The Motor vehicle Act 1988:
This is the class of Insurance through which a majority of the people
recognize general Insurance and that too because it is compulsory for all motorized vehicles to have an Insurance policy
against third party liability before
they can come on road. Though this class of Insurance is the major source of
premium earnings for the Insurance companies it is also the class which is
showing the biggest losses. It is necessary to have knowledge of Motor Vehicles
Act passed in 1939 and amended in 1988.
Walker
Compensation: In the old days, many of walker who were
knocked down by motor vehicles and who were killed or injured, did not get any
compensation because the motorists did not have the resources to pay the compensation
and were also not insured. In order to safeguard the interests of walker, the
Motor Vehicles Act, 1939, introduced compulsory insurance.
Compulsory
for third Party Liability: The
insurance of motor vehicles against damage is not made compulsory, but the
insurance of third party liability arising out of the use of motor vehicles in
public places is made compulsory. No motor vehicle can ply in a public place
without such insurance
For purpose of insurance, motor vehicles are classified into three
broad categories:
(a) Private cars
(b) Motor cycles and motor scooters
(c) Commercial vehicles, further classified into
(I) Goods carrying vehicles
(II) Passenger carrying vehicles e.g.
- Motorized rickshaws
- Taxis
-
Buses
(III) Miscellaneous Vehicles, e.g.
- Hearses (funeral van)
- Ambulances
- Cinema Film Recording & Publicity vans
-
Mobile dispensaries etc.
TYPES OF CLAIMS VEHICLE
Theft
Accident
Collision
Fire
Own Damage
Repair Death
Bodily injury
Property damage
Loss or Damage (or “Own Damage”). The risks covered are :
a) Fire, explosion, self-ignition or lightning.
b) Burglary, house breaking or theft.
c) Riot and strike.
d) Earthquake (fire and shock damage)
e) Flood, typhoon, hurricane, storm, tempest, inundation,
cyclone, hailstorm, frost.
f) Accidental external means.
g) Malicious act.
h) Terrorist activity.
i) Transit by road, rail, inland waterway, lift, elevator or
air.
j) Landslide /rockslide.
Motor Vehicles Act, 1988
Compensation for Damages: The Law relating to Torts is based on the
principle that every injury should have a remedy. The concept of
compensation and providing damages step in at this very instance. The
implications of the word – ‘compensation’ is quite wide. It seeks to provide
for the actual or the anticipated losses and does so under various heads and is
often awarded subjectively on a case-to-case basis. The Motor
Vehicles Act, 1988 has been described to be a welfare legislation
aimed at providing relief to the aggrieved parties.
Amendment of Act: The Motor Vehicle Act, 1939 consolidated all the laws relating to
motor vehicles but it had to be constantly amended in order to keep it up to
date. With the advancement in road transport technology and development of the
road network coupled with the change in the pattern of passenger transport, it
was important that the act was amended in order to incorporate all the modern
techniques relating to motor vehicles.
The Motor Vehicles Act,
1988 is an Act of the Parliament of India
which regulates all aspects of road transport vehicles. The Act came into force
from 1 July 1989. It replaced the Motor Vehicles Act, 1938 which earlier
replaced the first such enactment Motor Vehicles Act, 1914. The Act provides in
detail the legislative provisions regarding licensing of drivers and
conductors, registration of motor vehicles, control of motor vehicles through
permits, special provisions relating to state transport undertakings, traffic
regulations, insurance, liability, offences and penalties etc. Further, in
order to exercise the legislative provisions of the Act, the Government of
India made the Central Motor Vehicles Rules, 1989.
A review group was thus set up in order to
form a comprehensive legislation and based on the suggestions given, the Motor Vehicles Act,
1988 came into being on July 1, 1988. Sections 140-144
(Chapter X) dealt with no fault
liability, while Sections 145-164 (Chapter XI) deals with insurance in
third party claims and Sections 165-176 (Chapter XII) goes on to deal with claim
tribunals. The act is considered to be welfare legislation. It is primarily focused
on giving relief to innocent persons on the road who are often victims to
accidents and then find themselves not having a claim to the compensation that
they should otherwise receive.
A driving license was made mandatory for any of
the drivers through the provisions of the MVA, 1988. The act also required the
registration of a vehicle under the act which had a validity period of 15 years
after which it could be further renewed for another 5 years. These provisions
form the tip of the iceberg which extends to cover multiple other sections
which goes a long way in making the MVA, 1988 a welfare legislation.
Various Aspects of the
Motor Vehicles Act
Insurance and Third-party Claims -
Compulsory Insurance was introduced in order
to safeguard the interests of the third party who would be a probable victim of
an accident or an injury by the use of a motor vehicle. This gives the victim
or the third party for that matter to make claims either from the owner of the
motor vehicle or from the insurance party or from both of them as need be and
as given in the provisions.
As per Section 147(5) of the
Motor Vehicles Act, 1988 (MVA Act), the insurer has the
responsibility to indemnify the persons or the class of persons that the
corresponding policy aims to cover. This insurance to the third party was
considered to be mandatory under the statute and was not to be overridden on
the basis of any clause present in that insurance policy. It was laid out
in National Insurance Co. Ltd. v Faqir Chand that “third
party” was to include everyone except for the contracting parties to the
insurance policy.
It was also said that any Government Vehicles
were to be exempted from insurance, under Section 146(2) and Section 146(3),
which is then covered by a special fund organised for the same purpose.
Pillion rider driving out of scope: The policy as provided in the act was to
include and cover only third-party claims and nothing more. A passenger
traveling in a private car or a pillion rider driving a scooter was to be kept
outside the scope of the insurance claims. It was also held that the insurance
company would not be held liable for the accident to the pillion rider as long
as the scooter owner had a policy that did not cover for the rider as well.
Similarly, it was ruled that if the owner of the goods were to travel with the
goods in a vehicle, the insurance company was not to be liable in case of an
accident that were to occur in the process.
Issuance of Certificate
As per
the Act, policy of insurance shall have no effect unless and until a
certificate of insurance in the form prescribed under the Rules of the Act is
issued. The only evidence of the existence of a valid insurance as required by
the Motor Vehicles Act acceptable to the police authorities and R.T.O. is a
certificate of insurance issued by the insurers.
Liability under motor vehicle
Act:
The
liabilities which require compulsory insurance are as follows:
(a)
Any liability incurred by the insured in respect of death or bodily injury of any person including owner of the goods
or his authorised representative carried in the carriage.
(b)
liability incurred in respect of damage to any property of a third party;
(c)
liability incurred in respect of death or bodily
injury of any passenger of a public service vehicle;
(d)
liability arising under Workmen’s Compensation Act, 1923 in respect of death or
bodily injury of:
(i)
paid driver of the vehicle; (ii)conductor, or ticket examiner (Public service
vehicles); (iii) workers, carried in a goods vehicle;
(e)
liability in respect of death or bodily injury of passengers who are carried
for hire or reward or by reason of or in pursuance of contract of employment.
CLAIMS (OWN DAMAGE)
On receipt of notice of loss, the policy
records are checked to see that the policy
is in force and that it covers the vehicle involved. The loss is entered in
the Claims Register and a claim form is issued to the insured for completion
and return. The insured is required to submit a detailed estimate of repairs
from any repairer of his choice. Generally, these repairs are acceptable to the
insurers but they at times ask the insured to obtain repair estimate from
another repairer, if they have reason to believe that the competence, moral
hazard or business integrity of the repairer first chosen is not satisfactory.
Assessment
Independent automobile surveyors with
engineering background are assigned the task of assessing the cause and extent
of loss. They are supplied with a copy of the policy, the claim form and the
repairer’s estimate. They inspect the
damaged vehicle, discuss the cost of repair or replacement with the
repairer, negotiate as per the indemnity, and submit their survey report. In
respect of minor damage claims, independent surveyors are not always appointed.
The insurer’s own officials or their own automobile engineers inspect the
vehicle and submit a report.
Settlement
The survey report is examined and
settlement is effected in accordance with the recommendations contained
therein. The usual practice is to authorise
the repairs directly with the repairer to whom a letter is issued to that
effect. In this letter the repairers are also instructed to collect direct from
the insured the amount of the excess, depreciation, salvage, etc.The repairers
are also instructed to keep aside the
salvage of damaged parts, if there are any, for being collected by the
salvage buyer nominated by the Insurers. Or else, if the repairers are willing
to retain the salvage, its value, as indicated by the surveyor, is deducted
from the claim bill. On receipt of their final bill of repairs after completion
of repairs and a satisfaction note or voucher from the insured that the vehicle
has been repaired to his satisfaction, the payment to the repairer is effected.
Sometimes, the repairer is paid directly
by the insured in which case the latter is reimbursed on submission of a
receipted bill from the repairers. In either case, discharge voucher or receipt
is obtained. The Claims Register and the policy and renewal records are marked that
the claim is paid indicating the amount of claim and the amount of salvage, if
any.
Claims Documents
Apart from claim form and Survey report
the other documents
required for processing the claim are:
(1) Driving Licence
(2) Registration Certificate Book
(3) Fitness Certificate (Commercial
Vehicles)
(4) Permit (Commercial Vehicles)
(5) Police Report (Taxis, commercial
Vehicle need F.I.R./ spot survey if loss is heavy or T.P. loss occurs)
(6) Final Bill from repairers
(7) Satisfaction Note from the insured
(8) Receipted bill from the repairer, if
paid by insured.
(9) Discharge voucher (full and final
payment)
Total Loss Claims
Whenever a surveyor finds that a vehicle
is either beyond repairs or the repairs are not an economic proposition, he
negotiates with the insured to assess the loss on a Total Loss basis -
for a reasonable sum representing the market value of the vehicle immediately
prior to the loss.If the market value is more than the insured value,
the settlement will be brought about for the insured value. The Insured will be
paid in cash and the Insurers will take over the salvage of the damaged vehicle
which will thereafter be disposed of for their own benefit calling tenders
through advertisements in newspapers. However, before the actual payment is
made to the Insured, the Insurer will collect from him the Registration and
Taxation books, ignition keys and blank TO. and T.T.0. forms duly signed by the
insured, so that the salvage is usually not encouraged, unless insured desires,
so as to avoid the hassle of salvage disposal.
Theft Claims
Total losses can also arise due to the
theft of the vehicle and its remaining untraced by the police authorities till
the end. These losses will have to be supported by a copy of the First
Information Report (FIR) lodged with the Police authorities immediately after
the theft has been detected. The police authorities register the complaint
allotting it a number of the entry made in the Station Diary. This number which
is usually known as SDE No. or C.R. No. (Crime Register) has to be quoted by
the Insured in the claim intimation to the Insurers.
The police keep the investigations going
until the vehicle is traced and delivered to its owner. However, if they do not
succeed in recovering the vehicle after a period of, say 1-2 months, they file
away the case certifying that the case is classified as true but undetected.
This police certificate referred as “Non-Traceable” certificate is essential
before a total loss following theft is settled by the insurers. The documents
to be submitted by the Insured will be the same as those described above. If
the R.C. Book and Taxation Certificate are also stolen along
with the vehicle. It will be necessary for the insured to obtain
duplicate ones from the Registering Authority and thereafter deposit them with
the Insurers. The only additional
documents will be addressed by the Insured to the R.T.O. informing about the loss of the
vehicle due to theft and filing a Non User Form so that he is not made liable
to pay the taxes. Some insurers also obtain from the insured a special type of
a Discharge on a stamped paper whereby the Insured undertakes to refund the
claim amount if the vehicle is subsequently traced and delivered to him by the
police. He also undertakes in the Discharge Form to pay any taxes which may be
outstanding against the stolen vehicle. The ignition keys R.C.Books etc. are
preserved by the Insurer in their custody so that these are made readily
available if the vehicle is traced at a later date. It is always prudent to
inform the concerned Registering Authority by a Registered A/D letter that a
total loss claim is being processed for payment in respect of the stolen
vehicle and to request them not to transfer the ownership of the vehicle to any
one. This will prevent the thief from disposing of the stolen vehicle.
THIRD PARTY CLAIMS
Section 165 of the Motor Vehicles Act
1988, empowers the State Governments to set up Motor Accident Claims Tribunals
(MACT) for adjudicating upon third party claims. When a tribunal has been set
up for an area, no civil court has any jurisdiction to entertain any claim
falling under the tribunal’s jurisdiction.
The aggrieved party has to move the
tribunal within a period of six months from the date of accident. While making
the award, the tribunal has to specify the amount payable by the insurer.
The procedure for third party claims is
briefly described as follows:
On receipt of notice of claim from the
insured, or the third party or from the MACT, the matter is entrusted to an
advocate. Full information relating to the accident is obtained from the
insured. The various documents are collected and these include
– Driving Licence
– Police report
– Details of driver’s prosecution, if
any
– Death certificate, coroner’s (PM
report) report, if any (fatal claims).
– Medical Certificate (bodily injury
claims)
– Details of age, income and number of
dependants etc.
A written statement is then filed on the
facts of the case with the MACT by the advocate. Eventually, if the award is
made by the MACT, the amount is paid to the third party against proper receipt.
Compromise Settlements
Where their is clear liability under the
policy, claims are negotiated with the third party to accept a compromise
settlement, which if accepted by the third party, is registered with the MACT
and its consent obtained. The cheque is deposited with MACT for disbursement to
the rightful beneficiaries.
Lok Adalats
Pending cases with the MPACT where the
liability under the policy is not in doubt are placed before the Lok Adalat or
Lok Nyayalaya, for a voluntary and amicable settlement between the parties. A
copy of decision in the prescribed memo and the cheque is deposited with MACT.
Lok Adalat sessions are organized regularly by the insurance companies in
liaison with the Legal Aid Board of each State and MACT to effect amicable
settlement of third party claims.
