Sections 147, 148, 149 and 150 of the Motor Vehicles Act
Sections 147 to 150 form a central part of Chapter XI of the Motor Vehicles Act, 1988. They specify the minimum requirements of third-party motor insurance, recognise qualifying policies issued in reciprocating countries, establish an early settlement procedure after an accident, and define the insurer's duty to satisfy judgments and awards.
Section 147 - Requirements of policies and limits of liability
Section 147 sets out what an insurance policy must cover in order to comply with Chapter XI.
Authorised insurer: the policy must be issued by an authorised insurer.
Third-party death, injury and property: the policy must insure the person or classes of persons specified in it against covered liability arising from death or bodily injury to a person, including the owner of goods or an authorised representative carried in the vehicle, and damage to third-party property caused by or arising out of use of the motor vehicle in a public place.
Transport vehicle passengers: the statutory cover extends to death or bodily injury of a passenger of a transport vehicle, except a gratuitous passenger of a goods vehicle, where the death or injury is caused by or arises out of use of the vehicle in a public place.
The statutory explanation treats death, bodily injury or property damage as arising out of use of a vehicle in a public place even where the injured person or damaged property was outside the public place when the accident occurred, if the act or omission leading to the accident occurred in a public place.
Premium, certificate and indemnity
Section 147(2) provides for the Central Government, in consultation with the insurance regulator, to prescribe the base premium and insurer liability for third-party insurance relating to death or grievous hurt. Section 147(3) requires a prescribed certificate of insurance before the policy is effective for the purposes of Chapter XI.
A policy issued before commencement of the 2019 amendment continues on its existing contractual terms as provided by section 147(4). If a cover note is not followed by a policy within the specified period, the insurer must give the statutory notice within seven days after expiry of the cover note. Section 147(6) requires the insurer to indemnify persons specified in the policy in respect of liability that the policy purports to cover.
Section 148 - Validity of policies issued in reciprocating countries
Section 148 addresses cross-border motor insurance where India has an arrangement with a reciprocating country.
If a vehicle registered in a reciprocating country operates on a route or in an area common to India and that country, a policy satisfying the insurance law of that country may, subject to the statutory conditions and rules under section 164B, operate throughout the agreed route or area as though it complied with Chapter XI.
Section 149 - Settlement by insurance company and procedure
Section 149 creates an early settlement mechanism after information about a motor accident reaches the insurance company.
Designated officer: after receiving accident information from the claimant, an accident information report or otherwise, the insurer must designate an officer to settle claims arising from the accident.
Settlement offer: the designated officer may make an offer to the claimant before the Claims Tribunal within thirty days, after following the procedure prescribed by the Central Government.
If accepted: the Claims Tribunal records the settlement, the claim is treated as settled by consent, and the insurer must make payment within a maximum of thirty days from receipt of the settlement record.
If rejected: the Claims Tribunal fixes a hearing to adjudicate the claim on its merits.
Section 150 - Duty of insurers to satisfy judgments and awards
Section 150 requires an insurer, subject to the statutory conditions, to satisfy a qualifying judgment or award against an insured person in respect of third-party liability covered by section 147 or liability under section 164.
Where the required certificate of insurance has been issued, the insurer may be required to pay the person entitled to the benefit of the award up to the sum assured, together with applicable costs and interest, even where the insurer may otherwise have a right to avoid or cancel the policy, subject to section 150.
The insurer must have the statutory notice of the proceedings and is entitled to be made a party and defend the action on the grounds permitted by section 150.
Statutory grounds of defence
The permitted grounds include specified breaches of policy conditions concerning use of the vehicle, driving by an unauthorised or disqualified person or driving under the influence as contemplated by the Act, specified war or civil-disturbance exclusions, material non-disclosure or material misrepresentation, and non-receipt of premium as required by section 64VB of the Insurance Act, 1938.
Section 150 also addresses qualifying judgments from reciprocating countries, restrictions in policies that are ineffective against compulsory third-party liabilities, and the owner's duty to provide insurance details to the Tribunal or court when a claimant does not know the identity of the insurer.
Award: for section 150, an award means an award made by the Claims Tribunal under section 168.
Claims Tribunal: a Claims Tribunal constituted under section 165.
Material fact and material particular: respectively, a fact or particular capable of influencing the judgment of a prudent insurer in deciding whether to accept the risk and, if so, at what premium and on what conditions.
Official resources
Motor Vehicles Act, 1988 - India Code