Motor Insurance Claims - A Comprehensive Guide

1. MOTOR INSURANCE CLAIMSBYR.R.JOSHIEX-MANAGERUNITED INDIA INSURANCE COMPANY LTD.

2. Motor Constitutes45% of Total Premium

3. DEFINITION OF MOTOR VEHICLE Motor vehicle means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes chassis to which a body has not been attached and a trailer

4. Historical Background First Motor Car was introduced into England in 1894 and first Motor Policy was introduced in 1895 to cover Third Party Liability. By 1899,accidental damage to the car was added to the policy Road Traffic Act 1930 and 1934 introduced compulsory Third Party Insurance In India, the Motor Vehicles Act was passed in 1939.The Act was revised in 1988 The Motor Tariff was withdrawn in 2007. However, the policy formats and relevant General Regulations were allowed to continue

5. LEGISLATIVE ENVIRONMENT • The Insurance act • The Motor Vehicle Act • The India Motor Tariff (erstwhile)

6. Application of Basic Principles • Utmost Good Faith- Material facts in Motor Insurance are- • Type of Vehicle and IDV • Zone of Registration/Use • Past loss experience • Driving History and traffic convictions of Driver • Insurable Interest-Policy will be normally issued in the name of the Registered Owner of the Vehicle. Financial Interest/Hypothecation is recognized by special endorsements

7. Application of Basic Principles..contd. Indemnity—IDV will be the basis of settlement for TL/CTL/Theft claims and repair claims will be settled by applying depreciation as per policy table on the parts replaced Subrogation –modification introduced by Knock-for Knock Agreement Contribution –as per Insurance Law Proximate Cause---as per Insurance Law

8. Salient provisions of Motor Vehicles Act as applicable to Insurance Sections 140-144– deal with No Fault Liability Sections 145-164— deal with Insurance of Motor Vehicles against T.P.Risks Sections 165-176--- deal with Claims Tribunals Sections of Special Relevance are- Section-140 ---NFL Sections-146 and 147---Compulsory Insurance and Limits of Liability Section—149--- Defences available to Insurers Section---161--- Legislation regarding Hit and Run Section-163 A- Structured Compensation Section -166—Fault Liability

9. SECTION-146-Compulsory Third Party Insurance No person shall use, except as a passenger, or allow any person to use, a motor vehicle in a public place unless there is in force in relation to the use of the vehicle by that person or that other person as the case may be, a policy of insurance complying with the requirements of this chapter Exemptions---Central and State Government Vehicles and Vehicles belonging to Local Authorities/State Transport Undertakings

10. SECTION-147 LIMIT OF THIRD PARTY LIABILITY Policy of insurance must be a policy which insures the classes of persons specified in the policy against- Any liability incurred by the insured in respect of death or bodily injury to ANY person including owner of the goods or his authorized representative carried in the vehicle Liability incurred in respect of damage to any property of a third party Liability incurred in respect of death or bodily injury of any passenger of a public service vehicle.

11. LIMIT OF THIRD PARTY LIABILITY (contd..) Liability arising under Workmen’s Compensation Act, 1923 in respect of death or bodily injury to:- ( a ) Paid driver of the vehicle ( b ) Conductor or Ticket Examiner (Public Service Vehicles) ( c ) Cleaner/Coolies carried in goods vehicle V. Liability in respect of death or bodily injury of passengers who are carried for hire or reward or by reason of or in pursuance of contract of employment

12. LIMIT OF THIRD PARTY LIABILITY (contd..) The policy of insurance should cover the liability incurred in respect of any one accident as follows :- In respect of death or bodily injury to any person: the amount of liability incurred i.e. unlimited (B) In respect of damage to any property of third party: limit of Rs. 6000/- Insurers are providing increased property damage cover as under: Two Wheelers-----Rs.100000/- Private Cars and Commercial Vehicles-----Rs.750000/-

13. SECTION 140---NO FAULT LIABILITY The Supreme Court and High Courts had pointed out several times that proving negligence of Driver was a cumbersome task and the litigation became a prolonged and expensive process for the claimants. The Courts advocated the Principle of No Fault Liability, atleast as a measure of interim Relief. This led to the introduction of NFL in the Motor Vehicles Act As per the principle of no fault-- CLAIMANT IS NOT REQUIRED TO PROVE NEGLIGENCE OF THE DRIVER If there is a valid Insurance Policy covering the vehicle involved in the accident the Insurer is liable to pay Amount of compensation payable: Rs. 50,000/- for death/Rs.25,000/- permanent disablement

14. Section 149(2)---Defences available to the Insurer There has been a breach of a specified condition of the policy viz. a condition – Excluding the use of the vehicle: a)for hire or reward, where the vehicle is 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 2.Excluding driving by a named person/persons or by any person who is not duly licenced or by any person who has been disqualified from holding/ obtaining a driving license, during the period of disqualification

15. Section 149 (2)---Defences available to the Insurer..contd. 3. Caused/contributed by war/civil war/civil commotion • The Policy is void on the ground that it was obtained by non-disclosure or misrepresentation of a material fact The Insurer is treated as a Judgement Debtor and is liable to relinquish the liability which devolves upon the Insured as per the MACT Award . His defences are limited within the provisions of Section 149(2).In case there is a collusion between the Insured and claimant, the Insurer can, as per provisions of Section 170,contest the claim on all/any of the grounds available to the Insured

16. Section 163(A)-Structured Compensation Special Provision to pay compensation on Structural Formula basis. Claimant is not required to prove negligence of the Driver In case of Fatal Accidents, a Table of Compensation is provided in which the amount payable depends upon the age of the victim and the multiplier applicable Compensation is reduced by 1/3rd towards expenses of self maintenance incurred by the deceased, had he been alive Amount of Compensation will not be less than Rs.50,000/-

17. MOTOR ACCIDENT CLAIMS TRIBUNAL Established by the State Government as per provisions of Section 165 of M.V.Act Section 166-Application of Compensation has to be filed within six months from the accident date,to the MACT having jurisdiction over the area in which the accident occurred/ area in which the claimants/ defendants reside Award of the Claims Tribunal as per Section 168 and compensation to be deposited within 30 days of the Award date Section 173-Appeal,if any, to be filed within 90 Days of Award with the respective High Court

18. Section 161--HIT AND RUN • HIT AND RUN ACCIDENT– is defined as an accident arising out of the use of a Motor Vehicle, the Identity of which cannot be ascertained in spite of reasonable efforts for the purpose • Compensation is paid through the Solatium Fund – Death ---Rs.50000/- Grievous Hurt---Rs.25000/- • Claims Procedure— Application will be made in the prescribed Form to the Collector/Tehsildarand the Claims enquiry Officer appointed by them will enquire into the matter and submit a detailed Report to the Claims Settlement Commissioner. Once satisfied, he will pass the Award and the payment will be made from the Solatium Fund.

19. LokAdalat for speedy disposal of MACT cases Special Features Market Practice is to place claims upto Rs.500000/-before the LokAdalat, wherein liability is clear Consent applications from both parties are taken for placing the claims before the LokAdalat Notice will be issued to the parties/their Advocates to participate in the LokAdalat by the Legal Aid Officer Efforts will be made to bring the parties to a fair compromise and if agreement is reached, the Compromise Memo duly signed by both parties will be submitted to the Claims Tribunal for passing the Final Order and Apportionment of Compensation Insurer must deposit the agreed amount within 4 weeks from the Order date

20. De-Tariffing of Motor Business and Types of Motor Policies • Motor Tariff was discontinued w.e.f. 1/01/2007 However Policy Wordings and certain General Regulations will continue until amendments are permitted by IRDA • TWO TYPES OF POLICIES • Standard Form of LIABILITY ONLY POLICY –applies uniformly to all three classes of Vehicles and covers Act Liability plus P.A. to Owner / Driver 2. Standard Form of PACKAGE POLICIES– applies separately to the three classes of vehicles and - Section I covers own damage Section II covers liability as in (1) above and enhanced TPPD cover

21. LIABILITY ONLY POLICY • Salient Features: • Standard Form of Policy applicable to all classes of Vehicles with suitable amendments in Limitations as to Use • Policy covers the Insured’s Legal Liability towards Third Parties as per the Motor Vehicles Act, for accidents arising out of the use of the vehicle in a public place anywhere in India • Third Party includes amongst others— • Owner of Goods/representative of Owner of Goods travelling with the goods carried by the Goods Vehicle • Passangers carried for Hire or Reward ,in a Passanger Carrying Vehicle

22. LIABILITY ONLY POLICY..contd. • Employees travelling in the Commercial vehicle by reason of or in pursuance of Contract of Employment viz.Driver / Cleaner/Conductor/Coolies …Liability as per provisions of the W.C.Act • Additional Benefit—P.A.Cover to Owner/Driver • Owner/Driver must possess an effective Driving Licence for the respective class of vehicle and is covered whilst driving the vehicle,travelling as co-driver/occupant, mounting or dismounting • Benefit covers Death/ Loss Of Limbs/Permanent Total Disablement caused by bodily injury due to accidental, external, violent and visible means

23. LIABILITY ONLY POLICY..contd. OTHER DRIVER EXTENSION--Liability extends to indemnify persons possessing an effective Driving Licence and driving the vehicle with the Insured’s permission INDEMNITY TO LEGAL HEIRS/PERSONAL REPRESENTATIVES--In the event of death of the Insured after the accident giving rise to Third Party liability under the policy, the Insurer will indemnify the legal heirs/personal representatives against the liability incurred, treating them as the Insured No provision in the policy shall affect the right of any claimant to recover an amount by virtue of the provisions of the M.V.Act. Insurer may file a separate CIVIL SUIT to recover such amount( not payable as per the policy provisions )from the Insured

24. LIABILITY ONLY POLICY..contd. General Exclusions— Breach of Limitations as to Use Contravention of Driver’s Clause Contractual Liability Liability to the Employees of the Insured, other than those connected with the operation of the vehicle, travelling in the insured vehicle out of and in the course of employement …….(NFL may have to be paid) Liability to Gratuitous/NFPP in Commercial Vehicles and Liability to occupants of private car/pillion rider on two-wheeler.......(NFL may have to be paid) War and Allied Perils and Nuclear Perils

25. COMPARISON BETWEEN LIABILITY COVER UNDER PACKAGE POLICIES AND LIABILITY ONLY POLICY LIABILITY ONLY POLICY LIABILITY UNDER PACKAGE POLICY Death/Bodily Injury to occupants in private car/pillion rider on two-wheeler covered as per Court Award and also includes NFL amount. NFPP in Commercial Vehicles covered upto NFL amount Liability extends to include limits of carriageway during loading /unloading from GCV TPPD limit of Rs.100000/- for Two Wheelers and Rs.750000/- for Private Cars/Commercial Vehicles • Death/Bodily Injury to NFPP in Commercial Vehicles/occupants in private car/pillion rider on two-wheeler covered upto NFL amount • Liability does not extend to include limits of carriageway during loading /unloading from GCV • TPPD restricted to Rs.6000/-

26. COMPARISON BETWEEN LIABILITY COVER UNDER PACKAGE POLICIES AND LIABILITY ONLY POLICY LIABILITY ONLY POLICY LIABILITY UNDER PACKAGE POLICY Liability to goods carried in the vehicle not covered Liability for damage to bridge/viaduct/road due to vibrations/weight of vehicle /goods not covered Liability due to Towing of Disabled mechanically propelled vehicles is covered Wider Legal Liability under Fatal Accidents Act/Common Law to employees/workmen covered at additional premium • Liability for goods carried in the vehicle not covered • Liability for damage to bridge/viaduct/road due to vibrations/weight of vehicle /goods not covered • Liability due to Towing of Disabled mechanically propelled vehicles not covered • Wider Legal Liability to employees/workmen not covered

27. Package Policies under Motor Portfolio Standard Form of Package Policy for Private Car Standard Form of Package Policy for Two Wheelers Standard Form of Package Policy for Commercial Vehicles Standard Form of Package Policy for Road Transit Risk Policy Standard Form of Package Policy for Motor Trade Road Risk Policy Standard Form of Package Policy for Motor Trade Internal Risks

28. CLASSIFICATION OF VEHICLES • Private Cars • Motor Cycles / Scooters • Commercial Vehicles

29. COMMERCIAL VEHICLES Commercial Vehicles are further sub-divided into groups as follows-- Goods carrying Vehicles A.1 Public Carriers A.2 Private Carriers A.3 Goods carrying motorized 3 wheelers and Motorized Pedal Cycles (Public Carriers) A.4 Goods carrying motorized 3 wheelers and Motorized Pedal Cycles (Private carriers) Other than 3 wheelers

30. COMMERCIAL VEHICLES..contd. B. Trailers • Passenger Carrying vehicles C.1 4 wheeled & 3 wheeled vehicles not exceeding 6 passengers capacity- Taxies, Autos C.2 4 or more wheelers with passengers exceeding 6 and 3 wheelers exceeding 17 passengers-Buses, Tempos C.3 Motorized 3 wheelers carrying between 6 and 17 passengers C.4 Motorized 2 wheelers for carrying passengers

31. COMMERCIAL VEHICLES..contd. Mostly, MFGs & DEALERS D. Miscellaneous vehicle & special type of vehicles- Ambulances, Bulldozers etc. E. Motor Trade Road Transit Risks only F. Motor Trade Road Risks only G. Motor Trade Internal Risks only

32. MOTOR PACKAGE POLICY- PRIVATE CAR PERILS COVERED UNDER SECTION -I Own Damage • Fire explosion, self ignition, lightning • Burglary, housebreaking , theft • Riot and strike • Earthquake (fire and shock damage), Rockslide / Landslide • Flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost VI. Accidental external means • Malicious Act /Terrorism • Whilst in transit by road, rail, inland waterway, lift, elevator or air

33. OTHER ASPECTS RELATING TO SECTION -1 • Loss/Damage to Accessories are covered only if the accessories are on the Motor Car • Deduction for Depreciation on parts replaced • Protection and Removal to Garage cost restricted to Rs.1500/- in respect of any accident • Immediate Authorised Repairs necessarily and reasonably incurred towards damage covered under the policy restricted to Rs.500/- • Total Loss/Constructive Total Loss claims will be settled on the basis of IDV— IDV= Listed Selling Price(-)Depreciation for age

34. EXCLUSIONS TO SECTION 1 • Consequential loss, depreciation, wear and tear • Mechanical or electrical breakdown, failures or breakages(subsequent damage to the vehicle payable • Damage to tyres and tubes unless the motor car is damaged at the same time, in which case the liability of the insurer is limited to 50% of the cost of replacement • Any accidental loss/damage suffered whilst the Insured/any person driving with the knowledge and consent of the Insured is under the influence of intoxicating liquor or drugs

35. ADDITIONAL FEATURES/RESTRICTIONS UNDER TWO WHEELER AND COMMERCIAL VEHICLE PACKAGE POLICIES TWO WHEELER POLICY COMMERCIAL VEHICLE POLICY Theft of Accessories alone is not covered. Theft is covered only if vehicle is stolen at the same time Cost of Protection and Removal to Garage and immediate authorised repairs differ for the different categories of vehicles involved Loss/damage to lamps/tyres/ mudguards/bonnet side parts /painting not payable • Theft of Accessories alone is not covered. Theft is covered only if vehicle is stolen at the same time • Cost of Protection and Removal to Garage restricted to Rs.300/- and immediate authorised repairs restricted to Rs.150/-

36. GENERAL EXCEPTIONS(APPLICABLE TO ALL SECTIONS OF THE POLICY) • Accident, loss, damage, liability sustained outside the Geographical area • Any claim out of Contractual liability e.g. Goods in GCV are carried under Contract of Affreightment • Whilst the Insured Vehicle is-- • being used otherwise than in accordance with the Limitations as to use • Being driven by a person other than a driver as stated in the Driver’s clause 4) Consequential loss 5) War Perils/Nuclear Perils

37. DRIVER’S CLAUSE • Any person including insured: • Provided that a person driving holds an effective driving licence at the time of accident and is not disqualified from holding or obtaining such a licence. • Provided also that the person holding an effective learner’s licence may also drive the vehicle and that such a person satisfies the requirement of Rule 3 of the CMV Rules 1989.

38. LEARNER’S LICENCE PROVISIONS OF RULE 3 OF C.M.V RULES-1989 While receiving instructions or gaining experience in driving with the object of presenting himself for a test of competence to drive so long as: • such a person is the holder of an effective learner’s licence issued to him in Form 3 to drive the Vehicle. • Such a person is accompanied by an instructor holding an effective licence to drive the vehicle and such instructor is sitting in such a position to control or stop the vehicle and • There is painted, in front and the rear of the vehicle or on a plate or card affixed to the front and the rear--the letter “L” in the red on a white background

39. Extensions/Additional Benefits under Package Policies Own Damage Section— Electronic/Electrical Fittings are covered at higher premium rate CNG/LPG Kits and Fibre Glass Tanks are covered by charging extra premium Two wheeler Policies can be extended to cover theft of accessories alone by charging extra premium Exclusion of Lamps/Tyres/Mudguards etc. in Commercial Vehicle Policies can be deleted by charging extra premium

40. Motor Trade Policies • These policies are taken by Motor Traders who may be either- • Dealers/Distributers of Brand New/Second Hand Vehicles or • Engaged in their Overhaul/Repairs or • Both • The Motor Trader will require— • Motor Trade Road Transit Risk Policy for covering Road Transit Risks for brand new vehicles from the Manufacturer’s premises to their premises

41. Motor Trade Policies…contd. 2. Motor Trade Road Risk Policy for demonstration of brand new vehicles to the prospective buyers.These vehicles can be taken out on the public roads for trial runs by temporarily attaching Trade Certificates. Similarly, named driver plates are used for driving second hand registered vehicles 3. Motor Trade Internal Risk Policy for damage to Customers/Customer’s vehicles entrusted to them for maintenance and/or repairs, due to accidents, fire, negligence of employees etc. on their premises

42. MOTOR INSURANCE PRACTICE De-Tariffing of Motor Business w.e.f 01/01/2007 Insurers are free to charge rates for Own Damage premium based on the overall O/D Claims experience T.P.Premium structure as per IRDA guidelines. T.P.Premium collected by all Insurers was accumulated in a Pool administered by GIC till recently.T.P.Pool abolished w.e.f.01/04/2012 Add-on covers to be filed and approved by IRDA Policy terms/ conditions and relevant General Regulations of erstwhile Tariff to continue

43. Some of the General Regulations still applicable are discussed in detailG R-4 Extension of Geographical Area The geographical Area of Motor Policies can be extended, by charging a flat additional premium, to include the following SAARC countries— Bangladesh Bhutan Nepal Pakistan Sri Lanka Maldives Loss/Damage during Air /Sea Voyage excluded

44. G.R.8 –CONCEPT OF IDV AND SCHEDULE OF DEPRECIATION FOR ARRIVING AT IDV

45. G.R. 9--DEPRECIATION ON PARTS FOR PARTIAL LOSS CLAIMS

46. G.R. 9--DEPRECIATION ON PARTS All other Parts including metal and wooden parts

47. G.R. 10--GEOGRAPHICAL ZONES A)Private Cars/ Motorized two Wheelers / Commercial Vehicles under Sec. 4 C.1 & C.4 (Taxis and 3 wheeler PSVs upto 6 passangers capacity /Two wheeler taxis ) Zone A: Ahmedabad, Bangalore, Chennai, Hyderabad , Kolkata, Mumbai, New Delhi and Pune. Zone B:Rest of India B) Other Commercial Vehicles: Zone A : Chennai, Delhi / New Delhi, Kolkata, Mumbai Zone B : All other State Capitals Zone C : Rest of India

48. G.R. 12 SHORT PERIOD SCALE

49. G.R.17-TRANSFERS • Transfer of Liability portion of the policy-- • On transfer of Ownership, the Liability cover, either under Liability only or under Package Policy, is deemed to have been transferred in favour of the Transferee from the date of transfer. Thus, the Liability cover follows the fortunes of the vehicle • This ensures continuity of Insurance and protects the rights of Third Parties. • The Transferee must apply within 14 days to the Insurer of the vehicle providing the Insurance, previous Ownership and transfer particulars so that the Insurer will effect the necessary changes on the policy and issue a fresh Certificate of Insurance

50. G.R.17-TRANSFERS…contd. Transfer of O/D Portion of the policy—In the case of Package Policies, transfer of the Own Damage portion in favour of the Transferee involves the following procedure— Specific request from the Transferee by submission of a fresh proposal Consent of Transferor NOC from Bank/Financial Institution NCB/NCB difference recovery from Transferee, wherever applicable Submission of old Certificate for cancellation and payment of Transferee Fee as per norms