(1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which—
(a) is issued by a person who is an authorised insurer; and
(b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2)—
(i) against any liability which may be incurred by him in respect of the death of or bodily 1[injury to any person, including owner of the goods or his authorized representative carried in the vehicle] or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place;
(ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place:
Provided that a policy shall not be required—
(i) to cover liability in respect of the death, arising out of and in the course of his employment, of the employee of a person insured by the policy or in respect of bodily injury sustained by such an employee arising out of and in the course of his employment other than a liability arising under the Workmen’s Compensation Act, 1923 (8 of 1923), in respect of the death of, or bodily injury to, any such employee—
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as a conductor of the vehicle or in examining tickets on the vehicle, or
(c) if it is a goods carriage, being carried in the vehicle, or
(ii) to cover any contractual liability.
Explanation.—For the removal of doubts, it is hereby declared that the death of or bodily injury to any person or damage to any property of a third party shall be deemed to have been caused by or to have arisen out of, the use of a vehicle in a public place notwithstanding that the person who is dead or injured or the property which is damaged was not in a public place at the time of the accident, if the act or omission which led to the accident occurred in a public place.
(2) Subject to the proviso to sub-section (1), a policy of insurance referred to in sub-section (1) shall cover any liability incurred in respect of any accident, up to the following limits, namely:—
(a) save as provided in clause (b), the amount of liability incurred;
(b) in respect of damage to any property of a third party, a limit of rupees six thousand:
Provided that any policy of insurance issued with any limited liability and in force, immediately before the commencement of this Act, shall continue to be effective for a period of four months after such commencement or till the date of expiry of such policy, whichever is earlier.
(3) A policy shall be of no effect for the purposes of this Chapter unless and until there is issued by the insurer in favour of the person by whom the policy is effected a certificate of insurance in the prescribed form and containing the prescribed particulars of any condition subject to which the policy is issued and of any other prescribed matters; and different forms, particulars and matters may be prescribed in different cases.
(4) Where a cover note issued by the insurer under the provisions of this Chapter or the rules made thereunder is not followed by a policy of insurance within the prescribed time, the insurer shall, within seven days of the expiry of the period of the validity of the cover note, notify the fact to the registering authority in whose records the vehicle to which the cover note relates has been registered or to such other authority as the State Government may prescribe.
(5) Notwithstanding anything contained in any law for the time being in force, an insurer issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons.
Simplified Explanation
Section 147 of the Motor Vehicles Act in India specifies the requirements for insurance policies concerning the coverage of third-party risks and delineates the limits of liability that such policies must adhere to. This section is critical as it sets out the minimum standards for third-party insurance, ensuring adequate protection for victims of road accidents and defining the extent of coverage that insurers must provide.
Overview of Section 147
Section 147 details the fundamental conditions that an insurance policy must satisfy to be considered valid under the Motor Vehicles Act for covering third-party liabilities. It also establishes the minimum and maximum limits of liabilities that these policies must cover.
Key Elements of Section 147
- Scope of Coverage:
- Death or Bodily Injury: The policy must cover liability for any harm to third parties, including death and bodily injury. There is no limit to the liability for death or bodily injury, meaning the insurer’s potential liability can be substantial depending on the court’s assessment of compensation.
- Property Damage: For property damage, the Act usually sets a cap on the amount of liability coverage. Historically, the limit has been set at Rs. 7,500, but this may vary with amendments and regulations.
- Exclusions:
- The policy does not need to cover liability for the death of or bodily injury to an employee of the insured arising out of and in the course of employment, except in cases where it is required under the Workmen’s Compensation Act.
- Liability related to nuclear risks or war conditions is typically excluded from standard motor vehicle insurance policies.
- Policy Validity:
- The policy must be issued by an insurer approved to conduct business under the laws governing insurance in India.
- It should specify the period for which it is effective and must be renewed upon expiry to continue the legal compliance for vehicle use.
- Essential Clauses:
- The insurance policy must explicitly state the name and address of the insured, the registration number of the vehicle, the classification of the vehicle, the period of insurance coverage, and the limits of liability.
- Compulsory Nature:
- The law mandates that every motor vehicle plying on public roads must have a valid third-party insurance policy that meets these requirements.
Practical Implications
- Financial Security for Victims: By setting minimum coverage standards, the Act ensures that victims of road accidents have a higher likelihood of receiving adequate compensation.
- Legal Compliance for Vehicle Owners: Owners must procure and maintain insurance that meets these standards to avoid penalties, which include fines and potential imprisonment for non-compliance.
- Role of Insurance Companies: Insurers must ensure that their policies comply with these regulations and that they have adequate reserves to cover potential claims.
Conclusion
Section 147 is designed to protect public interests by ensuring that all motor vehicles have insurance policies that adequately cover third-party risks. This protection is crucial in providing financial compensation for victims of road accidents, thereby facilitating a fair and efficient remedy for damages sustained in such incidents. Understanding this section helps vehicle owners, insurance providers, and legal professionals navigate the requirements and obligations of third-party insurance under the Motor Vehicles Act.
