. Transfer of policy is mandatory

20.An amount of Rs.12,500/- is payable in case of hit and run motor accidenta. For injury causing disabilityb. Grievous injury c. Grievous hurtd. Any injury

21.Administration of Solatium Fund is vested in a. Central Governmentb. General Insurance Corporation of Indiac. Flag Company

11

d. District Magistrate

22.___________ amount is prescribed as notional income under the Structured compensation table prescribed u/s 163-A

a. Rs.40,000/- p.a.b. Rs.3,000/- p.m.c. Nild. Rs.15,000/- p.a.

23. Report submitted before MACT by police u/s 158(6) can be treated asa. Proof of accidentb. Driver is negligentc. Application for compensation u/s 166d. Vehicular documents are in order

24. Which statement is true a. Claim U/S 166 of MV Act, 1988 should be filed within three years of accident b. Separate petition u/s 140 should be filed alongwith petition u/s 166 for grant of No Fault liability award c. Claim either under Section 140 or under section 163-A is entertainable, but not under both

e. Negligence is to be proved in a case filed u/s 163-A

25.In case of death of a labourer engaged in truck for loading and unloading purpose, compensation case can be filed

a. Before MACT b. Before Employees’ Compensation commissioner c. Before any of the above two court d. Civil court 26. Awarding interest by MACT where any claim is allowed a. Mandatory b. Discretionary c. No interest if paid within 30 days d. At the rate of 12 % p.a. 27. Appeal if any against MACT award is to be filed a. Within 60 days from the date of award b. Within 90 days from the date of award u/s 171 c. Within 90 days from the date of award u/s 173 d. No time limit28. Duty of the driver to take certain precautions at unguarded railway level crossings is provided in MV Act, 1988

12

a. Under Section 131 b. Under Section 141 c. Under Section 132 d. Under Section 13029. Driver Charge-sheeted u/s 181 read with Section 3 of MV Act, 1988 relates to a. No valid permit b. Non possession of DL c. Drunken driving d. No helmet 30. Section 189 of MV Act, 1988 provides punishment for a. Driving vehicle when mentally unfit to drive b. Racing and trials of speed c. Driving dangerously d. Abatement of certain offences. 31. In case of filing of appeal against MACT award, appellant has to deposit a. 50% of the MACT award b. Rs.25,000/- c. 25% of the MACT award d. 50% of the award or Rs.25,000/- whichever is less32. Employee’s Compensation Act, 2009 came into force with effect from a. 1st October 2009 b. 2nd November 2009 c. 1st January 2010 d. 18th January 201033. Main issue to be decided in a case under Employee’s Compensation Act a. Employee must file the claim within six months b. Death/Injury must arise out of employment and in course of employment c. Driver of the vehicle is rash and negligent in causing the accident d. Age of the employee should not exceed 5034. Minimum Compensation for Permanent total disablement under Employee’s Compensation Act, 2009 a. Rs.1,20,000/- b. Rs.1,40,000/- c. Rs.1,00,000/- d. None of the above35. Compensation in a claim before Employees’ Compensation Commissioner is assessed a. Under Section 6 b. Under Schedule II

13

c. Under Section 3 read with Schedule III d. Under Section 4 read with Schedule IV

36. Claim for compensation under Employee’s Compensation Act, 2009 is made a. U/S 20 b. U/S 21 c. U/S 22 d. U/S 2337. Time limit for filing appeal u/s 30 of Employee’s Compensation Act is a. 30 days b. 60 days c. 90 days d. 45 days38. Amount to be deposited to file appeal u/s 30 of Employee’s Compensation Act a. Entire award amount b. Rs.50,000/- c. Only the principal award amount d. 50% of the award amount or Rs.25,000/- whichever is less39. Negligence on the part of deceased motorcyclist hit by offending truck is called a. Composite negligence b. Sole negligence c. Contributory negligence d. No negligence40. Package policy does not cover the risk of occupant in private car a. True b. True if additional premium is not paid c. Not true d. True if premium for PA Cover is not paid41. Financial authority for Lok Adalat settlement is limited to a. Rs.5,00,000/- b. Rs.25,00,000/- c. No limit d. Individual authority attending Lok Adalat

42. No Fault liability amount fixed for death under the old Motor Vehicles Act was a. Rs.50,000/- b. Rs.40,000/- c. Rs.25,000/-

14

d. Rs.15,000/-43. The decision of Supreme Court which is followed by almost all the MACTs for assessment of compensation is a. Santosh Devi Vs. New India b. Sarala Varma Vs. DTC c. Nagappa Vs. Guru Dayal d. None of above44. In case of dishonor of cheque, policy cancellation notice is to be served a. On the vehicle owner b. On the RTO c. On both vehicle Owner and RTO d. On vehicle Owner, RTO and Police Station where the owner ordinarily resides45. The Conciliatory Forum for Common sitting by the four PSU General Insurance Companies for compromise settlement of MACT cases devised by GIPSA is a. Common Conciliation Centre b. Pre conciliation sitting for Lok Adalat settlement c. Conciliatory Forum d. CMCSTPC46. Scheme for payment of compensation in ‘Hit and Run’ cases came into force with effect from a. 1st July 1989 b. 1st October 1982 c. 1st October 1988 d. 2nd November 199447. ‘Gross Vehicle Weight’ means a. Total weight of the vehicle b. Unladed weight of the vehicle plus the equipments ordinarily used with the vehicle. c. Total weight of the vehicle and load certified and registered by the registering authority as permissible

d. Total weight transmitted by the several wheels

48. Which statement is true a. Insurer is not liable for payment of interest in a WC case b. Insurer is not liable for payment of penalty in a WC case

15

c. Insurer is liable both for interest and penalty in a WC case d. Insurer is liable both payment of interest from the date of award and not from the date of accident in a WC Case49. Which statement is true a. Every award of the Lok Adalat shall be deemed to be a decree of a civil court b. No appeal shall lie to any court against the Lok Adalat award c. All proceedings before the Permanent Lok Adalat shall be deemed to be judicial proceedings d. All the above50. Which statement is true a. Decision of criminal case against driver is not binding on the MACT for deciding the issue of negligence b. Charge-sheet submitted by police against the driver is the conclusive proof of negligence in a case filed before MACT c. 161 statements recorded by police can be cited as concrete proof of negligence of driver d. Burden of proving driver’s negligence is on the respondent in a MACT proceeding.51. SLP before Supreme Court against the order of High Court is filed a. Under Section 173 of MV Act, 1988 b. Under Section 79 of Civil Procedure Code c. Under Article 136 of Constitution of India d. Under Article 142 of Constitution of India52. No appeal can be filed against MACT award if the amount in dispute in the appeal is a. Less than Rs.25,000/- b. Less than Rs.10,000/- c. Less than Rs.50,000/- d. Less than Rs.40,000/-

Answer to questions (Motor TP) :

1(c), 2 (c), 3(b), 4 (b), 5 (c) , 6 (c), 7 (b), 8 (a), 9 (c), 10 (c), 11 (d), 12 (c), 13 (d), 14(c), 15 (d), 16 (b), 17 (b), 18 (d), 19 (b), 20 (c), 21 (b), 22 (d), 23 (c), 24 (c), 25 (c), 26 (b), 27 (c), 28 (a), 29 (b), 30 (b), 31 (d), 32 (d), 33 (b), 34 (b), 35 (d), 36 (c), 37(b), 38 (a), 39 (c), 40 (c), 41 (d), 42 (c), 43 (b), 44 (c), 45 (d), 46 (b), 47 (c), 48 (b), 49 (d), 50 (a), 51 (c), 52 (b).

16

17