Motor Vehicles Act Section 150 — Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks
CHAPTER IX MOTOR VEHICLES TEMPORARILY LEAVING OR VISITING INDIA
Civil
Summary
Sub-section (1) states that once a certificate of insurance has been issued under section 147(3) in favour of the person who took out the policy, and a judgment or award is obtained against a person insured by that policy for a liability that must be covered under section 147(1)(b) or under section 164, the insurer must pay the person entitled to the benefit of that award. This payment is required even if the insurer could have avoided or cancelled the policy, or has already done so. The insurer must pay up to the sum assured under the policy, as if the person entitled to the award were a decree holder, and must also pay any costs and interest on that sum as provided by law relating to interest on judgments.
Sub-section (2) provides that an insurer is not required to pay under sub-section (1) unless it had notice, through the court or Claims Tribunal, of the proceedings before they began, or while execution of the judgment or award is stayed pending an appeal. If the insurer is given such notice, it has the right to be made a party to the proceedings and to defend the action on specific grounds. Under clause (a), the insurer may defend on the ground that there was a breach of a specified condition of the policy, such as a condition excluding use of the vehicle for hire or reward when the vehicle did not have a permit for that purpose, for organised racing and speed testing, for a purpose not allowed by the permit in the case of a transport vehicle, or without a side-car attached in the case of a two-wheeled vehicle. Under sub-clause (ii) of clause (a), the insurer may also defend on a condition excluding driving by a named person, by a person who is not duly licensed, by a person disqualified from holding or obtaining a driving licence during the disqualification period, or by a person driving under the influence of alcohol or drugs as laid down in section 185. Under sub-clause (iii) of clause (a), the insurer may defend on a condition excluding liability for injury caused or contributed to by war, civil war, riot, or civil commotion. Under clause (b), the insurer may defend on the ground that the policy is void because it was obtained by non-disclosure of a material fact or by a false representation of a material particular. Under clause (c), the insurer may defend on the ground that the premium was not received as required under section 64VB of the Insurance Act, 1938.
Sub-section (3) deals with judgments or awards obtained from a court in a reciprocating country, where a foreign judgment is conclusive under section 13 of the Code of Civil Procedure, 1908. In such cases, an insurer registered under the Insurance Act, 1938, whether or not registered under the corresponding law of the reciprocating country, is liable to the person entitled to the benefit of the decree in the same manner and to the same extent as specified in sub-section (1), as if the judgment or award were given by a court in India. However, no sum is payable unless the insurer had notice through the court of the proceedings before they began, and the insurer is entitled under the corresponding law of the reciprocating country to be made a party and to defend on grounds similar to those in sub-section (2).
Sub-section (4) states that where a certificate of insurance has been issued under section 147(3), any part of the policy that tries to restrict the insurance of the persons insured by reference to any condition other than those listed in sub-section (2) has no effect, as far as liabilities required to be covered under section 147(1)(b) are concerned.
Sub-section (5) provides that an insurer who has been given the notice referred to in sub-section (2) or sub-section (3) cannot avoid its liability to any person entitled to the benefit of a judgment or award referred to in sub-section (1) or sub-section (3), except in the manner provided in sub-section (2) or in the corresponding law of the reciprocating country, as the case may be.
Sub-section (6) states that if, on the date of filing a claim, the claimant does not know which insurance company the vehicle was insured with, it is the duty of the owner of the vehicle to provide the tribunal or court with information about whether the vehicle was insured on the date of the accident, and if so, the name of the insurance company with which it was insured.
The Explanation defines certain terms for the purposes of this section. Clause (a) defines "award" as an award made by the Claims Tribunal under section 168. Clause (b) defines "Claims Tribunal" as a Claims Tribunal constituted under section 165. Clause (c) defines "liability covered by the terms of the policy" as the liability that is covered by the policy, or that would be covered but for the fact that the insurer is entitled to avoid or cancel, or has avoided or cancelled, the policy. Clause (d) defines "material fact" and "material particular" as a fact or particular of such a nature that it would influence the judgment of a prudent insurer in deciding whether to take the risk, and if so, at what premium and on what conditions.
Official Text
(1) If, after a certificate of insurance has been issued under sub-section (3) of section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of section 147 (being a liability covered by the terms of the policy) or under the provisions of section 164 is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the award any sum not exceeding the sum assured payable thereunder, as if that person were the decree holder, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.
(2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment or award unless, before the commencement of the proceedings in which the judgment or award is given the insurer had notice through the court or, as the case may be, the Claims Tribunal of the bringing of the proceedings, or in respect of such judgment or award so long as its execution is stayed pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party thereto, and to defend the action on any of the following grounds, namely:—
(a) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely:––
(i) a condition excluding the use of the vehicle— (A) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward; or (B) for organised racing and speed testing; or (C) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle; or (D) without side-car being attached where the vehicle is a two-wheeled vehicle; or
(ii) a condition excluding driving by a named person or by any person who is not duly licenced or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification or driving under the influence of alcohol or drugs as laid down in section 185; or
(iii) a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or
(b) that the policy is void on the ground that it was obtained by nondisclosure of any material fact or by representation of any fact which was false in some material particular; or
(c) that there is non-receipt of premium as required under section 64VB of the Insurance Act, 1938 (4 of 1938).
(3) Where any such judgment or award as is referred to in sub-section (1) is obtained from a court in a reciprocating country and in the case of a foreign judgment is, by virtue of the provisions of section 13 of the Code of Civil Procedure, 1908 (5 of 1908) conclusive as to any matter adjudicated upon by it, the insurer (being an insurer registered under the Insurance Act, 1938 (4 of 1938) and whether or not that person is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the manner and to the extent specified in sub-section (1), as if the judgment or award were given by a court in India:
Provided that no sum shall be payable by the insurer in respect of any such judgment or award unless, before the commencement of the proceedings in which the judgment or award is given, the insurer had notice through the court concerned of the bringing of the proceedings and the insurer to whom notice is so given is entitled under the corresponding law of the reciprocating country, to be made a party to the proceedings and to defend the action on grounds similar to those specified in sub-section (2).
(4) Where a certificate of insurance has been issued under sub-section (3) of section 147 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons insured thereby, by reference to any condition other than those in sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub-section (1) of section 147, be of no effect.
(5) No insurer to whom the notice referred to in sub-section (2) or sub-section (3) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment or award as is referred to in sub-section (1) or in such judgment as is referred to in sub-section (3) otherwise than in the manner provided for in sub-section (2) or in the corresponding law of the reciprocating country, as the case may be.
(6) If on the date of filing of any claim, the claimant is not aware of the insurance company with which the vehicle had been insured, it shall be the duty of the owner of the vehicle to furnish to the tribunal or court the information as to whether the vehicle had been insured on the date of the accident, and if so, the name of the insurance company with which it is insured.
Explanation.—For the purposes of this section,—
(a) “award” means an award made by the Claims Tribunal under section 168;
(b) “Claims Tribunal” means a Claims Tribunal constituted under section 165;
(c) “liability covered by the terms of the policy” means the liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy; and
(d) “material fact” and “material particular” mean, respectively, a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he shall take the risk and, if so, at what premium and on what conditions.