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ANALYSING MOTOR VEHICLE CLAIMS IN INDIA: THE PROCESS, ESSENTIAL JUDGEMENTS, CRITICISMS AND POSSIBLE SOLUTIONS BY – SURYAANSH KISHAN RAZDAN
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ANALYSING MOTOR VEHICLE CLAIMS IN
INDIA: THE PROCESS, ESSENTIAL JUDGEMENTS, CRITICISMS AND POSSIBLE SOLUTIONS
AUTHORED BY
– SURYAANSH KISHAN RAZDAN
·
Introduction:
When it comes to the Law of Motor Vehicle Insurance or third-party risk
insurance or claims related to motor vehicle accident, the saying “reality is stranger than fiction” rings
true. And why wouldn’t it? The law related
to motor vehicle
accident insurance claims
is a clear example of the
grave differences which one comes across while analysing Theory and Practise.
Just like any other legislation, the words of law try and establish as exhaustive of a framework as possible and prescribe the
general rule that is to be followed, but if the law were to be analysed from a
mere keyhole perspective, there would be left no scope for Judicial
Interpretations or Judicial Development/Evolution.
Law
as a subject, profession or an element of human society cannot afford to be
stagnant, it needs to evolve and adapt to the society. This is where the discussion regarding the “Word of Law” and the
“Spirit of Law” comes into play.
The “word of law” when it comes to motor vehicle
insurance and its claims is plain and simple.
For example Section 146 of the Act states:
This
section makes its clear that any vehicle without a valid insurance policy will
not be applicable to be covered under the ambit of a vehicle allowed to be on
the road.
However,
the anvil of judgements of the Hon’ble Supreme Court and various Hon’ble High
Courts make the aspect regarding the “Spirit of Law” clear. The spirit being,
that the Motor Vehicle Act is a “beneficial legislation” and therefore
it must be construed in a similar
manner.
The
interpretation of the statute must be befitting to the needs of the people it
effects. The Judiciary in most cases functions in the grey area and provides
relief to those who are aggrieved. By this it becomes
clear that the Interpretation of the Motor
Vehicle Act or even the law in general pertaining to motor
vehicle claims is rather biased against the Insurance Companies.
Through
the various judgements of the Hon’ble Supreme Court the stance of the Judiciary
regarding the process of evaluating motor vehicle claims will become clear.
Multiple case studies and examples
will be refereed
to as well in order
to provide more clarity regarding the same.
Although stated
above, that the stance the judiciary takes in most cases is against the Insurance
Companies, as the aim is to interpret the legislation in the perspective for which it was created
i.e. a Beneficial Legislation. But that does not negate
the fact that various landmark
judgements of the Hon’ble
Supreme Court have provided a streamlined structure to evaluate the claims that are awarded to the claimants, most
notably, the judgements of the Hon’ble Supreme Court in the cases of “National
Insurance Co. Ltd vs Pranay Sethi”2
and “Sarla Verma & Ors vs Delhi
Transport Corp.& Anr”3.
But
a defined structure to determine the amount to be awarded is not the only
aspect of necessity when it comes to motor vehicle
claims. Every case has an aspect which
will determine the amount to
be awarded (i.e. determine the aspect of increment, decrement or awarded the
amount at all).
These
aspects range from the fact whether the policy was in effect at the date of the
accident; what qualifies as the appropriate evidence to support one’s motor
accident claim; did the accident take place or not; what if the vehicle or the
driver did not have proper registration; what to do if the vehicle was reported
stolen etc and the list goes on.
The
present article aims to list the various aspects which are accounted for while
evaluating motor vehicle claims all the way from the standard defined structure
of awards to the various additions and their basis of evaluation. The basic aim of this article is to act as a guide to certain
basics entailing a motor vehicle accident claim.
·
The Concept
of Third Party
Insurance:
As has been discussed above and is made amply clear vide Section 146 of the Motor Vehicle Act, that for a motor
vehicle to be legally driven on the roads
in India, it is pertinent for said vehicle to have Compulsory Third
Party Insurance.
The concept and the
importance of the same will become
clear through an example:
X was driving his car rashly and got into an accident
with Y. Y succumbed to his injuries
and passed away. Now, surely there
will be a criminal case initiated against X, but does the story
end here? Taking note of the spirit of the Motor Vehicle Act which establishes it as a
Beneficial Legislation, it clearly does not.
After the accident, the family of Y can file a Motor Vehicle
Insurance Claim against
X, but in reality the claim will be against the Insurance Company of X.
Insurance Policies
are contracts between
the policy holder
and the Insurer
wherein the Insurer (upon the payment of an amount
called the Premium) provides protection to the Policy
Holder in the instance
of any loss. In simpler
terms, it is a form of risk management in cases of unexpected
or uncertain losses.
In the case of third
party insurance, the beneficiary
of the policy is someone else other
than
the 2 parties to the insurance
contract i.e. the policy holder
and the Insurance Company. Thir party
insurance does not provide any benefit to the policy holder but covers the
Insured’s (Policy Holder’s) legal liability for death/disability of the Third
Party or any other form of loss or damage to the Third Party.
Therefore, in
the present example, since the offending vehicle had third party insurance, the
insurance company (if it
is established that there is any liability
of the company) will pay the
amount that has been claimed against the offending vehicle.
The Claim will be
filed before the Concerned Motor Accidents
Claim Tribunal and after taking note of the evidence presented before it, the MACT will decide whether
a claim is made or not and what amount is to be
paid to the claimant in the present case.
·
About MACT Trials:
Chapter 12 of the motor vehicles Act
is titled “Claims Tribunal” and talks about the general powers, procedures and method to initiate claim proceedings. Motor Accident
Claim Tribunal (MACT)
proceedings are not different from any other trial proceeding.
It
comprises of a petition to initiate the claim proceedings, the petition is
supported with relevant evidence and the respondents in the case present arguments
and evidence to refute the claim.
Section 166 of the Motor Vehicles Act states:
“166. Application for
compensation.—(1) An application for compensation arising out of an accident of
the nature specified in sub-section (1) of section 165 may be made—
(a)
by the person who has sustained the injury;
or
(b)
by the owner of the property;
or
(c) where death has resulted from the accident,
by all or any of the legal representatives of the
deceased; or
(d) by any agent duly authorised by the person
injured or all or any of the legal representatives of the deceased, as the
case may be”4
First
and foremost an application is to be filed before the concerned MACT providing
details of the incident and praying for a specific amount as the claim. The
amount claimed is to be substantiated by suitable evidence as well, although in
all cases the claimants state exorbitant amounts with hopes of setting a
benchmark amount.
There
are certain documents which are essential to be annexed with the Claim
Petitions, they are:
1. Copy of the
FIR registered in connection with said accident, if any.
2. Panchnama copy
(this is a list of damages that is drawn by cops in the presence of witnesses).
3. Copy of the
MLC/Post Mortem Report/Death Report as the case may be.
4. The documents
of the identity of the claimants and of the deceased in a death case.
5. Original bills
of expenses incurred on the treatment along with treatment record.
6. Documents of
the educational qualifications of the deceased, if any.
7. Disability Certificate,
if already obtained, in an injury case.
8. The proof
of income of the deceased/injured.
9. Documents about
the age of the victim.
10. The cover note
of the third party insurance policy, if any.
11. An affidavit
detailing the relationship of the claimants with the deceased.
12. RTO Certificate
(showing name and address of owner and insurance Particulars of vehicle/s
involved in the mishap).
13. Passport-Size
Photograph.
14. Court-Fee Stamp
It is based on the evaluation of the information provided by such
documents that the MACT decides upon the validity of the claim and the amount
to be awarded.
In
many cases, when the claim is awarded to the claimant, the insurer has the
right to pay the amount to the claimant and recover the same from the Policy
Holder.
However,
if either of the party is dissatisfied with the judgement of the MACT, the same
can be challenged before the Hon’ble High Court of the appropriate jurisdiction
and if further dissatisfied, the same may be brought before the Hon’ble Supreme
Court.
Now that we have a basic
understanding of the procedure involved
in Motor Vehicle
Claims, it is imperative to
discuss that what are the parameters which are used in order to finalise an
amount which is to be awarded to the claimants.
The calculation of the amount
to be awarded was based on various
precedents and there seemed
to be a lack of clarity or even certain amount of uniformity in evaluating the
amounts to be awarded. However, recent judgements of the Hon’ble Supreme Court
have thrown light upon the same issue and have provided a basic structure to
prescribe the amount which is to be awarded based upon the pecuniary heads, the
other additions are under non-pecuniary heads.
·
The Pranay Sethi & Sarla Verma Method: The Streamlining of Calculation of Claims-
The Hon’ble Supreme Court was of the opinion that there needs to be a set
structure in order to determine the amounts to be awarded in Motor Vehicle
Accident Claims. The issue of establishing certain guidelines in order to
evaluate claims was addressed in great detail in the judgement of Sarla Verma & Ors vs Delhi Transport Corp.& Anr5
and then taking note of the various findings of the afore-mentioned judgement, came the judgement of National Insurance Co. Ltd vs Pranay Sethi6.
The Hon’ble
Supreme Court in the
Judgement of Pranay Sethi7
noted that the concept of “fair compensation” should be determined on grounds of fairness, reasonableness and on acceptable legal standards, since such a
provision “can never be in arithmetical exactitude”.
The
essential aspect in calculating the amount to be awarded to the claimant is the
income of the deceased or the injured. Based on the income, it is evaluated
that what sort of loss has the claimant or the family of the claimant
undergone and therefore taking into consideration other non-pecuniary criterions, a final amount is awarded.
While
calculating the income of the deceased or injured it is essential to include
the aspect of future prospects i.e. in order to ascertain that if the claimant
had not been injured or had the relative of the claimant not died, there would have been eventual
increments in his income and for the same, a standardised system is
provided to determine the income after inclusion of future prospects.
The judgement of Pranay Sethi clearly states
that:
“(iv) In case the deceased was
self-employed or on a fixed salary, an addition of 40% of the established
income should be the warrant where the deceased was below the age of 40 years.
An addition of 25% where
the deceased was between the age of 40 to 50 years and 10% where
the deceased was between the age of 50 to 60 years
should be regarded
as the necessary method
of computation. The established income means the income minus the tax
component.”8
After
an addition of future prospects is made, the next step comes regarding the
deduction of personal expenses from the salary of the deceased or injured. The
deduction of personal expenses is made on the basis of the number of dependants
the claimant or the deceased
has.
The
judgement of Pranay Sethi has stated that the amount that is to be deducted is
to be determined based on Paras 30-32 of the Judgement of Sarla Verma.
However, the basic gist of the aspect of deduction is provided by Para 30 of the aforementioned
judgement itself. It states:
This provides
us with a base amount
to which the multiplier is to be applied in order to ascertain
the amount which is to be awarded to the claimant based on the income of the
claimant or the deceased.
The
judgement of Pranay Sethi has clearly stated that the amount which is to act as
the multiplier to the income of the claimant
or the deceased is to be determined based upon the age
of the deceased/claimant.
This
establishes the amount which is to be awarded to the claimant based on the
streamline method of evaluation of claims. From here on certain amounts are
awarded under non- pecuniary or other conventional heads of loss of estate,
loss of consortium and funeral expenses.
Other amounts
such as medical
expenses or future expenses in case of disabilities or whatever
amounts the court feels justified to include are also added up to the total
amount.
It is however imperative to note that the amounts which have been claimed by the claimants be it the income or even the medical expenses, need to be substantiated with suitable evidences.
·
Why The Motor Vehicle
Act Is Rather Biased Against
Insurance Companies/Criticisms
Of The Act:
That
it is a very old saying that practise is different from theory. The realm of
Motor Vehicle Insurance Claims is no
exception.
On paper it seems
that it is basic enough
i.e. you present
your claims and if it does not fit in the
ambit of the insurance policy, you do not get your claimed amount.
In
practise, when one analyses the anvil of judgements of the Hon’ble Supreme
Court and various Hon’ble High Courts it becomes clear that the odds are
generally stacked against the insurance companies.
It
is correct that the legislation is in spirit and word a beneficial one,
however, there must be certain guidelines like the one’s in judgements of Pranay Sethi and Sarla Verma which prescribe
certain reliefs to the Insurance Companies as well.
For example,
it is evident that motor
vehicle claims are filed when someone is injured or loses
their life as a result of a motor vehicle “accident”,. Therefore, when the death of the deceased is not caused a result
of motor vehicle accident rather as a result of a robbery involving the vehicle or any reason which is not a motor vehicle accident their claim for the same should be dismissed.
This
seems reasonable enough? However, the Hon’ble Supreme Court vide its judgement
in Smt.Rita Devi & Ors vs New India Assurance
Co.Ltd.11 while going into the depth of
what constitutes an “accident” has established that in a situation, where the death of
the victim took place as an “accidental outcome” to
the robbery of the victim or theft of the motor vehicle or any other
instance involving the motor vehicle,
then it falls
under the ambit of a “Motor Vehicle Accident”.
There are other instances where the Hon’ble Supreme Court has chosen to overlook various aspects in order to ensure that an amount is after all paid to the claimant. For example, in insurance policy cover notes it is stated that the policy is applicable to either the owner of the policy or any other person who at the time of the incident was holding a valid drivers licence. Thus showing that just like a valid policy is essential to drive a vehicle on Indian roads, so is a Driver’s License (which goes without saying), however in various judgements, where even if
it
was found that the driving licence was fake or invalid, the Supreme Court has
chosen to award the claims.
The
courts do take note of the fact whether the accident took place because of the
rash and negligent driving of the deceased/injured or of the driver of the
offending vehicle or was it a case of contributory negligence.
But
still there is no specific relief for the Insurance Companies, years of
precedents have however established certain basic contentions which are
presented by Insurance Companies against the claims which have been awarded.
There are numerous instances
ranging from allowing
claims where there are invalid
policies to allowing claims
for un-registered vehicles such as Jugaad12
which show that the insurance companies are at a rather disadvantage when it
comes to such claims.
·
Conclusion:
It is completely understandable that the Motor Vehicle Act is a
Beneficial Legislation with its primary purpose (in terms of Accident Claims)
being to ensure that the aggrieved are provided
with some relief or the other in order to compensate them against the loss.
However, in order to level the playing field, the same way the judgements of Pranay Sethi and
Sarla Verma have provided a structured formula to evaluate the claims, there
must be established a structured method in order to ascertain the deductions
which can be made to the total amount attributed to certain factors of the
case.
For
example, overlooking the absence of a valid driver’s licence and allowing the
claim is completely acceptable, however, such negligence should not go
completely forgiven, there must be a penalty for the same and must be
attributed to the negligence of the deceased/claimant.
Through this, 2 objects may be achieved:
a) The legislation will maintain its spirit
of being a beneficial legislation; and
b)
It will level
the playing field and provide
certain reliefs to the Insurance Companies as well.
Article Information
ANALYSING MOTOR VEHICLE CLAIMS IN INDIA: THE PROCESS, ESSENTIAL JUDGEMENTS, CRITICISMS AND POSSIBLE SOLUTIONS BY – SURYAANSH KISHAN RAZDAN
Authors: SURYAANSH KISHAN RAZDAN
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/04/16
- Issue 7
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International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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