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Insurers liable to pay compensation even if vehicle ownership changes: SC
July, 26th 2011

TheSupreme Court has ruled thatinsurance companies are liable to paycompensation to claimants even if ownership of the vehicle in question changes. "The liability to pay compensation is based on a statutory provision . Compulsory insurance of the vehicle is meant for the benefit of the third parties. The liability of the owner to have compulsory insurance is only in regard to third party and not to the property. Once the vehicle is insured, the owner as well as any other person can use the vehicle with the consent of the owner.

Section 146 of the Act (Motor Vehicles Act,1988) does not provide that any person who uses the vehicle independently, a separate insurance policy should be taken. The purpose of compulsory insurance in the Act has been enacted with an object to advance social justice," the apex court said. The court allowed a bunch of appeals filed by the Uttar Pradesh State Road Transport Corporation (UPSRTC) challenging the award passed by Motor Accident Claims Tribunal , Barabanki.

It had fastened the liability on the the appellant corporation and the owner of the vehicle to pay compensation to the claimants. The issue before the court was if an insured vehicle was plying under an agreement of contract with the corporation whether the insurance company would be liable to pay compensation or would it be the responsibility of the corporation or the owner of such vehicle in case of an accident? It was a vexed question with no unanimity in the judgments of various high courts and it has not been considered directly so far by the apex court, pointed out justice Verma writing the verdict for the bench.

"If the Corporation had become the owner... and the vehicle having been insured at the instance of original owner, it will be deemed that the vehicle was transferred along with the insurance policy in existence to the Corporation and thus insurance company would not be able to escape its liability to pay the amount of compensation," said a bench comprising Justice Dalveer Bhandari and Justice Deepak Verma in its judgement on Monday.

In one such case, the owner of a mini bus had entered into an agreement with the UPSRTC for plying the vehicle as per the permit issued in favour of the Corporation. On account of the amendment in the Motor Vehicles Act,1988 the Corporation hired the vehicle and used the same on the routes as per the permit granted to it.

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