CHAPTER 1 INTRODUCTION TO MOTOR INSURANCE APPLICATION OF BASIC PRINCIPLES
OF INSURANCE Q. Discuss the application of principle of insurable interest under Motor Insurance. Ans. The competency of a person to effect a contract of insurance is, inter alia, determined by his legal pecuniary relationship to the subject matter. This legal pecuniary relationship is known as insurable interest. Insurable interest gives a person legal right to insure the subject matter. There are following three essentials of insurable interest : i) the existence of property exposed to loss, damage or a potential liability; ii) such property or liability must be the subject matter of insurance; ii) The insured must bear a legal pecuniary relationship to the subject matter so that he would benefit by its safety or would suffer financial loss in the form of physical damage or creation of liability because of its loss or damage. Following paragraphs show how the principle of insurable interest is applicable in motor insurance: 1.Owner’s Insurable Interest in Vehicle - The motor vehicle which is the subject matter of motor insurance is exposed to loss by theft or damage due to an accident. Such loss or damage would cause financial loss to the insured. This entitles the owner to insure his vehicle against loss or damage. 2. Owner’s Insurable Interest in Legal Liability - Under Motor Vehicle Act in the case of an accident due to negligent use of the vehicle the insured has a legal liability towards third parties. He may suffer financial loss if he incurs such liability.
(2) This entitles the owner to insure his vehicle against third party risk. Even if the vehicle is not driven by the insured and If the accident is caused due to negligence of the driver he is legally liable to third party for his negligent act. So the question arises how the insured has insurable interest in the liability of the driver. Although owner insured has, strictly speaking, no insurable interest in any such liability, he is deemed as having acted as an agent in arranging the indemnity on behalf of other persons who may drive the vehicle and incur liability. Otherwise, the injured third parties will have no recourse to recover damages. This entitles the owner to insure his vehicle against third party risk. 3. Owner’s Insurable Interest offered by M.V. Act Moreover under the requirement of Section 146 of the Motor Vehicles Act 1988 no person shall allow any other person to use a vehicle in a public place unless the vehicle is covered by an insurance policy complying with the requirements of the Act. This entitles the owner to insure his vehicle against third party risk. 4. Financer’s Insurable Interest - If a vehicle is purchased under a hire purchase agreement, the finance Company has an insurable interest in the vehicle until all the instalments are repaid. This entitles the finance Company to insure such vehicle under motor policy. 6. Garage Owners’ Insurable Interest Garage Owners act as bailee for customers’ vehicle. So they have insurable interest in respect of loss or damage to customers’ vehicle which are in their custody. Q. Motor Insurance is a contract of Indemnity. Discuss Ans. The principle of indemnity requires that when a loss arises under an insurance policy, the loss must be made good in such a manner that financially the insured is neither better off nor worse off as the result of the loss. The object of this principle is to place the insured after a loss in the same
(3) pecuniary position as far as possible as he occupied immediately before the loss. The effect of this principle is to prevent the insured from making a profit out of a loss. Motor Insurance contracts are contracts of indemnity. The principle is applied to this insurance as under: Total Loss - In total loss of the vehicle, insurers pay the market value of the vehicle at the time of loss or the sum insured whichever is less. Partial Loss - In partial loss to the vehicle, the cost of repairs is paid, but if old parts are replaced by new, a suitable depreciation is charged on the cost of new parts. However in case of motor cycles and private cars no such depreciation is applied. Insurers also reserve the option to repair or replace the vehicle or pay in cash. Third Party Liability – Policy indemnifies the actual damages awarded subject to the limits of liability, if any, specified in the policy. Policy also indemnifies actual legal costs. Q. Discuss the application of principle of Utmost Good Faith under Motor Insurance. Ans. Application of principle of Utmost Good - In insurance contracts, the legal, doctrine of utmost good faith applies. This casts on the insured the duty to disclose all material facts that have a bearing on the insurance. A breach of this duty may make the contract void or voidable depending upon the nature of the breach. The principle of utmost good faith is applicable to Motor Insurance in the same manner and with the same force as it is applicable to other classes of insurance. The insured is under the duty to disclose all material facts that have a bearing on the insurance. For this purpose proposal forms is used. In this form the insured submits various material facts such as the type of vehicle, the geographical area of use, the physical condition of the driver, the driving history and traffic convictions of the driver, past loss
(4) experience etc. There is a declaration clause in the form. The effect of declaration is that the answers given in the proposal become warranties. The answers are required to be literally true and correct. Any wrong answer, irrespective of its materiality, will render the contract voidable by insurers. Thus it converts the common law duty into a contractual duty of utmost good faith. However under compulsory third party insurance the doctrine is modified. Section 149 of the Motor Vehicles Act places the duty upon Insurers to satisfy judgements and awards against persons insured in respect of third party risks. Q. Discuss in brief the application of following principles in Motor Insurance: a) Contribution b) Subrogation c) Proximate Cause Ans. a) Contribution - The principle of Contribution is applicable in contracts of indemnity. In motor insurance contribution arises when the same vehicle is insured under more than one policy. According to policy condition the loss is shared pro-rata between the insurers. b) Subrogation -Subrogation is the transfer of rights from the insured to the insurer on payment of loss under the policy. When the loss or damage to the vehicle is caused by the negligence of another person the insured has legal rights to claim against such person. These rights pass to the insurers on payment to the insured. Motor policies provide a condition for subrogation before the payment of the claim. In practice subrogation is modified by Knock for Knock agreement amongst insurers. According to this agreement when there is a collision between two vehicles, one of, which is responsible for the accident the OD Claim (under policy B) shall be paid by insurer of the vehicle.
(5) c) Proximate Cause - According to he doctrine of proximate cause loss is payable if proximately caused by insured peril. This doctrine applies to motor insurance as to other classes of insurance. The loss or damage to the vehicle is payable only if it is proximately caused by on of the insured perils. The doctrine is also applicable to third party claims where in third party injury or property damage must be proximately caused by the negligence of the insured for which he is held legally liable to pay damages. CLASSIFICATION OF MOTOR VEHICLES Q. Define Motor Vehicle. Classify Motor Vehicles for the purpose of Motor Insurance. Ans. Definition of Motor Vehicle - The Motor Vehicle Act defines "Motor Vehicle" as * a mechanically propelled vehicle adapted for use upon roads * whether power of propulsion is transmitted thereto from an external or internal source * it includes a chassis to which a body has not been attached and a trailer * but does not include a vehicle running upon fixed rails. Classification of Motor Vehicles for the purposes of insurance For the purposes of insurance, motor vehicles are classified into three broad categories, 1.Private cars, 2.Motor cycles / Scooters and 3.Commercial vehicles. 4. Miscellaneous and special Types of Vehicles 1. Private Cars – Private Cars includes the following: (a) Vehicles used solely for social, domestic and pleasure purposes.
(6) (b) Car of private type including station wagons, used for social, domestic and pleasure purposes and for the business or Professional purposes of the insured. These may be used by the insured or his employees for such purpose but the carriage of goods other than samples is not permitted. Use of such vehicles for the following is exclude: i) Hire or reward ii) Racing iii) Pacemaking reliability trial iv) Speed Testing v) For any purpose in connection with the Motor Trade (c) Three wheeled cars including cabin scooters used for private purposes. 2.
Motor Cycles / Scooters – These include the following vehicles: i) Mechanically propelled two wheelers with or without side car. ii) Mechanically propelled three wheelers with engine capacity not exceeding 350 cc. 3. Commercial Vehicles - These include the following: 1) Goods Carrying Vehicles - Motor Tariff Categorises the Goods Carrying Vehicle as i) Own Goods Carrier and ii) General Cartage Carrier for rating purpose. 2) Trailers – These include trucks, carts, carriages or other vehicles without means of self propulsion including agricultural implements drawn or hauled by self-propelled vehicle. 3) Vehicles used for carrying passengers for hire or reward A i) Passengers Carrying Vehicles with Carrying capacity upto 6 passengers. ii) Three wheelers with a carrying capacity between 7 & 17 passengers.
(7) iii) Other vehicles with a carrying capacity over 6 passengers. B i) Taxis or Private Car Type Vehicles plying for public hire. ii) Private Type Taxis let out on Private Hire direct from the Owner with or without meters and driven by the Owner or an employee of the Owner. iii ) Private Car type vehicles let out on Private Hire and driven by the Hirer or any driver with his permission. iv) Private Car Type Vehicles owned by Hotels and hired by them to their guests. C Passenger Carrying Motorised Rickshaws 4. Miscellaneous and Special Types of Vehicles – Following are the few examples of vehicles in this category: i) Agricultural Tractors Pedestrian Controlled. ii) Delivery Truck - Pedestrian Controlled. iii) Trailers towed by Tractors. iv) Ambulances. v) Cinema Film Recording& Publicity Vans. vi) Dumpers. vii) Fire Brigade & Salvage Corps Vehicles viii) Road Rollers ix) Excavators. x) Mobile shops and Canteen Vehicles FORMS OF MOTOR POLICIES Q. What are the forms of Motor Policies? Ans. Motor policies are available in following two forms: 1) Form A Policy - This covers "Act" Liability. 2) Form B Policy - This covers 'Own Damage' losses and 'Act' Liability. It can also be extended to cover additional liabilities as provided in the Tariff, for example Increased Third Party Property Damage Liability, Personal Accident Risk, etc.
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CHAPTER 2
LEGAL ASPECTS: THE MOTOR VEHICLES ACT, 1988 IMPORTANT DEFINITIONS BEARING ON MOTOR INSURANCE Q. Define Contract Carriage and Stage Carriage and give the distinction between them. Ans. Contract Carriage – The M.V. Act defines Contract Carriage as a motor vehicle which carries passenger(s) for hire or reward and is engaged under a contract, * whether expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein, and * entered into by a person holding a permit in relation to such vehicle or any person authorised by him in this behalf on a fixed or agreed rate or sum on i) a time basis, or ii)from one point to another, and, in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey. Contract Carriage includes a maxicab and a motorcab. Stage Carriage – The M.V. Act defines Stage Carriage as a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers either for the whole journey or for stages of the journey. Distinction between Contract Carriage and Stage Carriage- The contract carriage is engaged for the whole of the journey between two points for carriage of a person or persons hiring it. It cannot pick up other passengers en route.
(9) Where as the stage carriage runs between two points irrespective of any prior contract, and it can pick up passengers en route who pay the fare for the distance they propose to travel. Q. Define the following: a) Gross Vehicle Weight b) Goods Carriage c) Light Motor Vehicle d) Maxicab e) Motorcab f) Private Service g) Public Service h) Public Place Ans. a) Gross Vehicle Weight - Gross Vehicle Weight means in respect of any vehicle, the total weight of the vehicle and load certified and registered by the Registering Authority as permissible for the vehicle. b) Goods Carriage - Goods Carriage means only motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods. c) Light Motor Vehicle - Light Motor Vehicle (LMV) means a transport vehicle or omnibus, the gross vehicle weight (GVW) of either of which or a motor car or a tractor or road roller, the unladden weight of any of which does not exceed 7,500 Kgs. d) Maxicab- Maxicab means any motor vehicle constructed or adapted to carry more than six, passengers, but not more than. twelve passengers, excluding the driver, for hire or reward. e) Motorcab - Motorcab means any motor vehicle constructed or adapted to carry not more than six passengers, excluding the driver, for hire or reward. f) Private Service Vehicle - Private Service Vehicle means
(10) motor vehicle constructed or adapted to carry more than six persons, excluding the driver, and ordinarily used for the purpose of carrying persons for, or in connection with, his trade or business otherwise than for hire or reward, but does not include a motor vehicle used for public purposes. g) Public Service - Public Service Vehicle means any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a maxicab, a motorcab, contract carriage and stage carriage. h) Public Place - Public Place means a road, street, way or other place whether thoroughfare or not, to which the public have a right of access, and includes any place or stand at which passengers are picked up or set down by a stage carriage. Q. Discuss the following a) Period or currency of driving licence b) Classification of Goods Carrying Vehicles based on GVW Ans. a) Period or currency of driving licence i) Transport vehicle carrying dangerous goods- Licence to drive a transport vehicle carrying goods of dangerous / hazardous nature, the license shall be effective for a period of one year and renewal thereof shall be subject to the condition that the driver undergoes one day refresher course of the prescribed syllabus. ii) Other transport Licences - Other transport licences are valid for 3 years. iii) Private Cars - In case of private cars, earlier, driving licence used to be valid upto 20 years till a person attains age of 40 years. Now, as per amendment, the driving licence of persons above the age of 50 years would be renewed for a period of 5 years at a time on payment of prescribed fees. b) Classification of Goods Carrying Vehicles based on GVW-
LMV MMV HGV
(11) - Upto GVW 7,500 Kgs. - GVW 7,500 Kgs. To 12,000 Kgs. GVW above 12,000 Kgs.
Necessity For Compulsory Third Party Insurance Q. Why there is compulsion For Third Party Insurance of a Motor Vehicle? What exemptions are provided by the M.V. Act? Ans. Necessity For Compulsory Third Party Insurance The law has made it obligatory that no motor vehicle shall be used without a third party insurance. Section 146 of the Motor Vehicles Act, 1988 provides that no person shall use except as a passenger, or allow any other person to use, a motor vehicle in a public place, unless the vehicle is covered by a policy of insurance complying with the requirements of the Act. As per Amendment Act 1994 an additional duty is caste upon the owner of the vehicle carrying dangerous or hazardous goods for a policy of insurance under the Public Liability Insurance Act , 1991. This is to protect members of public travelling in vehicles or using the roads against motor vehicles accidents. A Court can only pass an award or decree for compensation. It cannot ensure actual payment, because the person held liable may be insolvent or may not have sufficient resources to meet the award. To overcome the situation, the law has made it obligatory that no motor vehicle shall be used without a third party insurance. Exemption from Compulsory Third Party Insurance – following vehicles are exempted from compulsory third party insurance: i) any vehicle owned by the Central Government or a State Government and used for Government purposes unconnected with any commercial enterprise. ii) exemption may also be granted by the appropriate Government for any vehicle owned by: (a) the Central Government or a State Government if the
(12) vehicle is used for Government purposes connected with any commercial enterprise: (b) any local authority; (c) any State Transport undertaking. However, the above exemption is made only if a fund is established and maintained by that authority for meeting any liability arising out of the use of any vehicle. The fund has to be established in accordance with the Rules framed under the Act. Requirement of Policies Q. What are the requirement under M.V. Act of a policy of insurance issued for a motor vehicle? Mention the limits of liabilities required to be compulsorily covered. Ans. The policy of motor insurance is required to be issued by an 'authorised insurer. Section 147 of the Motor Vehicles Act, 1988 requires that the policy of insurance must provide cover: i) against any liability which may be incurred by the insured in respect of death of or bodily injury to any person, including owner of the goods or his authorised representative carried in the carriage, or ii) damage to any property of a third party; or iii) against death 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. The policy, however, shall not be required to cover: i) any contractual liability; or ii) any liability in respect of death arising out of and in the course of employment of the employee of the Insured, or in respect of bodily injury sustained by such employee arising of out of and in the course of his employment. The policy must however cover liability arising under the Workmen's Compensation Act, 1923 in respect of death or bodily injury to any such employee (a) engaged in driving the vehicle, or (b) engaged as conductor or ticket examiner in a public service
(13) vehicle, or (c) if it is a goods carriage, being carried in the vehicle. Transfer of Certificate of Insurance Q. What are the provisions under M.V. Act regarding Transfer of Certificate of Insurance? Ans. - Section 157 of the M.V. Act 1988 provides that where a person in whose favour a Certificate of Insurance has been issued, transfers to another person the ownership of the motor vehicle in respect of which the insurance was taken, then the Certificate of Insurance and the relative Policy shall be automatically deemed to be transferred in favour of the new owner from the date of transfer of ownership of the vehicle. Such deemed transfer shall include transfer off rights and liabilities of the said Certificate of Insurance and Policy of Insurance. The transferee should apply within 14 days from the date of transfer on the prescribed form to the insurer for making the necessary changes in the Certificate of Insurance and in the Policy, and the insurer is obliged to make such changes in the said documents to give effect to the transfer of insurance. Duty of Insurers to satisfy Judgements Q. Discuss the duty of insurers to satisfy the judgement of court in respect of a third party claim under motor policy. What defences are available to insurers to resist such claim? Ans. The duty of insurers to satisfy the judgement Section 149 of Motor Vehicles Act, 1988 provides that if a judgement in respect of compulsory third party liability is obtained against an insured person, then the insurer has to pay to the third party the amount decreed plus costs and interest awarded, subject to the sum insured under the Policy. Thus it is the duty of the insurers to make payment to the third parties even though they may be entitled to avoid or cancel the Policy or may have avoided or cancelled the Policy.
(14) Defences are available to insurers - The Act provides certain rights and defences to the insurers to resist third party claims. Before the commencement of the proceedings, the insurers are entitled to receive notice through the Court or the Claims Tribunals, as the case may be, of the bringing of the proceedings or in respect of any judgement awarded so long as execution is stayed thereon pending an appeal. The insurer who receives the notice is entitled to be made a party thereto and to defend the action on any of the following grounds: a) that there has been breach of a specified condition of the Policy, being one of the following condition, viz.: (i) a condition excluding the use of the vehicle: (a) for hire or reward, where vehicle is on the date of the contract of insurance 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, or (d) without side-car being attached, where the vehicle is a motor-cycle; or (ii) a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving license during the period of disqualification; or (iii) a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or b) that the Policy is void on the ground that it was obtained by the non-disclosure of a material fact or by the representation of fact which was false in some material particular. The Act also provides that anything in the Policy which restricts the liability under the Policy towards the third parties by reference to any of the conditions relating to (a) above shall be of no effect.
(15) The Act, however, provides that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the Policy by virtue only of this proviso shall be recoverable by the insurer from that person. Rights of Third parties against Insurers on Insolvency of the Insured and Effect of Death of Insured Person Q. What are the rights of Third parties against Insurers on Insolvency of the Insured? Ans. Section 150 Motor Vehicles Act, 1988 provides for the rights of third parties in the event of the insolvency of the insured or in the event of winding up when the insured is a Company. The Act provides that if, either before or after that event, any third party liability is incurred by the insured, his rights against the insurer under the Policy are transferred to the third party to whom the, liability was incurred. When such transfer takes place, the insurer will be under the same liability to the third party as he would have been to the insured person, but (i) if the liability of the insurer to the insured person exceeds the liability of the insured person to the third party, the insured person's rights against the insurer in respect of the excess are not affected. (ii) if the liability of the insurer to the insured person is less than the liability of the insured person to the third party, the rights of the third party against the insured person in respect of the balance are not affected. In the event of an Insured becoming insolvent or making arrangements with his creditors ( if a company, being wound up) the rights of the Insured under the Policy will be transferred to and vest in the injured third party. In other words the injured third party is able to recover compensation direct from the Insurers. Q. What is the effect of Death of Insured Person on a third
(16) party claim? Ans. Section 155 of 1988 Act provides that if the insured person dies after incurring third party liability, then the cause of action survives against the insured's estate, or legal heirs or against the insurer. If this provision was not made, then the third party's right of action against the negligent owner of the vehicle would die with the death of the owner. Motor Accidents Claims Tribunals Q. Write an essay on Motor Accidents Claims Tribunals. Ans. - i) Constitution of MACT - Section 165 of Motor Vehicles Act, 1988 provides for the constitution of the Motor Accident Claims Tribunal by different State Governments for the purpose of speedy disposal of third party claims at a minimum cost. Such tribunals are presided over by a person of the rank of a District judge or High Court Judge. ii) Procedure and Powers of MACT – Section 169 provides that where any Claims Tribunal has been constituted for any area, the Civil Courts have no jurisdiction to entertain any question relating to claims for motor accident claims compensation. The Claims Tribunals have all the powers of a civil court for the purpose of taking evidence on oath, enforcing the attendance of witnesses and of compelling the discovery and production of documents, etc. The Motor Accident Claims Tribunals have exclusive jurisdiction to decide the claims with regard to death, personal injury as well as damage to third party property, irrespective of the amount involved in the property damaged. iii) Application for Compensation – According to Section 166 of Motor Vehicles Act, 1988 an application for compensation arising out of an accident may be made: a) by the person who has sustained the injury; or b) by the owner of the property; c) where the death has resulted from the accident, by the legal representative(s) of the deceased; or d) by any agent duly authorised by the person injured.
(17) Application has to be made to the Claims Tribunal having jurisdiction over the area in which the accident occurred, or to the claims tribunal within the local limits whose jurisdiction the claimant resides or carries on business or within the local limits of whose jurisdiction the defendant resides. The application shall be in such form and shall contain such particulars as may be prescribed. iv) Option regarding claims for compensation in certain cases - A claim for compensation under the Motor Vehicle Act and also under the Workmen's compensation Act, 1923 the person entitled to compensation may claim such compensation under either of these Acts but not under both. v) Award of the Claims Tribunal - Section 168 defines the duty and obligation of the Claims Tribunal to give prior notice of the third party's application for compensation to the Insurers as also giving opportunity to the Insurers of being heard. The Claims Tribunal makes an award determining the amount of compensation, which appears to it to be just. The tribunal can award simple interest at such rates as it thinks fit, to be paid along with the award for compensation. When Award is made the Judgment debtor shall deposit the entire amount awarded with 30 (thirty) days of the announcement of the Award. vi) Impleading Insurer in certain cases – According to Section 170 where in the course of an inquiry, the Claims Tribunal is satisfied that (a) there is collusion between the person making the claim and the person against whom tfi6 claim is made ( that is, there is collusion between the claimant and insured ), or (b) the person against whom the claim is made, has failed to contest the claim, it may direct that the concerned Insurer be impleaded as a party to the proceedings. The Insurer so impleaded shall thereupon have, without prejudice to the provisions contained in Section 149 (2), the right to contest the claim on all or any
(18) of the grounds that are available to the person against whom the claim has been made. vii) Appeals - Any person aggrieved by an award of a Tribunal may, within ninety days from the date of the award, prefer an appeal to the High Court. No appeal by the person who is required to pay the amount shall be entertained unless he deposits with the High Court Rs. 25000 or 50% of the awarded amount, whichever is less. The High Court may entertain the appeal after the expiry of the said period of ninety days, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal in time. According to Section 173 no appeal is permissible if the amount in dispute is less than Rs. 10000. Q. Discuss the features of provision regarding liability without fault under the M.V. Act. Ans. No Fault Liability - Section 140 of M.V. Act, 1988 provides for Liability without Fault. Following are the feature of this provision i) Strict Liability - This is a strict liability. The claimant involved in a motor vehicle accident is not required to prove wrongful act, neglect, or default (i.e. negligence) on the part of the owner of the vehicle or by any other person. The claim under these provisions is not defeated or affected in any way, by my wrongful act, neglect or default on the part of the claimant; nor can be quantum of compensation be reduced on the basis of the claimant's share of responsibility for the accident. In other words, the legal defence of 'contributory negligence' is not available to the motorist and his insurers. ii) Application of Provision - these provisions apply in cases where the claimant suffers death or permanent disablement. iii) Amounts of Compensation - The amounts of compensation are fixed as follows: Death, Rs. 50000, and Permanent Disablement Rs. 25000.
(19) iv) Object of the provision - The object behind the no-fault principle is to get minimum statutory relief expeditiously to the victim of the road accident or his legal representative. Q. What is Permanent Disablement fir the purpose of Nofault Liability? Ans. Permanent Disablement – According to Section 142 permanent disablement shall mean injury or injuries involving (a) permanent privation of the sight of either eye or the hearing of either ear, or privation of any member or joint; or (b) destruction or permanent impairing of the powers of any member or joint; or (c) permanent disfiguration of the head or face. Hit and Run Accident Q. Write a short note on Hit and Run Accident Ans. Hit and Run Accident - Hit and Run Accident is a motor accident arising out of the use of a motor vehicle or motor vehicles the identity whereof cannot be ascertained in spite of reasonable efforts for the purpose. Section 161 of the M.V.Act. provides for payment of following compensation for such accidents: i) Death - Rs. 25000 ii) Grievous hurt - Rs. 12500 As per the new M.V. Act, the payment of Compensation shall be made by G.I.C. and its subsidiaries. Q. What is grievous hurt under M.V. Act for the purpose of compensation under hit and run accident? Ans. Grievous Hurt - According to Section 161 grievous hurt shall have the same meaning as in the Indian Penal Code. Section 320 of the Indian Penal Code has designated the following kinds of hurt as grievous: i) Emasculation ii) Permanent privation of the sight of eye. iii) Permanent privation of the hearing of either ear.
(20) iv) Privation of any member or joint. v) Destruction or permanent impairing of the powers of any member or joint. vi) Permanent disfiguration of the head or face. vii) Fracture or dislocation of a bone or tooth. viii) Any hurt which endangers life or which causes the sufferer to be during the space of twenty days in severe bodily pain or unable to follow his ordinary pursuits. Compensation on Structural Formula Basis Q. What is Structural formula Basis of compensation to road accident victims? How the compensations are determined under this provision of M.V. Act? Ans. Compensation on Structural Formula Basis - Section 163 (A) of M.V. Act has introduced a new provision for payment of compensation to road accident victims on Structural Formula Basis. Under this Section the amount of compensation payable to claimants is calculated in a tabular form and shown in the Schedule. For any claim compensation under this Section, the claimant is be required to plead or establish that the death or permanent disablement in respect of which the claim has been made, was due to any wrongful act or neglect or default of the owner(s) of the vehicle(s) concerned or of any other person. Thus, the compensation shall be payable on the basis of ‘No Fault’. However, he scheme is optional, and if the claimant feels that the amount prescribed in the Schedule is not acceptable, a claim can be filed under Section 166 of the Motor Vehicles Act. Computation of Amount of Compensation - Following is the method of computation of compensation under Section 163 A : (a) Fatal Accidents - In case of fatal accidents a table of compensation is provided showing the amounts payable depending on the age of the victim and the multiplier applicable. The amount of compensation so arrived at in case of fatal accident claims reduced by one-third in consideration
(21) of the expenses which the victim would have incurred towards maintaining himself, had he been alive. It is provided that the amount of such compensation shall not be less than a specified amount (at present Rs. 50,000) Besides the amount of compensation shown above for fatal cases, the schedule also indicates General Damages of specified amounts payable in case of death for: 1.Funeral expenses. 2.Loss of consortium, if beneficiary is the spouse. 3.Loss of estate. 4.Medical expenses incurred before death not exceeding a specified amount. These are to be supported by bills/ vouchers (b)Disability in non-fatal accidents - In case of non-fatal accidents Compensation is payable for loss of Income, if any, for actual period of disablement not exceeding 52 weeks, Plus either of the following: In case of payment total disablement, the amount payable shall be arrived at by multiplying the annual loss of income by the "multiplier" applicable to the age on the date of determining the compensation, or In case of permanent partial disablement, such percentage of compensation which would have been payable in the case of permanent total disablement as specified in the above item. Besides the amount of compensation shown above the schedule also indicates General Damages of specified amount are payable in case of injuries and disabilities for : 1.Pain and suffering for grievous and non-grievous injuries. 2.Medical expenses incurred not exceeding a specified amount as one time payment. These are to be supported by bills/ vouchers. The Schedule also specifies notional income of nonearning persons.
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CHAPTER 3
LOK ADALAT / LOK NYAYALAYA AND JALAD RAHAT YOJANA Lok Adalat or Lok Nyayalaya Q. Explain the concept of Lok Adalat. What are advantages of Lok Adalat Settlements from the viewpoint of insurance companies? Ans. - Nature and Procedure - For the purpose of bringing about voluntary settlement of disputes Hon'ble Shri P.N.Bhagwati, the ex-Chief Justice of the Supreme Court, conceived a unique concept Lok Adalat or Lok Nyayalaya. Due to enormous increase in the number of accidents and the number of persons maimed or killed, the MACT Courts are faced with a very large number of cases. The net result is that it takes years through the MACT for disposal of claims. Arising from this problem, G.I.C supported the concept and adopted settlements in Lok Adalat. to dispose of such cases speedily in an informal way but with judicial backing and in a spirit of compromise. This movement, in the last five years. resulted in expeditious disposal. For bringing about amicable and speedy settlement of cases pending before the MACT, Lok Adalat sessions are held from time to time in close liaison with the local Legal Aid Committee of the Legal Aid Board of each State and the MACT or the District and Sessions Judge. Following procedure is adopted: i) Consent application from parties concerned - Consent application well in advance is taken from the applicant, dealing advocates for the parties, and the insurer is obtained for placing the cases before the Lok Adalat. ii) Notice to parties concerned - Notice under registered post is issued to the applicant and his advocate and to the
(23) concerned insurer calling upon them to be present in the Lok Adalat on the appointed date and time. iii) Compromise - Efforts are made to bring the parties to a fair compromise without coercion or forces and the agreement arrived at is reduced in writing on the prescribed form. iv) Submission of compromise memo to the concerned Claims Tribunal - The compromise memo is submitted to the Claims Tribunal for passing the final order and apportionment of the compensation in terms of the settlement. v) Payment - The insurers are required to deposit the cheque for the amount agreed with MACT within specified time from the date of the agreement to settle. As per current guidelines of G.I.C., only those cases where claim made to MACT is upto Rs. 500000 are to be considered in the Lok Adalat sessions. Advantages of Lok Adalat Settlements - Settlement of T.P. Claims in the Lok Adalat is advantageous to insurance companies for the following reasons: a) the insurers get an opportunity to clear up a large backlog of motor claims cases; b) the claim is deemed have been settled once and for all and there is no further litigation by way of appeal to the higher Courts; c) speedy settlement gives satisfaction to third party as well as to the insured. d) serves as a means of good publicity, good name and prestige to the insurance company. Jald Rahat Yojana (Pre-litigation Scheme for settlement Third Party Motor Insurance Claims) Q. “Jald Rahat Yojana is an unique Pre-litigation Scheme for settlement Third Party Motor Insurance Claims”. Discuss. Ans. Nature of Jald Rahat Yojana - The Jald Rahat Yojana
(24) was introduced by General Insurance Corporation of India with effect from 14th March. 1992. This is a Pre-litigation Scheme for settlement Third Party Motor Insurance Claims for motor accident victims. It provides quick payment of compensation to victims of road accidents without their adopting legal proceedings. In Lok Adalat only cases pending before MACT are taken up for compromise settlement, whereas under the Jalad Rahat Yojana injured persons or legal heirs of the victims need not have to go to MACT at all. Cases can be straightaway taken to this forum. The procedure – For disposal of T.P. Claims a panel consisting of following persons is constituted: i) a retired Judge, ii) a medical practitioner and iii) a retired executive of an insurance company having sound knowledge and clear understanding of motor accident claim cases. This panel jointly examines individual cases on a regular basis on certain specified time and terms and offer compromise settlement of claims. If the parties accept such offers, settlement can be promptly finalised. In the initial stage, the Scheme applies to Non-fatal bodily injury claims of road accident victims above 18 years of age. It covers both "fault" and "no-fault" liability claims. To settle any claim under this scheme the claimants’ application is to be supported by the following documents: a) Copy of First Information Report lodged with the Police. b) Registration number and Insurance particulars of offending vehicle. c) Medical certificates in support of claim. d) Medical bills and hospital records. e) Proof of age and income. f) Passport size photograph of victim. There is no mention of any time limit for lodging claims
(25) under the Scheme. However some time limit ought to be set keeping in view the statutory limit under the Motor Vehicles Act. Benefits of the Scheme - The Jald Rahat Yojana offers following benefits to public: i) ‘No Expenses’ and Litigation Free Remedy – This is a litigation free remedy to get compensation for road accidents. The claimant is not required to incur any expenses on Court fees and lawyer’s fees. The claimant is of course free to take assistance from lawyers. ii) Early and easy settlement – the scheme provides settlement of claims within shortest possible time of 2 to 3 months. iii) Option open to go to MACT – Settlement is not binding under this scheme. If the claimant is not satisfied with the compensation offered, the offer can be rejected and the claimant can go to MACT for getting compensation. iii) Just and fair assessment of claims -The scheme offers a just and fair assessment of claims as it is done by independent panels of retired judges, medical practitioners and retired insurance executives. Settlement of T.P. Claims under this scheme is advantageous to insurance companies for the following reasons: a) the insurers get an opportunity to clear up cases without going for litigation. If many claims get settled through this machinery, it is felt that smaller number of cases will go to MACT Courts. b) the claim is deemed have been settled once and for all and there is no further litigation by way of appeal to the higher Courts; c) speedy settlement gives satisfaction to the insured. d) serves as a means of good publicity, good name and prestige to the insurance company.
(26)
CHAPTER 4
MOTOR POLICIES Policy A and Policy B Q. What is the difference between Motor Policy A and Policy B? Ans. India Motor Tariff provides for following two types of policies: Policy 'A' - Policy ‘A’ covers liability to public risks as required under the M.V.Act. In this type of Insurance the loss/ damage to the Motor Vehicle itself, generally known as 'own damage' is not covered. Policy 'B' - Policy 'B'. covers third party (T.P.) liability risk as per the Act and own damage. This is a wider cover and called as 'Comprehensive Insurance'. Motor vehicles are generally classified by Insurers into a) Private Cars, b) Motor cycles, Motor Scooters, Auto cycles etc. and c) Commercial Vehicles. Both Policy A and Policy B are available to all these classes of Motor Vehicles. Policy A is issued in a Standard Form which is uniformly applicable to all above classes of vehicles. Whereas Policy B varies with the class of vehicle covered. Policy 'B' has two sections in the case of Private car and Motor Cycle/Scooters - Section I Loss or Damage and Section II Liability to Third parties. In the case of Commercial vehicles there are three sections - Section I Loss or Damage, Section II Liability to Third parties and Section III Towing Disabled Vehicle.
Scope of Standard Form for A Policy Q. Discuss the cover provided by Motor Policy A. Ans. - Policy A is issued in a Standard Form which is uniformly applicable to all above classes of vehicles.
(27) Scope of Cover - Liability to Third Parties – The policy provides: (1) Subject to the limit of liability as laid down in the Motor Vehicles Act, 1988, the Insurance Company will indemnify the Insured in the event of accident arising out of the use of the motor vehicle anywhere in India, against all sums, including claimant's costs and expenses, which the Insured shall become legally liable to pay in respect of i) death of or bodily injury to any person, and/or ii) damage to any property of third party. (2) The Company will also pay all costs and expenses incurred with its written consent. (3) The Company will indemnify any driver who is driving the insured motor vehicle on the insured's order or with his permission. (4) In the event of the death of any person entitled to indemnity under the policy, the Company will indemnify his legal representatives in terms of and subject to the limitations of the policy. (5) The Company may at its own option A) arrange for representation at any Inquest of Fatal Injury in respect of death which may be the subject of indemnity, and B) undertake the defence of proceedings in any Court of Law in respect of any liability which may be the subject of indemnity under policy. Q. Explain the following clauses under Motor Policy A: a) Application of Limits of Indemnity b) Avoidance of certain terms and Right of Recovery Ans. a) Application of Limits of Indemnity - In the event of any accident involving indemnity to more than one Person, any limitation of the amount of any indemnity shall apply to the aggregate amount of indemnity to all persons indemnified and such indemnity shall apply in priority to the Insured.
(28) b) Avoidance of certain terms and Right of Recovery - The Motor Vehicles Act provides that the judgement obtained against insurers shall not be defeated by the incorporation of exclusion clauses in the policy other than those authorised by Section 149 of the Act. All motor policies therefore contain a clause called "Avoidance of certain terms and right of recovery" reading as under: "Nothing in this policy or any endorsement hereon shall affect the right of any person to recover an amount under or by virtue of the provision of the Motor Vehicles Act. But the Insured shall repay to the Company all sums paid by the Company, which the Company would not have been liable to pay but for the said provisions shall for all purpose be deemed to have been abandoned and shall not thereafter be recoverable under the policy”. Thus this clause in its effect provides that any provision in the policy which has the effect of denying payment of claim to any person who is entitled to receive it by virtue of provisions of the Motor Vehicles Act, is of no effect. Thus, the interests of third parties are safeguarded. Q. What are the General Exceptions under Motor Policy A? Ans. Following are the General Exceptions under Motor Policy A: (1) The Insurer shall not be liable for any claim arising whilst the, motor vehicle is a) being used otherwise than in accordance with Limitation as to Use, or b) being driven by any person other than a driver as stated in Driver's Clause. (2) There is no liability in respect of any claim arising out of any contractual liability. (3) Except in so far as is necessary to meet the requirements of the Motor Vehicles Act, the Insurance Company shall not
(29) be liable for death or bodily injury arising out of and in the course of employment of a person in the employment of the Insured or in the employment of any person who is indemnified under the Policy. (4) Except so far as is necessary to meet the requirements of the Motor Vehicles Act, the Company shall not be liable in respect of death or bodily injury to any person (other than a passenger carried by reason of or in pursuance of a contract of employment) being carried in or upon or entering or mounting or alighting from the motor vehicle at the time of occurrence of the event out of which any claim arises. (5) War and allied perils. (6) Nuclear Risk.
Private Car B Policy Q. Describe the cover offered by Section I of Private Car Policy B and exclusions applicable to this section. Ans. Risks Covered under Section I - Loss or Damage of Private Car Policy B – This section is also known as ‘Own Damage’ Section. It provides indemnity to the Insured against loss or damage to the insured Motor Car and/or its accessories whilst thereon: a) by fire, explosion, self-ignition or lightening; b) by burglary, housebreaking or theft; c) by riot and strike; d) by earthquake (fire and shock damage); e) by flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost; f) by accidental external means; g) by malicious act; h) by terrorist activity; i) whilst in transit by road, rail, inland waterway, lift, elevator or air; j) by landslide / rockslide.
(30) Protection and Removal Costs - If the motor car is disabled by reason of loss or damage covered under the policy, the insurer will bear reasonable cost of protection and removal to the nearest repairers and of redelivery to the insured but not exceeding in all Rs. 1,500/- in respect of any accident. Authorisation for Repair - The insured may authorise repairs necessitated by damage covered under the policy, provided that : (a) the estimated cost of such repairs does not exceed Rs. 500/(b) the insurer is furnished forthwith a detailed estimate of the cost, and (c) the insured gives the insurer every assistance to see that such repair is necessary and the charge reasonable. Exclusions under Section I - The insured will not be liable to make any payment for the following: (a) consequential loss, depreciation, wear and tear, mechanical or electrical breakdown, failures and breakage. (b) damage to tyres unless the motor car is damaged at the same time when the liability of the insurer is limited to 50% of the cost of replacement. (c) any accidental loss or damage suffered whilst the insured or any person driving with the knowledge and consent of the insured is under the influence of intoxicating liquor or drugs. Q. Explain the following under Motor Car Policy B: a) Loss to Accessory b) Consequential loss c) Mechanical Breakdown
Ans. a) Loss to Accessory - The parts which are directly supplied by the manufacturer along with the car, but are not essential for the running of the motor car, are considered as accessories. The engine of a car, is an essential part for the running of the vehicle. So it is not an accessory. Whereas
(31) a taximeter will be considered as an accessory of a taxi cab because the vehicle can run without it. Loss or damage of accessories are covered only if the accessories are on the motor car. For example, the stepny is removed from the car and kept separately in a garage from where it is stolen, the loss will not be covered by the policy. Accessory should be distinguished from Extra Fittings. Radios, tape recorders, air conditioners and other electric or electronic items, etc. which are fitted on the motor cars are not accessories. They will be considered as extra fittings and will not be covered unless they are separately described and valued in the Schedule of the Policy. b) Consequential Loss - The policy covers only direct loss caused by an accident to the car and not the consequential loss. The insured may suffer loss of use of the car during repairs in the form of cost and expenses of alternate transportation. This is a consequential loss which is not covered. c) Mechanical Breakdown – The policy does not cover mechanical or electrical breakdown, failures, breakages. The reason being they are associated with wear and tear. However, subsequent damage following mechanical breakdown is covered. If the steering rod breaks and causes an accident resulting in damage to the car, claim in respect of breakage in steering is not payable, but subsequent damage to the car is accidental damage and claim in respect of that will be admissible. Q. Describe the cover granted by Section II-Liability to Third Parties of Private Car Policy B. Ans. Cover granted by Section II-Liability to Third Parties of Private Car Policy B – This Section provides the following coverage: 1. Liability to Third Party - This section provides indemnity to the insured in the event of accident caused by or arising out of the use of the motor car against all sums, including
(32) claimant's cost and expenses, which the insured shall become legally liable to pay in respect of (i) death or bodily injury to any person, including occupants carried in the motor car, provided such occupants are not carried for hire or reward. This does not cover the employees of the insured as the risk falls under the Workmen's Compensation insurance policy. However, as required by the Motor Vehicles Act, workmen's compensation liability towards a paid driver is covered under this section. (ii) damage to property other than property belonging to the insured or held in trust or in the custody or control of the insured. 2. Legal costs and expenses - The insurer will also pay all legal costs and expenses incurred with its written consent. 3. Indemnity to driver - The indemnity under this Section is available to any driver who is driving the motor car or with his permission, provided that such driver shall as though he were the insured observe, fulfill and be subject to the terms, exceptions and conditions of the policy in so far as they can apply. Limits of Liability Under Section- II- 1 (i) - As per Motor Vehicles Act, 1988 (The Act provides for unlimited liability in respect of third party death or bodily injury). Under Section- II- 1 (ii)Rs. 6,000/- in respect of any one claim or series of claims arising out of one event. For third party property damage the limit provided is that required by the Act . The tariff however provides for increased limits upto unlimited liability for T.P. property damage, on Q. What are the general exceptions under Private Car Policy B which are applicable to both the sections of the policy.
(33) Ans. - General Exceptions - Private Car Policy B is subject to certain general exceptions which are applicable to both the sections of the policy. According to these exceptions the Insurer shall not be liable in respect of the following: (1) Any accident, loss, damage or liability caused, sustained or incurred outside the Geographical Area described in the Policy. (2) Any claim out of any contractual liability. (3) Whilst the insured vehicle is (i) being used otherwise than in accordance with the limitations as to Use. (ii) being driven by any person other than a Driver as stated in the Driver's Clause. (4) Nuclear risks (5) Any accident, loss, damage or liability directly or indirectly arising from nuclear weapons material. (6) War and Allied Perils. Q. Discuss the following under Private Car Policies: a) Limitations as to Use under Private Car Policy b) Driver’s Clause Ans. a) Limitations as to Use under Private Car Policy – This clause under the policy reads as under: "Use only for social, domestic and pleasure purposes and for the Insured's own business. The Policy does not cover the use for hire or reward or for organised racing, pacemaking, reliability trials, speed testing, the carriage of goods (other than samples) in connection with any trade or business or use for any purpose in connection with Motor Trade." b) Driver’s Clause - This clause under the policy reads as under: Driver: Any person including Insured Provided that the person driving is holding an effective driving licence at the time of accident and is not disqualified from holding or obtaining such a licence Provided also that the
(34) person holding an effective learner's license may also drive the vehicle and such a person satisfies the requirements of Rule 3 of the Central Motor Vehicles Rules, 1989. Conditions of the Policy Q. What are the conditions under Private Car Policy B? Ans. Following are the conditions under Private Car Policy B: (1) Notice of loss: Notice should be given immediately to the insurer upon the occurrence of any accident, loss or damage and, in the event of any claim the insured should give all information and assistance as the insurer may require. - Every letter, claim. writ, summons, etc. should be forwarded to the insurer immediately on the receipt of insured. -In the event of any impending prosecution, inquest or fatal inquiry, the insured should immediately inform the insurer in writing. - In case of theft or other criminal act which may be the subject of a claim, the insured should give immediate notice to the Police and cooperate with the insurer in securing the conviction of the offender. (2) No, admission, offer, promise or payment: - The insured should not settle or make any payment in respect of any claim, or admit liability or make any other admission with respect to the accident or any claim arising there from without the written consent of the insurer. - The insurer shall be entitled, if he so desires, to take over and conduct in the name of the insured , the defence or settlement of any claim or to prosecute in the name of the insured any claim for indemnity. The insured should give any information or assistance which the insurer may require for the purpose of resisting or settling any claim. (3) Indemnity: - The insurer has the option to repair, reinstate or replace the motor car or part thereof and / or its accessories or may pay in cash the amount of the loss or damage.
(35) - In any event, the liability of the insurer shall not exceed the value of parts damaged or lost less depreciation plus reasonable cost of fitting. In no case shall the liability of the insurer exceed the insured's estimate of value of the motor car (including accessories thereon) at the time of the loss or damage, whichever is less. (4) Safeguarding the vehicle from loss or damage: - The insured is expected to take all reasonable steps to safeguard the motor car from loss or damage. -He is also obliged to maintain it in an efficient condition. -In the event of any accident or breakdown the motor car should not be left unattended without proper precaution being taken to prevent further damage or loss. -If the motor car is driven before necessary repairs are effected, any extension of the damage or any further damage shall be entirely at insured's own risk. (5) Cancellation: The insurer may cancel the policy by sending seven days notice by registered letter to the insured, and in such event he will return to the insured the premium paid less the prorata portion thereon for the period the policy has been in force. The policy may be cancelled by the insured on seven days notice and provided no claim has arisen during the currency of the policy, the insured shall be entitled to a return of premium, less premium at the insurance company's Short Period Rates for the period the policy has been in force. However where the ownership of the vehicle is transferred, the policy cannot be cancelled, unless evidence that the vehicle is insured elsewhere is produced. (6) Contribution : If at the time any claim arises, there is any other existing insurance covering the same loss, damage or liability, then the insurer shall not be liable to pay or contribute more than its rateable proportion of such loss, damage, compensation, costs or expenses.
(36) (7) Arbitration: -This condition provides for settlement of disputes under the policy through arbitration which is a less expensive and faster method of settlement than litigation. Only disputes regarding the amount or quantum of the claim can be referred to arbitration. If the insurer has disputed or denied liability under the policy, then the insured will have to take recourse to a court of law. -The arbitrator has to be appointed in writing by the parties in difference. - If the parties cannot agree upon a single arbitrator, then two disinterested persons are to be appointed as arbitrators, of whom one shall be appointed in writing by each of the parties. -If either party shall refuse or fail to appoint an arbitrator within two calendar months after receipts of notice in writing by the other party in accordance with the provisions of the Arbitration Act, 1940 then the other party shall be at liberty to appoint a sole arbitrator. In case of disagreement between the arbitrators, the difference will have to be referred to the decision of an Umpire, who has to be appointed by the arbitrators in writing before entering on the reference. The Umpire has to sit with the arbitrators and preside at the meetings. It shall be a condition precedent to any right of action or suit upon the policy that award by such arbitrators or Umpire of the amount of the loss or damage shall be first obtained. A claim will be deemed to be abandoned or time-barred if a suit is not filed in a court of law within 12 calendar months from the date the insurer declines liability for the claim,. Thus this condition stipulates a time limit for filing suit. (8) Observance of conditions as precedent to liability: Due observance and fulfillment of the terms, conditions and endorsement of the policy and the truth of the statements and answers in the proposal form shall be the conditions precedent to any liability of the insurer under the policy.
(37) Q. Write a short note on Bonus/Malus Clause Ans. Bonus/Malus Clause - The insured should always be rewarded by way of reduction in premium for good risk and penalised for bad risk. Under erstwhile Motor Tariff there was only reward by way of No Claim Bonus. But with the introduction of the new Motor Tariff, effective from Ist April, 1990 a new concept is introduced in India which provided loading of premium for the insured who made a claim or claims under his policy. This is provided by Bonus/Malus Clause. Under this clause there is a discount, called Bonus for the claims free period which is given on renewal premium. Similarly if the insured lodges a claim in his policy, loading is applied on the renewal premium which is called Malus. No claim discount is allowed if policy is renewed within 90 days of the expiry of the previous policy. Percentage of bonus/malus is given in the policy. Motor Cycle "B" Policy Q. Describe the cover offered by Section I of Motor Cycle Policy B and exclusions applicable to this section. Ans. Risks Covered under Section I - Loss or Damage of Private Car Policy B – This section is also known as ‘Own Damage’ Section. It provides indemnity to the Insured against loss or damage to the insured Motor Cycle and/or its accessories whilst thereon: a) by fire, explosion, self-ignition or lightening; b) by burglary, housebreaking or theft; c) by riot and strike; d) by earthquake (fire and shock damage); e) by flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost; f) by accidental external means; g) by malicious act; h) by terrorist activity; i) whilst in transit by road, rail, inland waterway, lift,
(38) elevator or air; j) by landslide / rockslide. (You shall kindly observe that the risks covered are the same as those enumerated in the Private Car "B" Policy.) Protection and Removal Costs - If the motor cycle disabled by reason of loss or damage covered under policy, the insurer will bear reasonable cost of protection removal to the nearest repairers and of redelivery to insured but not exceeding in all Rs.300 /- in respect of accident.
is the and the any
Authorisation for Repair - The insured may authorise repairs necessitated by damage covered under the policy, provided that : (a) the estimated cost of such repairs does not exceed Rs. 150/(b) the insurer is furnished forthwith a detailed estimate of the cost, and (c) the insured gives the insurer every assistance to see that such repair is necessary and the charge reasonable. Exclusions under Section I - The insured will not be liable to make any payment for the following: (a) consequential loss, depreciation, wear and tear, mechanical or electrical breakdown, failures and breakage. (b) damage to tyres unless the motor cycle is damaged at the same time when the liability of the insurer is limited to 50% of the cost of replacement. (c) Loss of or damage to accessories by burglary, housebreaking or theft, unless the Motor Cycle is stolen at the same time.(This is additional exclusion in Motor Cycle Policy which do not appear under Motor Car Policy.) (d) any accidental loss or damage suffered whilst the insured or any person driving with the knowledge and consent of the insured is under the influence of intoxicating liquor or drugs. (You shall kindly observe that except exception (d) other
(39) exceptions are the same as those enumerated in the Private Car "B" Policy.) Q. Describe the cover granted by Section II-Liability to Third Parties of Motor Cycle Policy B. Ans. Cover granted by Section II-Liability to Third Parties – This Section provides the following coverage: 1. Liability to Third Party - This section provides indemnity to the insured in the event of accident in the event of any accident involving the insured vehicle against all sums which the insured shall become legally liable to pay in respect of (i) death of or bodily injury to any person, including person conveyed in or on the Motor Cycle, provided such person is not carried for hire or reward; (ii) damage to property other than property belonging to the insured or held in trust or in the custody or control of the insured. It is provided the insurer shall not be liable in respect of death, injury or damage caused or arising beyond the limits of any carriageway or thoroughfare in connection with the bringing of the load to the Motor Cycle for loading thereon or taking away of the load from the Motor Cycle after unloading therefrom. 2. Legal costs and expenses - The insurer will also pay all legal costs and expenses incurred with its written consent. 3. Indemnity to driver - The indemnity under this Section is available to any driver who is driving the motor cycle with insured’s permission, provided that such driver shall as though he were the insured observe, fulfill and be subject to the terms, exceptions and conditions of the policy in so far as they can apply. Limits of Liability Under Section- II- 1 (i) - As per Motor Vehicles Act, 1988 (The Act provides for unlimited liability in respect of third
(40) party death or bodily injury). Under Section- II- 1 (ii) - Rs. 6,000/- in respect of any one claim or series of claims arising out of one event. For third party property damage the limit provided is that required by the Act . The tariff however provides for increased limits upto unlimited liability for T.P. property damage, on extra premium. Q. What are the general exceptions under Motor Cycle Policy B which are applicable to both the sections of the policy. Ans. - General Exceptions under Motor Cycle Policy B General exceptions (applicable to all Sections of the Policy) under Motor Cycle Policy B are the same as those found in the private car policy. Q. What are the conditions under Motor Cycle Policy B. Ans. –Conditions under Motor Cycle Policy B – Conditions under Motor Cycle Policy B are the same as those found in the private car policy.
Commercial Vehicles B Policy Q. Describe the cover offered by Section I of Commercial Vehicle Policy B and exclusions applicable to this section. Ans. Risks Covered under Section I - Loss or Damage of Commercial Vehicle Policy B – This section is also known as ‘Own Damage’ Section. It provides indemnity to the Insured against loss or damage to the insured vehicle and/or its accessories whilst thereon: a) by fire, explosion, self-ignition or lightening; b) by burglary, housebreaking or theft; c) by riot and strike; d) by earthquake (fire and shock damage); e) by flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost;
(41) f) by accidental external means; g) by malicious act; h) by terrorist activity; i) whilst in transit by road, rail, inland waterway, lift, elevator or air; j) by landslide / rockslide. (You shall kindly observe that the risks covered are the same as those enumerated in the Private Car "B" Policy.) Protection and Removal Costs - If the vehicle is disabled by reason of loss or damage covered under the policy, the insurer will bear reasonable cost of protection and removal to the nearest repairers and of redelivery to the insured but not exceeding in all Rs.2500 /- in respect of any accident. Authorisation for Repair - The insured may authorise repairs necessitated by damage covered under the policy, provided that : (a) the estimated cost of such repairs does not exceed Rs. 500/(b) the insurer is furnished forthwith a detailed estimate of the cost, and (c) the insured gives the insurer every assistance to see that such repair is necessary and the charge reasonable. Deduction for Depreciation: a)For all rubber, nylon, plastic parts, tyres and battery 50 % b)For all parts made of glass Nil c)For all other parts: AGE OF VEHICLE PERCENTAGE OF DEPRECIATION Up to 6 months Nil Between 6 months& One year 5% Between 1 year & 2 years 10% Between 2 years & 3 years 15% Between 3 years & 4 years 25% Between 4 years & 5 years 35% Between 5 years & 10 years 40% Over 10 years 50%
(42) Compulsory Excess - The Commercial Vehicle Policy B for certain classes of vehicles to which Endorsement No.26 applies is subject to Compulsory Excess of Rs. 1,5 00/- . This endorsement further provides that except in case of total loss of the vehicle, the insurer shall not liable under Section I of the Policy for loss/damage to lamps, tyres, mudguards and/or bonnet side parts, bumpers and/or paintwork. Exclusions under Section I - The insurer shall not be liable to make any payment (a) in respect of consequential loss, depreciation, wear and tear mechanical or electrical breakdowns, failure or breakages, nor for damage caused by overloading or strain of the motor vehicle, nor for loss of or damage to accessories by burglary, house-breaking or theft unless such motor vehicle is stolen at the same time; (b) in respect of damage to tyres unless the motor vehicle is damaged at the same time, when the liability of the insurer is limited to 50% (fifty percent) of the cost of replacement; (c) in respect of any accidental damage or loss suffered whilst the insured or any person driving with his knowledge and consent is under the influence of intoxicating liquor or drugs. (d) there is no liability for damage caused by overloading or strain of the motor vehicle; (e) nor is there any liability for loss of or damage to accessories by burglary, house-breaking or theft unless the motor vehicle is stolen at the same time. (You shall kindly observe exclusions (a) to (c) above are substantially the same as in the Private Car "B" Policy.) Q. Describe the cover granted by Section II-Liability to Third Parties of Commercial Vehicle Policy B. Ans. Cover granted by Section II-Liability to Third Parties of Commercial Vehicle Policy B – This Section provides the following coverage:
(43) 1. Liability to Third Party - This section provides indemnity to the insured in the event of accident caused by or arising out of the use of the vehicle against all sums, including claimant's cost and expenses, which the insured shall become legally liable to pay in respect of (i) death/bodily injury to any person caused by or arising out of the use (including the loading and/or unloading) of the motor vehicle; (ii) damage to third party property caused by the use (including the loading and/or unloading) of the motor vehicle. 2. Legal costs and expenses - The insurer will also pay all legal costs and expenses incurred with its written consent. 3. Indemnity to driver - The indemnity under this Section is available to any driver who is driving the vehicle with insured’s permission, provided that such driver shall as though he were the insured observe, fulfill and be subject to the terms, exceptions and conditions of the policy in so far as they can apply. Limits of Liability Under Section- II- 1 (i) - As per Motor Vehicles Act, 1988 (The Act provides for unlimited liability in respect of third party death or bodily injury). Under Section- II- 1 (ii)Rs. 6,000/- in respect of any one claim or series of claims arising out of one event. For third party property damage the limit provided is that required by the Act . The tariff however provides for increased limits upto unlimited liability for T.P. property damage, on Q. What are the exceptions under Section II-Liability to Third Parties of Commercial Vehicle Policy B. Ans. Following are the exclusions under this section: (a) The insurer shall not be liable in respect of death, injury or damage caused or arising beyond the limits of any carriageway or thoroughfare in connection with the bringing of the load for loading on the motor vehicle or taking away of the load from the motor vehicle after unloading therefrom
(44) .This liability may be covered under a separate Workmen's Compensation Policy. (b) Except so far as is necessary to meet the requirements of the Motor Vehicles Act, the insurer shall not be liable for death or bodily -injury to any person in the employment of the insured, arising out of and in the course of such employment. Section 147 of the Motor Vehicles Act, 1988 provides that a policy shall not be required to cover liability in respect of death or bodily injury sustained by an employee of the insured arising out of and in the course of his employment other than a liability arising under the Workmen's Compensation Act, 1923 in respect of death/bodily injury to employees: (i) engaged in driving the vehicle, or (ii) if it is a public service vehicle, engaged as conductor or ticket examiner, or (iii) If it is a goods carriage, being carried in the vehicle. (c) Legal liability towards person carried in the vehicle is excluded. However, as required by the Motor Vehicles Act, legal liability towards fare paying passengers and persons carried by virtue of a contract of employment is covered. (d) The insurer is not liable in respect of damage to property belonging to or held in trust by or in the custody or control of the insured or a member of the insured's household or being conveyed by the motor vehicle. (e) The insurer shall not be liable in respect of damage to any bridge and/or viaduct and/or to any road and/or anything beneath by vibration or by the weight of the motor vehicle and/or load carried by the motor vehicle. (f) Except so far as is necessary to meet the requirements of the Motor Vehicles Act, the insurer shall not be liable for death and/or injury to any person or persons who are not employees of the insured and not being carried for hire or reward, other than the owner of goods being carried in or upon or entering or mounting or alighting from the motor vehicle insured under the policy, or of such owner of the goods.
(45) Q. Describe the cover granted by Section III - Towing Disabled Vehicles of Commercial Vehicle Policy B. Ans. This Section provides that the policy shall be operative i.e. indemnity shall be available whilst the motor vehicle being used for the purpose of towing any one disabled mechanically propelled vehicle, and the indemnity provided by Section II of the policy. (Third Party Liability ) shall be extended to apply in respect of liability in connection with such towed vehicle, provided that (a) such towed vehicle is not towed for reward; and (b) the insurer shall not be liable in respect of damage to such towed vehicle nor in respect of property being conveyed there by. Q. What are the general exceptions under Commercial Vehicle Policy B which are applicable to all the sections of the policy? Ans. All the six "exceptions" are identical to those in the Private Car "B" Policy. Q. What are the Conditions under Commercial Vehicle Policy B? Ans. Following are the conditions under Commercial Vehicle Policy B which are substantially same as those in Private Car B Policy : i) Notice of loss. ii) No admission, offer, promise or payment iii) Indemnity (repair, reinstate or replace etc.) iv) Safeguarding the vehicle from loss/damage and maintaining it in efficient condition. v) Contribution Clause vi) Cancellation Clause yii) Arbitration Clause viii) Observance of Conditions as precedent to liability.
(46) Q. What is the Specialty of Condition No. 3 ‘Indemnity’ of Commercial Vehicle Policy B as compared to this condition under B Policies for other classes of vehicle? Ans. Condition No. 3 ‘Indemnity’ of Commercial Vehicle Policy B as compared to this condition under B Policies for other classes of vehicle has a distinct feature. This condition under commercial Vehicle Policy provides that after a valid claim for Third Party Property Damage under Section 11- 1 (ii) of the Policy, the insurer may pay the insured the full amount of his liability under the Section and relinquish the conduct of any defence, settlement or proceeding without prejudice to its interests for having taken that course of action; nor shall the insurer be liable for any costs or expenses incurred by the insured or any claimant after the insurer has relinquished such conduct. For Third Party Property Damage the Act requires a limit of Rs. 6,000/-. The policy under Section II-1(ii) also provides this limit. But there is provision in Motor Tariff for higher limits for property damage, subject to additional premium. If the insured has opted for a limit which is below unlimited, then a situation may arise when the third party claim against the insured for such property damage may be for an amount far higher than the limit provided under the policy. In order to defend such claim on behalf of the insured, the insurers will have to incur legal expenses disproportionate to the limit of liability. In such circumstances, the indemnity is paid as per the limit under the policy, and the defence of the claim is left to the insured himself. There is another argument in favour of this condition. In the event of property damage claim far in excess of the limit under the policy, the financial interest of the insured would obviously be greater than that of the insurer. The insured would therefore want to appoint his own legal advisers and would be averse to the insurer exercising their rights of dealing direct with third parties. Thus, this condition provides a solution to the insurers who can pay to the insured the full
(47) amount of their liability under Section II - I (ii) - third party property damage - and leave the insured to conduct the defence and proceedings at his own cost and expense. Q. In what way does the scope of cover under Section II of the Commercial Vehicle B Policy differ from that of the Section II Cover of a Private Car Policy B? Ans. The scope of cover under Section II Liability to Third Party of the Commercial Vehicle Policy B differs from that of Section II cover of the Private Car Comprehensive Policy as under: a) Death of or bodily injury to persons carried for hire or reward or in pursuance of a contract employment only is covered under Commercial Vehicle Policies whereas liability in respect death/ injury to any occupant carried is covered in the Private Car Policy. b) Death of or injury to third party or damage to third party property arising out of the accident beyond the limits of any carriage -way or thoroughfare in connection with bringing load to the motor vehicle or taking away loads therefrom are not covered under Commercial Vehicle Policy. c) Damage to any bridge, weighbridge, viaduct or to any road by vibration or by the weight of the motor vehicle and/or load carried by the motor vehicles is also excluded under the Commercial Vehicle Policy. d) The insurers are not liable for damage to third party property caused by sparks or sparks or ashes from the motor vehicle or out of the explosion of the boiler of the motor vehicle under the Commercial Vehicle Policy. Q. Describe the Wordings regarding Limitations as to Use: (i) For Goods Carrying Vehicle (IZ-300-301): (ii)For Passenger Carrying Vehicle (IZ-400) Ans. (i) Wordings regarding Limitations as to Use For Goods Carrying Vehicle (IZ-300-301):
(48) Use only for carriage of goods within the meaning of the Motor Vehicles Act, 1988. The Policy does not cover (1) Use for organised racing, pace making, reliability trial or speed testing. (2) Use whilst drawing a trailer except the towing (other than for reward) of any one disabled mechanically propelled vehicle. (3) Use for carrying passengers in the vehicle except employees (other than driver) not exceeding six in number coming under the purview of Workmen's Compensation Act, 1923. (ii) Wordings regarding Limitations as to Use For Passenger Carrying Vehicle (IZ-400) Use only for carriage of passengers in accordance with the permits (Contracts Carriage or Stage Carriage) issued within the meaning of the Motor Vehicles Act, 1988 The Policy does not cover (1) Use for organised racing, pace-making, reliability trial or speed testing. (2) Use whilst drawing a trailer except the towing (other than for reward) of any one disabled mechanically propelled vehicle. Q. Describe the Wordings of Drivers Clause in respect of: (a) Stage Carriage / Contract Carriage / Private Service Vehicle (b) Goods Carriage (c) Non-transport vehicles Ans. (a) Wordings of Drivers Clause in respect of Stage Carriage / Contract Carriage / Private Service Vehicle: Persons or class persons entitled to drive: Any person including the Insured Provided that a person driving holds an effective driving licence at the time of the accident and is not disqualified from holding or obtaining such a licence.
(49) Provided also that the person holding an effective learner's licence may also drive the vehicle when not used for the transport of passengers at the time of the accident and that such a person satisfies the requirements of Rule 3 of the Central Motor Vehicle Rules, 1989. (b) Wordings of Drivers Clause in respect of Goods Carriage: Persons or class persons entitled to drive Any person including the insured Providing that a person driving holds an effective driving licence at the time of the 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 when not used for the transport of goods at the time of the accident and that such a person satisfies the requirements of Rule 3 of the Central Motor Vehicle Rules, 1989. (c) Wordings of Drivers Clause in respect of nontransport vehicles: Persons or class persons entitled to drive Any person including Insured Provided that a person driving holds an effective driving licence at the time of the accident and is not disqualified from holding or obtaining such a licence Provided also that the person holding an effective learn-er's licence may also drive the vehicle and such a person satisfies the requirements of Rule 3 of the Central Motor Vehicle Rules, 1989. Tariff Endorsement No.26 Q. What special exclusions form part of Policy B on Public Carriers? Ans. Tariff Endorsement No.26 - Section I of the Policy B on Public Carriers is subject to Tariff Endorsement No.26.
(50) This endorsement provides for Special Exclusions which relate to Compulsory Excess and exclusion of loss/ damage to certain parts of Public Carriers as under: a) Compulsory excess - In respect of Own Damage claims arising out of each and every accident during the currency of the policy, the insured is required to bear the first Rs. 1500 as Compulsory Excess. This is applicable in regard to claims for total loss also. b) Loss/damage to certain parts - The insurers are not liable for loss of or damage to lamps, tyres, mudguards and/or paint work. However, this is not applicable to a total loss claim. The purpose of these Special Exclusions is to discourage small claims as otherwise the insurers' claims experience in respect of own damage would be more, resulting in increase in the rate of premium in the long run. Q. Discuss the insurer's liability under Comprehensive Motor Policies for following claims. (a) Loss of horn by theft from a motor cycle. (b) Accident damage to an ornamental hub-cap of a private car. (c) Damage to the cabin due to an accident to a public carrier, the estimated repair cost of which is Rs.1475/-. (d) Death of an employee of the owner of the goods carrier who was travelling in the lorry at the time of the accident. Ans. (a) Motor Cycle Comprehensive Policy does not cover the loss of or damage to accessories by burglary, housebreaking or theft unless the Motor Cycle is stolen at the same time. Hence the insurers are not liable, for the loss of the horn, an accessory alone by theft from a Motor Cycle. (b) The ornamental hub cap is an extra fitting. The loss of or damage to Extra fittings is payable only if such fittings are specifically covered. (c) The Comprehensive Policy for a public carrier is subject to a compulsory excess of Rs. 1500/- as per the endorsement
(51) No.26. As the estimated repair cost is less than Rs. 1500, there is no liability under the Policy. (d) According to the provisions of the Motor Vehicles Act, an insurance Policy in respect of a lorry (goods vehicles) is required to cover employees being carried in the vehicle in the course of or arising out of their employment. As per the interpretation of the provisions by various High Courts, the employment need not necessarily be with the insured. Hence the insurers are liable for Death of an employee of the owner of the goods carrier who was travelling in the lorry at the time of the accident. Q. A goods carrying vehicle (general cartage) insured for comprehensive risks without extra benefit met with an accident inside a factory compound. How will you deal with claims lodged for the following? (a) Damage to the mudguard and/or bonnet side parts, head light and bumper the estimated loss of which is Rs. 1600/-. (b) Death of a coolie carried in the vehicle. (c) Damage to the car of the owner of that public carrier which happened to accompany the lorry inside the private place at the material time of the accident. (d) Injury to the driver's friend travelling in the vehicle. (e) Damage to stereo. Ans. Under the Comprehensive Policy conditions, the insurers are liable for claims arising out of the use of vehicle in a private place e.g. a factory compound also. (a) As the damage relates to parts specially excluded under Tariff Endorsement No.26 there is no liability under the policy, (b) The insurers are liable to the extent of the requirements of the Workmen's Compensation Act. (c) Section II of the Comprehensive Policy for commercial vehicle excludes liability in respect of damage to property belonging to the insured. As the lorry and the car belong to
(52) the same owner, there is no liability under the Policy. ( d) Such liability can be covered by way of extra benefit on legal liability to non-fare paying passengers. Otherwise the insurers are not liable. ( e) The stereo is an extra fitting. The loss of or damage to Extra fittings is payable only if such fittings are specifically covered.
(53)
CHAPTER 5
MOTOR TRADE POLICIES Q. What are the special insurance requirements of Motor Traders? What are the policies available to satisfy them? Ans. Motor Traders like dealers of vehicles or those engaged in overhaul or repair of motor vehicles have to demonstrate the vehicles to prospective clients by giving a trial run. These activities involve risk. Motor Traders are also exposed to legal liability for accidental bodily injury, fatal or otherwise, and/or damage to property of third parties, caused by negligence in connection with the use of the vehicles, and/or defects in the plant or premises of the Motor Trader. In view of the above they have special insurance requirements. The Motor Tariff provides for special policies named Motor Trade Policies to cater to the special insurance requirements of the Motor Trade. There are following two types of motor trade policies: (i) Motor Trade 'B' Policy: Road Risks –This is a comprehensive policy which covers loss or damage to the motor vehicle, third party liability and trailers attached to the vehicle whilst the motor vehicle is in a public place or; is temporarily garaged during the course of a journey. (ii) Motor Trade Internal Risk Policy – this Policy offers cover against loss or damage to the vehicle or liability arising out of an event occurring on the insured’s business premises. Q. Write a short note on Motor Trade Certificate. Ans. - Motor Traders like dealers of vehicles or those engaged in overhaul or repair of motor vehicles have to demonstrate the vehicles to prospective clients by giving a trial run. To enable them to do so, the transport authorities allow them number plates which are known as Trade Certificates. The Trade Certificate can be temporarily attached to the vehicle being taken out on the public road for trial runs. Normally, Trade Certificates are used in. case of brand new vehicles
(54) which are unregistered. Alternatively, these plates are allotted the names of the drivers who will be demonstrating the vehicles. Such named driver plates are normally used for driving secondhand registered vehicles. Q. Describe the Cover granted under Motor Trade B Policy. Ans. The cover under Motor Trade B Policy is operative whilst the motor vehicle is in a public place or; is temporarily garaged during the course of a journey but not in or on any premises owned by or in the occupation of the insured. There are following three Sections of the policy: Section I Loss or Damage – This section provides indemnity in respect of loss or damage to the motor vehicle. This Section is not subject to Depreciation Clause. Cost of Protection and Removal upto Rs. 150 is also payable. Section II Liability to Third Party – The cover provided under this section is identical to that granted under the Commercial Vehicles "B" Policy. Section III Trailers – This section deals with extension of cover in respect of trailers (mechanically propelled or otherwise) attached to the motor vehicle for the purpose of being towed. The indemnity provided by Section I (Own Damage) and Section II (Liability to Third Party) is extended to such trailers. This extension is subject to the following provisions: a) the Limits of Liability shown in the Schedule of the Policy are not increased by this extension; b) the insurer shall not be liable in respect of damage to property conveyed by the towed vehicle; c) there is no liability in respect of loss, damage and/or liability sustained or incurred whilst the motor vehicle is towing a greater number of vehicles than is permitted by law. MOTOR TRADE INTERNAL RISKS POLICY Q. Describe the Scope of Comprehensive Motor Trade
(55) Internal Risks Policy. Ans. This policy applies to accident, loss or damage or liability arising out of an event occurring only on the business premises of Motor Trader. There are following two Sections under the policy: Section I – Damage - The insured shall be indemnified in respect of damage to any motor vehicle, including its accessories, whilst thereon i) the property of the insured or any member of the insured's family or household, ii) caused by accidental external and visible means, and iii) occurring in or on the insured premises mentioned in the policy, Exceptions - This section is subject to following exceptions: The Insurer shall not be liable to pay a) for loss of use, depreciation, wear and tear, mechanical or electrical breakdowns, failures or breakages, b) for damage to tyres by application of breaks or by puncture, cuts or bursts. Excess –The indemnity under this section is subject to an "excess" of Rs. 50/- any one accident or a number of accidents arising out of one cause. Limit of Liability for own damage - The present Motor Tariff provides for a limit of Rs. 30,000/- any one accident. Section II Liability to the Public Risks - This Section indemnifies the Insured against all sums, including claimants costs and expenses, which the Insured shall become legally liable to pay in respect of (1) accidental death or bodily injury to any person other than a person in the Insured's service or a member of the Insured's family or household; (2) accidental damage to a) any motor vehicle (including its accessories whilst thereon ) held in trust by or in the custody or control of the Insured;
(56) b) other property not being property belonging to or held in trust by or in the custody or control of the Insured; occurring, in on or about the premises through i) the negligence of the Insured or any person in the service of or acting on behalf of the Insured, or ii) by or through any defect in the premises or in the ways, works, machinery or plant therein. Limits of Liability (a) Under Section II (1) in respect of any one claim or number of claims arising out of one cause - Unlimited As per Motor Vehicles Act, 1988 (b) Under Section II (2) in respect of any one claim or number of claims arising out of one cause .... Rs.6,000/-. The Tariff however provides for following higher limits i)Property damage excluding damage to vehicles - Rs. 1,50,000/- any one accident. ii)Damage to vehicles property damage - Rs. 1,50,000/any one accident. Q. What are the General Exceptions of Comprehensive Motor Trade Internal Risks Policy? Ans. General Exceptions - These exceptions are applicable to both the Sections of the policy. The Insurer shall not be liable under the policy in respect of a) accident, loss, damage or liability due to i) war and allied perils. ii) flood, volcanic eruption, earthquake and other convulsions of natureb) damage to property caused directly or indirectly by fire or explosion. c) any consequence of burglary, housebreaking or theft or any attempt thereat. d) damage to property sustained while it is being worked upon and directly resulting from such work, e) any defective workmanship,
(57) f) death, injury or damage caused by or through any demolition or of structural alteration or addition to the premises or by or through the installation of any equipment. g) death, injury or damage caused by or through or in connection with the use by the insured of power driven cranes, elevators, lifts or hoists other than car hoists having a lift not exceeding six feet or its equivalent, h) any liability which attached by virtue of an agreement. i) death, injury or damage resulting from the driving else where than in or on the premises of any vehicle by the Insured or any person in the service of or acting on behalf of the Insured, j) damage to any motor vehicle or its accessories caused by weather conditions. k) any accident, loss, damage or liability caused by nuclear weapons material.
(58)
CHAPTER 6
MOTOR TARIFFS GENERAL TARIFF REGULATIONS Q. Discuss the following tariff provisions: 1) Geographical Area 2) Prohibition of Agreed Value Policies 3) Short Period Scale of Premium Ans.1) Geographical Area - Under Motor Policies Geographical Area is India which may be extended to include Nepal and Bhutan without charging additional premium. By charging flat additional premium Geographical Area may be extended to include Bangladesh. 2) Prohibition of Agreed Value Policies - An "Agreed Value Policy" is a policy which undertakes in the event of a total loss to pay a specified sum as the value of the vehicle insured and which does not take into account the current market value of such vehicle. For Motor Vehicles it is not permissible to issue such policies except for vintage cars. A vintage car is any car which is over 40 years old and is certified to be in working condition by an automobile engineer or surveyor. 3) Short Period Scale of Premium - Tariff provides following Short Period Scale of Premium for Policies issued or renewed for periods shorter than 12 months: Period (Not Exceeding)
1Week 1Month 2 Months 3 Months 4 Months 6 Months 8 Months Exceeding 8 Months
Rate
... ... ... ... ... ... ... ...
10% of the Annual Rate 25% of the Annual Rate 35% of the Annual Rate 50% of the Annual Rate 60% of the Annual Rate 75% of the Annual Rate 85% of the Annual Rate Full Annual Premium.
(59) The above scale must also be applied in calculating the premium when policies are cancelled during the currency at the request of the insured. Q. Discuss the following tariff provisions: 1) Transfer of a Vehicle 2) Cancellation of Insurance 3) Double insurance Ans. 1) Transfer of a Vehicle - On transfer of a vehicle, the benefits under the policy in force on the date of the transfer shall automatically accrue to the new owner. If transferee is not entitled to the benefit of the bonus or subjected to malus already shown on the policy, the recovery of the difference between his entitlement if any, and that shown on the policy shall be waived till the expiry of the policy. However, on expiry and/or termination of existing policy, the transferee will be eligible for Bonus or will be subjected to Malus as per his own entitlement. If the transferee wants to change the policy in his name, it may be done on getting acceptable evidence of sale and fresh proposal form duly filled and signed. If a new Certificate of Insurance in the Transferee's name is required, the old Certificate of Insurance must be surrendered and a fee ofRs.20/ -must be collected. If the old Certificate of Insurance is not surrendered, a proper declaration must be taken from. the transferee before a new Certificate of Insurance is issued. 2) Cancellation of Insurance - A policy can be cancelled only after ensuring that the vehicle is insured elsewhere and the original Certificate of Insurance is surrendered. If a claim is made or reported, no refund of premium should allowed. A pro-rata refund subject to minimum premium being retained, can be made if the vehicle has been insured continuously for at least 12 months preceding the date of cancellation under a policy in the name of the policy holder. If the policy has been in force for less than a year, the refund should be on short period basis subject to minimum premium being retained.
(60) The Insurer should inform the R.T.O. by registered A.D. post about the cancellations of the insurance. 3) Double insurance – In case of double insurance the insurers or insured may cancel one of the policies. In that case refund should be granted on pro-rata basis and not on short period basis for the period both the policies are in force concurrently. Q. Write notes on: a) The cover note b) Cancellation of Certificate of Insurance c) Lost, Destroyed or Mutilated Certificates Ans. a) The cover note - The cover note is issued pending issuance of a policy. It is valid for 15 days. If due to any reason, the Insurer is not able to issue a policy during that period, the validity of the Cover Note shall be extended for further period of 15 days, at a time, but in no case the total period of validity of the Cover Note shall exceed two months. Where a Cover Note is not followed by Policy of Insurance within the prescribed time limit, the Insurer is required, within seven days of the expiry of the period of the validity of the Cover Note, to notify the fact to the Registering Authority in whose records the vehicle to which the Cover Note relates has been registered. The cover note is issued only in the form prescribed by the Tariff. b) Cancellation of Certificate of Insurance – Tariff provides the following in this regard: a) Whether any alteration is made in the policy affecting the information shown on the Certificate of Insurance, the Certificate of Insurance must be returned to the Insurance Company by the Insured for cancellation, and a new Certificate must be issued. b) Whenever the period of cover made under a Policy is terminated or suspended before its expiration by effluxion of time, the Insured should be advised by registered mail that he
(61) must return the Certificate of Insurance within seven days, or if the Certificate is lost or destroyed, he should make a declaration to that effect. c) Whenever a Policy is cancelled or suspended by the Insurer, the Insurer should, within seven days, notify such cancellation or suspension to the registering authority concerned. c) Lost, Destroyed or Mutilated Certificates - In the event of a Certificate of Insurance (or Cover Note) is lost, destroyed, torn, soiled, defaced or mutilated, a fresh Certificate may be issued on the representation of the Insured. The insured is required to comply with the following: a) to lodge with the Insurer a declaration in which he should set out also the particulars of the circumstances connected with the loss or destruction and the effort§ made to find it; or b) to return to the insurer the Certificate in such defaced or mutilated condition, and c) to pay to the Insurer a fee of Rs. 50/- for each new Certificate of insurance that he may issue after being satisfied about fact of its loss, destruction or mutilation. The new Certificate shall be plainly endorse to the effect that it is a duplicate, issued to replace the original. When a fresh Certificate is issued on the representation that a Certificate has been lost, and if the original Certificate is later found by the holder, it shall be forthwith delivered to the Insurer. Q. a) What is bonus/malus and what are the rules provided under Motor Tariff regarding application of bonus/malus to Policy renewals? b) What procedure is adopted for charging premium if the insured is unable to produce evidence of Bonus/Malus? Ans.(a) Bonus/Malus - 'Bonus' is a reward which allows discount in renewal premium for claim-free experience.
'Malus' is a form of loading on the renewal premium for adverse claims experience. (62) Rules regarding application of bonus/malus - Following are the rules provided under the Motor Tariff regarding application of bonus/malus: a) The bonus/malus concept is applicable only to the OD section of 'B' policies except Road Transit and Motor Trade Policies and Policies which cover only fire and theft risks. b) The discounts/ loading shall follow the fortunes of the original insured and not the Policy and in the event of transfer of interest in the policy from one insured to another the period of qualification for discount or application of loading, so far as it affects the new insured shall commence afresh with effect from the date of renewal only; c) In the event of the insured transferring his insurance from one insurance company to another, the new company shall be entitled to allow him the same rate of discount which he would have received from the previous company or must charge the same loading which would have been charged by the previous company on the basis of evidence in the form of a renewal notice or letter; d) No Claim Discount will be allowed, provided a fresh Policy is obtained within 90 days of the expiry of the previous Policy. e) When an insured vehicle is sold and not followed by the replacement of a new vehicle and the insured is not able to get the renewal effected immediately, the already earned No Claim Discount may be granted on a subsequent insurance, provided such new insurance is effected within 3 years of the date of expiry of previous insurance; f) In the event of an accident for which the insured is wholly free from blame coming within the scope of a Knock-forKnock Agreement, the insurance company has the discretion to treat it as if no claim has been made. g) Bonus/Malus Clause – Following shall be the Table of Discount or Loading as applicable:
(63) Loading/Discount Position on O.D. Premium at Expiry of Policy
% Loading/discount on O.D. Premium to be applied at Renewal If claim is made during expiring policy year
If no claim is made During expiring policy year
PRIVATE CARS and TAXIS with 50% loading continue50%loading charge 30% loading with 30% loading charge 50% loading charge 10% loading with 10% loading charge 30% loading No loading/No disc. No loading/ Disc. charge 10% loading allow 20% discount with 20% Disc. No loading/No Disc. allow 35% discount With 35% Disc. reduce Disc.to 20% allow 50% discount with 50% Disc. reduce Disc.to 35% allow 65% discount with 65% Disc. reduce Disc.to 50% allow 65% discount MOTOR CYCLE/SCOOTER & COMMERCIAL VEHICLES with 40% loading continue 40% loading charge 30% loading with 30% loading charge 40% loading charge 25% loading with 25% loading charge 30% loading charge 15% loading with 15% loading charge 25% loading No loading/No disc. No loading/ Disc. charge 15% loading allow 20% discount with 20% Disc. No loading/No Disc. allow 30% discount With 30% Disc. reduce Disc.to 20% allow 35% discount with 35% Disc. reduce Disc.to 30% allow 45% discount with 45% Disc reduce Disc.to 35% allow 55% discount with 55% loading reduce Disc.to 45% allow 55% discount (b) When a Vehicle is brought for insurance if the insured is
unable to produce evidence of Bonus/Malus, following procedure is to be adopted. 1) If the inspection of Registration book reveals that the insured has owned the vehicle for a period of 30 days or less
only no malus is to be charged; a declaration is to be obtained from the insured that he did not own a vehicle earlier. (64) 2) It the inspection of Registration Book reveals i) Owning the vehicle for 12 months or less - Malus as per first slab i.e. – i) Pvt. Car & Taxies 10%, loading ii) Motor Cycle & CommercialVehicle15% loading. ii) Owning the vehicle for over 12 months - Malus as per second slab i.e. – i) Pvt. Car and Taxies 30% loading ii) Motor Cycle & Commercial Vehicle25% loading. If adequate proof is produced before the expiry of the policy suitable adjustment in premium may be made. Q. What are the conditions for Concession for Vehicles Laid Up and in what forms such connections may be available? Ans. Conditions for Concession for Vehicles Laid Up Concession for Vehicles Laid Up is available on a vehicle which is laid up in garage and not in use for a period of two consecutive months or more. This Concession is available if following conditions are satisfied: i) the vehicle is not undergoing repairs as a result of an event giving rise to a claim under the policy; ii) previous notice in writing has been given to the Company; iii) the Certificate of Insurance has been returned to the Company. iv) the period of suspension shall not extend beyond 12 months from the original expiry date of the policy. Concession for Vehicles Laid Up apply to all classes of vehicles except Trailers and Vehicles used for hire or reward or for Motor Trade purpose, except when the permits for vehicles are temporarily withheld or suspended by government. Form of Concession – The concession may be available in the following form:
(1) In case of suspension of whole cover under the policy a) The liability of the insurance Company may be suspended
(65) suspended and a pro-rata return of premium for the period during which the policy is suspended may be credited to the insured after charging a sum of Rs. 5 for this concession. The return of premium. is allowed only as a credit to be deducted from the next renewal premium and not as a cash refund; or b) The expiry date of the current period of insurance under the policy may be extended for a period equal to the period of suspension on payment of a sum of Rs. 5 for this concession. (2) In case of restriction of cover under the policy - Under 'B' Policy the liability of the company may be restricted for loss / damage by Fire and Theft only, and in consideration of the reduced risk, a) a pro-rata return of premium for such period may be allowed after charging premium for the period of such restriction at the rate of 15 paise per cent on IEV per month or part thereof, and subject to a minimum premium of Rs. 30/-. The return of premium may be allowed only as a credit deductible from the next renewal premium, and not as a cash refund; or b) the expiry date of the current period of insurance may be extended for a period equal to the laid up period on payment of premium at the rate of 6 paise per cent on IEV per month or part thereof, during which the cover has been so restricted to Fire and Theft risks, subject to a minimum premium of Rs. 15/-. Q. Discuss the Tariff Provisions regarding: a) Policy on vehicles subject to hire purchase agreements b) Minimum Premium c) Addition of benefits during currency of policy d) Inclusion of riot, strike, earthquake, flood perils during the currency of the policy. Ans. a) Policy on vehicles subject to hire purchase agreements – It is not allowed to insure vehicle in a name other than that in which the vehicle is registered. In case vehicles subject to hire purchase agreements it is not permi -
(66) - ssible to issue policies in the joint names of the Hirer and Owner. Policies must be issued in the name of the Hirer and the Owner's interest is protected by an endorsement incorporated in the policy. This endorsement recognises the interest of the owners in the motor vehicle insured and provides that payment in respect of loss or damage to the motor vehicle (which loss or damage is not made good by repair or replacement) shall be made to Owners as long as they are the Owners of the motor vehicle. The Owner's receipt will be a full and final discharge to the insurers in respect of such loss or damage. b) Minimum Premium - Minimum premium is Rs. 100/- per vehicle except "Act Only" premium for Motor Cycles/Scooters/Auto Cycles. Minimum premium for vehicles specially designed for handicapped persons will be Rs. 151only. c) Addition of benefits during currency of policy -Any extra benefits may be added and limitation cancelled once only during the currency of an annual policy up to expiry date on a pro rata basis subject to the minimum premium applicable. When an extra benefit has been so added or limitation so cancelled, no return of additional payment by the insured may subsequently be allowed. d) Inclusion of riot, strike, earthquake, flood perils during the currency of the policy – At he inception of the policy the insured can opt for exclusion of riot, strike, earthquake, flood perils. If the insured exercises the option of excluding these covers from the policy, it is not permissible to include these perils during the currency of the policy. Q. Discuss the Tariff Provisions for granting Personal Accident Cover under Motor Policies. Ans. Personal Accident cover for limited duration my be granted under Motor Policies. This cover shall be operative whilst the insured person is connected with the use of the vehicle including mounting into, dismounting from or
(67) travelling in the vehicle in any capacity. Any Personal Accident insurance for 24 hours duration can not be given under Motor Policy. The benefits of the P.A. cover are as under: Description of Benefits i) Death only ii) Loss of two limbs or sight of two eyes or loss of one limb and sight one eye. iii) Loss of one limb or sight of one eye. iv) Permanent Total Disablement from injuries other than named above.
Benefits: % of Capital Sum Insured 100% 100% 50% 100%
Sum Insured and Premium - Maximum cover is limited to Capital Sum Insured of Rs. 2 lakhs per person. Premium per year per person for Capital Sum Insured of Rs. 10,000/- is as under :For Private Cars ... Rs. 5.00 For Motor Cycles/ Scooters ... Rs. 7.50 For Commercial Vehicles ... Rs. 6.00 If the policy is for named persons, the premium mentioned above should be charged for each person. If the policy is desired for unnamed persons the cover should be taken – i) in case of private car or taxi for the number of persons the vehicle is authorised to carry (including the driver); ii) in case of motor cycle/ scooter without side car for minimum two persons the vehicle is authorised to carry. Q. Write short notes on: a) Endorsement No. 71 - Personal Accident Cover for Drivers (other than paid driver)
(68) b) Policies issued to cover foreign made vehicles of Embassies, High Commissions or Consulates in India c) Vehicles specially designed for use of handicapped persons d) Motor Vehicles solely within the insured’s premises. Ans. a) Endorsement No. 71 - Personal Accident Cover for Drivers (other than paid driver) - Endorsement No. 71 provides for Personal Accident Cover for Drivers against death or bodily injury in a motor accident for Capital Sum Insured of Rs. 20,000/. This benefit is included as extension to standard cover without charging any additional premium. This extension is available to any driver including insured when driving himself. However paid driver who is otherwise covered under Workmen's Compensation Act, 1923 as per the requirements of M,V. Act is not be covered under this extension. b) Policies issued to cover foreign made vehicles of Embassies, High Commissions or Consulates in India – In case of Motor Policies issued to cover foreign made vehicles of Embassies, High Commissions or Consulates in India, when the duty element is not included in the Insured's Estimate of Value (IEV), the premium chargeable on Own Damage cover is to be loaded by 15%. c) Vehicles specially designed for use of handicapped persons - While charging the premium on private vehicles, including two/three wheelers specially designed for the use of handicapped persons a discount of 33 1/3% shall be allowed. This benefit is also extended to vehicles owned and used by institutions engaged in services of blind handicapped and mentally retarded persons. d) Motor Vehicles solely within the insured’s premises Motor policies may be issued for the vehicles which are used solely within the insured’s premises (not being a motor trader) or on sites to which the public have no general right of access. These vehicles should not be licensed for general road use.
(69) The usual tariff rates less a reduction of 33.3% are charged as premium for this class of vehicles. Q. What are the rules for issue of Non-Motor Policies? Ans. It is not permitted to insure Liability risks under the Motor Vehicles Act in Non-Motor Policies. It is however permissible to give other cover as follows: (1) Vehicles not licensed for general road use - Non-Motor Policies may be issued for vehicles which are not licensed for road use and for which no Certificate of Insurance is required, provided: i) such vehicles are used only on the premises of the insured (not being a Motor Trader) or on sites to which the public has no general right of access. ii) Vehicles (not being pedestrian controlled agricultural implements) used for agricultural or forestry purposes are excluded. iii) Vehicles used by haulage contractors are excluded. (2) Vehicles which otherwise provided for under the Special Types Tariff - It is permissible in the case of following types of vehicle to give any other cover (except cover for legal liability in respect of use on a road) by means of a Non-Motor Policy : a) Mobile Cranes. b) Mechanical Navies, Shovels, Grabs and Excavators. c) Mobile Plant d) Site Cleaning and Leveling Plant ( other than vehicles designed or adapted for the carriage of goods or materials or Road or Footpath Rollers). e) Any vehicle which is used only on sites on which the insured is carrying out work under a Building or Civil Engineering Contract. f) Fork-Lift Trucks. (3) Contractors and Builders - Non-Motor Policies may be issued to Contractors and Builders performing civil Engineering or construction work, provided that
(70) i) such policy is issued only for the period of one specific contract; ii) the vehicles are those used in, on or about the site clearing, engineering or construction work to which the contract relates; iii) any vehicle qualifying for a private car licence is excluded; iv) any goods carrying vehicle used under a private or public carrier permit issued in accordance with the Motor Vehicles Act, is excluded. PRIVATE CAR TARIFF Q. Discuss the factors for rating private cars on a comprehensive basis. Ans. Factors for rating private cars - Following are the factors for rating private cars on a comprehensive basis : i) Cubic capacity of the vehicle – for this purpose Private cars are grouped under two groups viz., cubic capacity not exceeding 1500 cc, and exceeding 1500cc ii) Value of the vehicle iii) The Zone of operation - There are two Zones of operation, Zone A and Zone B. Zone A consists of Madras Region and Bombay excluding "Bombay". Zone B consists of Rest of India, i.e. Calcutta Region, Delhi Region and "Bombay". Following is the extract of Schedule of premium for own damage section: Insured's Cubic Capacity Estimate of Not Exceeding Exceeding Value (IEV) 1500 c.c. 1500 c.c. Zone A Zone B Zone A Zone B Rs. Rs. Rs. Rs. Rs. 15,000 561 792 20,000 680 955 30,000 916 1,279 966 1,238 40,000 1,153 1,604 1,202 1,686 50,000 1,389 1,928 1,439 2,011
(71) N o t e s : i) Intermediate values and values in excess of those shown in the schedule above shall be charged at Rs. 2.37% for Zone A and Rs. 3.25% for Zone B calculated on the difference to the nearest rupee. ii) Electrical and/or electronic items fitted to private cars should be insured separately under a 'B' Policy at a premium of Rs. 3.40% on the value of such fittings, which should be obtained separately for each item. Q. Name the discounts granted under Private Car Comprehensive Policies. Explain any three of them. Ans. Discounts on the premium for the following are granted under Private Car Comprehensive Policies: i) Exclusion of fire risk; ii) exclusion of theft risks; iii) excess accidental damage or IBFP (insured bearing first portion); iv) membership of an automobile association; v) no claim discount vi) exclusion of earthquake and/or flood and/or riot perils. 1) Discount for Excess Accident Damage Excess Accident Damage Discount Insured bearing first Rs. 500 Insured bearing first Rs. 1000 Insured bearing first Rs. 1500 Insured bearing first Rs. 2500 Insured bearing first Rs. 5000 Insured bearing first Rs. 7500 Insured bearing first Rs.10000
5% but not exceeding Rs. 125 10% but not exceeding Rs. 250 15% but not exceeding Rs. 375 20% but not exceeding Rs. 625 25% but not exceeding Rs.1250 30% but not exceeding Rs.1800 35% but not exceeding Rs.2500
2) Discount for exclusion of earthquake and/or flood and/or riot perils Discount For Perils excluded 0.10% on IEV of car Earthquake (Fire and Shock damage), 0.15% on IEV of car Flood, typhoon, Hurricane, Storm, Tempest, Inundation, Cyclone, Hailstorm and Frost. 0.15% on IEV of car Riot & Strike and Terrorist Activity.
(72) 3) Discount for membership of a recognised Automobile Association - A discount of 5% subject to maximum of Rs. 100/- per car may be allowed from the Own damage or liability premium (whichever is more favourable to the insured). Following are the conditions for this discount: 1) The discount can be allowed only in respect of membership of one Association. 2) The insured shall produce membership card issued by the Automobile Association or a reference shall be made to the secretary of the Association concerned. This procedure must be followed at the time of renewal also. 3) The discount is applicable only to individual owners or joint owners of private cars and not to firms. The discount may be given on policies subject to Hire Purchase or Leasing Agreement, provided the insured is otherwise eligible for discount. 4) The discount applies to both new business and renewals. In the event of the insured becoming a member during the currency of the policy, discount may be allowed pro-rata. Q. a) Name five Extra benefits under private car comprehensive policies. b) Discuss any Three extra benefits available on payment of extra premium, under the above Policy. Ans. Five Extra benefits under private car comprehensive policies: i) Legal Liability to employees of the insured who may be travelling or driving the employer’s car (other than paid drivers). ii) Personal Accident benefits to the insured and others. iii) Additional cover to the luggage trailer. iv) Cover for use of cars for reliability trials and rallies. v) Cover for Extra fittings b) Three extra benefits available on payment of extra premium, under the above Policy(1) Reliability Trails and Rallies held in India - Policies may
(73) be extended to permit use during a particular reliability trail or rally under the auspices of any recognised motoring organisation on payment of following additional premium: "B" Policies - Rs. 50 for the first day and Rs. 25 for each succeeding day. The cover is subject to an excess of Rs. 500 for each and every claim under Section I of the Policy. "A" Policies - Rs. 20 for the first day. Rs. 10 for each succeeding day. (2) Increased Third Party Property Damage under Section II-1(ii) of the Policy - The Motor Vehicles Act, 1988 provides for minimum Rs. 6000 cover for Third party Property Damage. It is possible to obtain higher limits of T.P.P.D. cover at following additional premium: First increase of Rs. 44000 (i.e. for total cover of Rs. 50000) - Rs. 15 per vehicle. For each additional Rs. 50000 - Rs. 10 per slab of Rs. 50000 per vehicle. For unlimited liability - Rs. 50 total premium per vehicle. 3) Cover for Extra Fittings – Extra Fittings are to be covered separately. Separate values are to be given for items intended to be covered. Premium is charged @ 3.40% on the value. Exclusion as to Mechanical or Electrical Breakdown is applicable to extra fittings also. MOTOR CYCLES / MOTOR SCOOTERS TARIFF Q. What are the factors to be taken into account for rating for Policy 'B' cover for Motor Cycle/Scooters? Ans. Following Factors are to be taken into account for rating for Policy 'B' cover for Motor Cycle/Scooters: (a) Cubic Capacity, (b) IEV. and (c) Whether side car attached or not. Cubic Capacity and IEV – Following Rating Schedule is applied: (a) For Motor Cycles and Scooters other than Auto Cycle or mechanically assisted Pedal Cycles:
(74) Cubic Capacity
Uptol50c.c. Upto250c.c. Over 250 c.c.
Own Damage
Rs. 88/- plus 1.10% on IEV Rs. 110/- plus 1.10% on IEV Rs. 132/- plus 1. 10% on IEV
In applying the scale of rates, Motor Cycles / Motor Scooters exceeding any of the stated cubic capacities are to be rated according to the next higher capacity. (b) For Auto Cycles or Mechanically Assisted Pedal Cycles Own Damage - Rs. 30/- plus 0.40% on IEV Minimum values for computation of premium shall be as under, irrespective of any lower value proposed for insurance: Upto 150 c.c. Rs. 3,000/Upto 250 c.c. Rs. 4 , 000/_ Over 250 c.c. Rs. 5,000/Side car - The insured value of any side car is to be stated separately. A 25% reduction may be allowed where the cover excludes use of a Motor Cycle / Motor Scooter without a sidecar attached. Discounts for deletion of named perils – Following discounts may be allowed from Own Damage Premium: i) 0.10% on IEV if Earthquake, etc. perils excluded. ii) 0. 15% on IEV if Flood, etc. perils excluded. iii) 0. 15% on IEV if Riot, Strike etc. perils excluded. Q. Enumerate the extra benefits available under motor Cycle Comprehensive Policies. Ans. Extra Benefits under motor Cycle Comprehensive Policies: (1) Loss of Accessories – The policy does not cover Loss of Accessories by Theft. This may be covered at an additional premium of 3% on the value of such accessories, with a minimum premium of Rs. 15 subject to a compulsory excess of Rs. 50/-
(75) (2) Legal Liability to persons employed in connection with the operation and / or maintenance - Legal Liability to persons employed in connection with the operation and / or maintenance of the Motor Cycle under the Workmen's Compensation Act, 1923, Fatal Accidents Act, 1855 and at Common Law may be covered at the extra premium of Rs. 15 per person. (3) Liability to Employees of the Insured - Legal Liability to Employees of the Insured, who may be driving/riding the Employer's Motor Cycle may be covered at the extra premium of Rs.50/-. (4) Reliability Trials and Rallies - Policies may be extended to permit use during particular reliability trial or rally under the auspices of a recognised motoring organisation on payment of specific additional premiums. ( For the scope of this extension please refer the description in the Private Car Tariff). (5) Increased Third Party Property Damage – The policy may be extended for Increased Third Party Property Damage. (Additional premium shall be as described in Private Car Tariff) Q. What are discounts available under Motor Cycle Policy? Ans. Discounts available under Motor Cycle Policy: (1) Excess Accidental Damage : i) Insured bearing first Rs. 100/ - 10% Discount but not exceeding Rs. 25/ ii) Insured bearing first Rs. 200/- 15% but not exceeding Rs. 50/ (2) No Claim Bonus (3) Discount for Membership of an Automobile Association - Discount for Membership of an Automobile Association is 5% subject to a maximum of Rs. 30/- per motor cycle. Same rules apply as in Private Car Tariff.
(76) Commercial Vehicles Tariff Q. (a) Name the extra benefits available under Commercial Vehicle Comprehensive Policies. (b) Describe the scope of cover under extra benefit for Legal liability for accidents to non-fare paying passengers. Ans.(a) Following are the extra benefits available under Commercial Vehicle Comprehensive Policies: i) Legal Liabilities to employees of the insured. ii) Personal Accident benefits to the insured and others. iii) Legal Liability for accidents to passengers (fare paying). iv) Legal Liability to non-fare paying passengers. v) Increased Third Party Property Damage vi) Liability for damage to property caused by spark risk in connection with steam driven vehicles. vii) Cover for extra fittings b) Legal liability for accidents to non-fare paying passengersCommercial Vehicles Policies may be extended to cover Legal Liability to non-fare paying passengers.. There are two types of non-fare paying passengers: i) Non-fare Paying Passengers who are employees of the Insured but not "Workmen" ;under the Workmen's Compensation Act- Following additional premium is payable: a) Vehicles not designed for carriage of passengers, e.g. Goods Carrying Vehicles - Rs.50/- per passenger. b) Vehicles designed for carriage of passengers e.g. Bus Rs.110/- per Passenger. ii) any other non-fare paying passengers - Legal Liability for accidents to Non-fare Paying Passengers, who are not employees of the Insured carried in a Goods Carrying Vehicles may be covered at additional premium of Rs.50/per passenger. Q. Describe the Scale of Discount for Excess Accidental Damage for Commercial Vehicles.
(77) Ans. Scale of Discount for Excess Accidental Damage for Commercial Vehicles Excess
Discount
Insured bearing 1st Rs. 1000 5% but not exceeding Rs.250 Insured bearing 1st Rs. 2500 10% but not exceeding Rs.625 Insured bearing 1st Rs. 5000 15% but not exceeding Rs. 1250 Insured bearing 1st Rs. 7500 20% but not exceeding Rs. 1875 Insured bearing 1st Rs.10000 25% but not exceeding Rs.2500 Q. Write a short note on IMT 74 Ans. IMT 74 – Commercial Vehicle Policy with Endorsement No 26 provides that except in the case of total loss of the vehicle, the Insurer shall not be liable under Section I of the Policy (i.e. Own-Damage Section) for loss of or damage to lamps, tyres, mudguards and/or bonnet side parts, bumpers and/or paintwork. Majority of Exclusion under IMT 26 can be deleted by paying an additional premium attaching endorsement, IMT 74 which cover losses (excluding theft under any circumstances) of items like tyres, mudguards, headlights and painting of damage portion under commercial Vehicle 'B' Policy. Q. What is the basis of rating for charging Premium for Own Damage Cover under various Commercial Vehicles? Ans. Premium for Own Damage Cover under various Commercial Vehicles – (1) Goods Carrying Vehicles - The Rate is based on Gross Vehicle Weight, which means the total weight of the Vehicle and Load certified by the registering authority as permissible for that vehicle. Based on GVW, the specified amount of premium plus a percentage surcharge on the IEV is charged. A discount of 30% may be allowed to Own Damage Premium for vehicles which are used for carrying "own goods" only. (2) Vehicles Carrying Passengers for Hire or Reward – i) Taxis with carrying capacity upto 6 Passengers - The Rate is based on Cubic Capacity upto 1500 c.c. and exceeding 1500 c.c.
(78) ii) Three Wheelers with carrying capacity upto 6 Passengers - The Rate is based on Cubic Capacity ( different capacities given under Tariff). iii) Other Vehicles with carrying capacity exceeding 6 Passengers – The rates are based on Licensed Passenger Carrying Capacity and (3) Trailers – The rate varies according to the class of vehicle that will tow the trailer and the number of trailers towed. (4) Miscellaneous and special Types of Vehicles – The rates vary according to type of vehicle. Q. How the Trailers can be insured under Motor Policies? Ans. A trailer is any truck, cart, carriage or other vehicle without means of self- propulsion including agricultural implements drawn or hauled by any self-propelled vehicle. Trailers can be covered under Motor Policies in the following ways: i) Policy Covering the Vehicle which will tow the trailer may be extended to cover the Trailer(s) or ii) A separate policy is issued to cover trailer(s) at the prescribed rates, subject to the Trailer and the Towing Vehicle being insured on identical terms with the same Company. For the purpose of Bonus / Malus. Clause, the towing vehicle(s) and the trailer(s) whilst attached thereto shall be treated as a single unit and claim made or arising in respect of one section of the unit will affect the Bonus / Malus entitlement of both sections of the unit. The premium is calculated at the rate applicable to the highest rated class of vehicle that will tow the trailer(s) at any time. The rating Schedule - both of own damage and Third Party Liability gives premium when (a) towed by vehicle rated under agricultural Forestry class and (b) Others. Also the premium varies according to whether one trailer is towed or two, or three right upto eight trailers
Where more than one trailer is owned but not more than one trailer is towed at a time, the basis of rating of such trailer
(79) is the basis of “towing one trailer only" and this must be applied to all trailers. The premium so calculated must be charged on all trailers owned by and / or in the possession of the insured. The same principle shall be applied in cases where not more than two trailers are towed at a time. The following clause must appear on all policies covering either the towing vehicle or the trailers "Warranted that not more than …… trailers shall be towed by the towing vehicle and further warranted that the Company shall not be liable to indemnify the insured in connection with any vehicle or trailer while a greater number of trailers in all is being towed than is permitted by law." Q. What are the Tariff provisions regarding premium for Motor Trade Internal Risks Policy. Ans. For Motor Trade Internal Risks insurance the rates of premium are based on (a) Superficial area of premises occupied by the insured for Motor trade business (b) Wages paid to employees The first and all renewable premiums are regulated partly on wages, salaries etc. paid by the insured to employees during the period of insurance. The insured has to maintain the record of employees and the insurers have the right to inspect such records.
(80)
CHAPTER 7
DOCUMENTS OF MOTOR INSURANCE Q. Discuss the importance of various documents used for Motor Insurance. Ans. Various documents used for Motor Insurance with their use and importance are enumerated as under: (i) Proposal Form -The Proposal Form is compulsory in Motor Insurance. The information/particulars given by the insured in the Proposal Form, form the basis for the insurance contract. The Declaration Clause in the form converts the common law duty into a contractual duty of utmost good faith. The effect of this is that the answers given in the proposal become warranties. (ii) Cover Note - Cover Note is issued pending issuance of policy. It is unstamped document The cover note is to be issued in the prescribed form and it is valid for a period of 15 days and can be extended upto two months. (iii) Certificate of Insurance -The Certificate of Insurance is an evidence that a motor vehicle is insured against third party liability as required by the Motor Vehicles Act. The Certificate is to be issued as per the form prescribed in the Act. (iv) The Policy - The Policy is a stamped document evidencing the contract of insurance. It includes the terms and conditions of the insurance cover. (v) Various Endorsements- Endorsements are attached to the policy to incorporate changes in the terms of the Policy. It may be attached at the time of issuing the policy to provide additional benefits and cover or to impose restrictions. The wordings of the Endorsements are provided in the Tariff.
(81) (vi) Renewal Notice - The Renewal Notice is reminder to the insured about the expiry of the policy and calling for the renewal for a further period of one year. (vii)Renewal Receipt – While renewing the insurance some insurers issue the Renewal Receipt in place of the Policy. It is worded to the effect that, in consideration of receipt of the renewal premium, the Policy is renewed for a further period of 12 months. Q. What are the questions commonly asked in Motor Proposal form? Ans. Proposal Form -The Proposal Form is compulsory in Motor Insurance. It is designed to elicit information necessary for a proper evaluation of the risk and for rating. The information/particulars given by the insured in the Proposal Form, form the basis for the insurance contract. Following are the questions commonly asked in Proposal form: (a) Particulars about the proposer i) Proposer's name in full. This is required to establish the identity of the insured and to make enquiry concerning the moral hazard. ii) Address-It is necessary for communications and area of use of the vehicle. iii) Occupation- It indicates social status of the proposer and also gives some indication about the extent and purpose the vehicle is likely to be used. iv) Physical disability and mental infirmity- Though this information is relevant from the point of risk involved, it is difficult to get precise answers as the vehicle may be driven by persons other than the insured. v) Previous convictions- This throw light on driving habits. (b) Details of vehicles to be insured i) Registration, Engine and Chassis Number and Make of the vehicle -These give identification of the vehicles and are required for verification in case of accident. ii) Year of manufacture -This is necessary to decide the age
(82) of the vehicle particularly for comprehensive cover. iii) Type of body, Seating capacity and Cubic capacityThese are required for Rating. iv) Date of Purchase – This is required for applying loading in case of late Registration v) Insured's estimate of the value of the vehicle- Required for premium calculation and this is also the Sum Insured in Motor. (c) Details of other vehicles – Details of Vehicles owned by the proposer and details of accidents during the past 3 to 5 years give some idea about the physical and moral hazard. (d) Details of insurance history-This is to ascertain whether there were any adverse features, such as declinature, cancellation or imposition of special terms and conditions by previous insurers. (e) Questions relating to extra benefits and eligibility for discount – Required for additional premium or discount of premium as the case may be. (f) Certain other particulars in case of commercial vehicles – E.g. the type of permit, the total licensed passenger carrying capacity etc. (g) Declaration - The answers to the questions are followed by declaration. The Declaration Clause in the proposal form converts the common law duty into a contractual duty of utmost good faith. The effect of this is that the answers given in the proposal become warranties. Q. Certain common features appear in all types of Motor Certificates of Insurance. What are they? Ans. In Motor Insurance, in addition to the policy, a Certificate of insurance in the prescribed form is issued as required by the Motor Vehicles Act. There are certain common features which appear in all types of motor certificates of insurance. These are as under: (a) Certificate number. (b) Registration mark and number or description of the
(83) vehicle insured. (c) Effective date of commencement of insurance for the purpose of the Act; (d) Date of expiry of insurance; (e) Persons or classes of Persons entitled to drive; (f) Limitations as to use The above details are followed by a certificate signed by the Authorised Insurer to the effect that the Policy and the Certificate of Insurance are issued in accordance with the provisions of the Chapters X & XI of the Motor Vehicles Act, 1988. Particulars(a) to (d) are same in all certificates. Differences in wordings are found in the particulars (e) and (f). Q. Describe the wordings appearing in Certificate of Insurance for Private Car for the following: (i) Persons or classes of persons entitled to drive (ii) Limitations as to Use Ans. (i) Persons or classes of persons entitled to drive Any of the following: (a) The Insured. (b) Any other person who is driving on the Insured's order or with his permission Provided that the person driving holds or had held and has not been disqualified from holding an effective driving license with all the required endorsements thereon as per the Motor Vehicles Act and the Rules made there under for the time being in force to drive the category of motor vehicle insured hereunder. (ii) Limitations as to Use Use only for social, domestic and pleasure and for the Insured's own business. The Policy does not cover the use for hire or reward or organised racing, pacemaking, reliability trials, speed testing,
(84) the carriage of goods (other than samples) in connection with any trade or business or use for any purpose in connection with Motor Trade. Q. Describe the wordings for Limitations as to Use for: (a) Goods Carrying Vehicle (b) Passenger Carrying Vehicle Ans. (a) Limitations as to Use for Goods Carrying Vehicle - own goods or general cartage: Use only for carriage of goods within the meaning of the Motor Vehicles Act, 1988. The Policy does not cover (1) Use for organised racing, pacemaking, reliability trial or speed testing. (2) Use whilst drawing a trailer except the towing (other than for reward) of any one disabled mechanically propelled vehicle. (3) Use for carrying passengers in the vehicle except employees (other than driver) not exceeding six in number coming under the purview of Workmen's Compensation Act, 1923 (b) Limitation as to Use For Passenger Carrying Vehicle: Use only for carriage of Passengers in accordance with the permits (Contract Carriage or Stage Carriage) issued within the meaning of the Motor Vehicles Act, 1988. The Policy does not cover (1) Use for organised racing, pacemaking, reliability trial or speed testing. (2) Use whilst drawing a trailer except the towing (other than for reward) of any one disabled mechanically propelled vehicle. Q. Describe Motor Cover Note. Ans. Motor Cover Note is a document issued in advance of
(85) the Certificate and the Policy. It is valid for a period of 15 days from the date of its issue. If for any reason the insurers are not able to issue a policy during that period, the validity of the Cover Note may be extended for a further period of 15 days at a time but in no case the total period of validity of a Cover Note shall exceed two months. Motor Cover Note is to be issued in the following form prescribed by the Motor Tariff: "The Insured described in the Schedule below, having proposed for insurance in respect of the Motor Vehicle(s) described therein and having paid the sum of Rs.... as premium the risk is hereby held covered under the terms of the Company’s usual form of.... Policy applicable thereto (subject to any Special Conditions or Restrictions mentioned overleaf) for the period between the dates specified in the schedule unless the cover be terminated by the Company by notice in writing in which case the insurance will thereupon cease and a proportionate part of the premium otherwise payable for such insurance will be charged for the time the Company had been on risk." The Cover Note further contains the following particulars: (1) Registration mark and number, or description of the Vehicles insured / Cubic capacity / Carrying capacity/Make / Year of manufacture. (2) Name and Address of the Insured. (3) Effective date and time of commencement of insurance for the purpose of the Act.: Time Date (4) Date of expiry of insurance. (5) Persons or classes of persons entitled to drive. (6) limitations as to Use (7) Additional Risk if any (8) Special Conditions The Motor Cover Note incorporates a certificate to the effect that it is issued in accordance with the provisions of Chapters X and XI of the Motor Vehicles Act, 1988.
(86)
CHAPTER 8
MOTOR UNDERWRITING Q. Discuss the primary factors in underwriting motor business. Ans. On the one hand where Motor business forms major part of insurers insurance business, on the other hand it is unprofitable also. In view of this it is necessary to adopt a sound underwriting policy in motor business. The primary factors in underwriting motor business may be grouped under the following headings: (i) The vehicle (ii) The use of the vehicle (iii) The geographical area of operation (iv) The Proposer of the vehicle and (v) The claims experience. (i) The Vehicle - The underwriting approach depends on the type of vehicle. In this regard following are the considerations: a) The year of manufacture -The age of the vehicle is important from the underwriting point of view. As a vehicle becomes older, defects appear more frequently and metal fatigue sets in. Old vehicles are normally inspected before underwriting and subject to their condition, they are accepted for insurance with or without excess and/or for restricted cover. b) The purchase price or the insured's estimated value Since there is no pro rata condition of average in motor policy, careful attention has to be paid to the insured's estimated value in relation to age of the vehicle. This is essential to avoid dispute in the event of Total Loss. c) Imported cars -Greater care is to be exercised in underwriting imported cars and sports cars. (ii) Use of the vehicle – Following are the considerations:
(87) a) The purpose for which the vehicle is used – This has link with exposure of risk. This aspect is taken care of in the rating system adopted by the tariff. Private cars poses a lighter risk than taxis which are subject to much greater utilisation. Similarly private carriers are better risks than public carriers as the latter are exposed to a greater incidence of accidents and wear and tear. b) Goods carried in case of goods carrying vehicles - The general nature of the goods carried in respect of a goods vehicle is also an important aspect for underwriting purposes, especially if they are flammable or likely to explode. (iii) Area of operation- The exposure to risk depends upon the area in which the vehicle is used. This is a physical hazard. In the rating system for private cars the tariff and has taken care of this aspect wherein the rates differ according to the zones in which the car is used. (Zone A and Zone B) (iv) Proposer of the vehicle – These consideration are to take care of Moral Hazard. In comparison to physical hazards like the physical condition of the vehicle or the use to which it is put or the area in which it is used the proposer/owner of the motor vehicle is more responsible for bad claims experience. While considering the acceptance of new proposals, it may not be easy to ascertain all aspects of moral hazards. But the owner's behaviour and attitude during the currency of the policy and when a claim arises will be indicative of the moral hazard. This aspect will have to be borne in mind at the time of renewal. (v) The Claims Experience – The claims experience for last three to five years gives a good clue regarding the proposal. Hence the information regarding the claims experience of the proposer is asked in the proposal form separately for 'own damage' claims and third party claims. A single or a series of major claims need not be a matter of concern but a series of minor accidents over a period of time is definitely an unsatisfactory experience. Such proposals should be accepted with great care and preferably an excess should be imposed.
(88) Q. The Driver of the Vehicle is an important underwriting consideration in Motor Insurance. Discuss. Ans. This consideration is to take care of Moral or Personal Hazard. In comparison to physical hazards like the physical condition of the vehicle or the use to which it is put or the area in which it is used the driver of the motor vehicle is more responsible for bad claims experience. The physical hazards are taken care of in the rating system but the personal hazard of the driver can not be taken care of in the rating system. It is essentially the driver who is responsible for good or bad claims experience in motor insurance. By careful driving and by taking a pride in his vehicle, an insured can substantially reduce loss possibilities. On the other hand, neglect and carelessness are two factors which are responsible for bad claims experience. The hazard arising from the driver can be assessed from the point of view of' his age, physical condition, driving experience and occupation. Age has a material bearing on the risk. The young driver presents an unfavorable hazard because speed has a special attraction for youth. Similarly, an elderly driver involves an increased physical hazard. Because of advancing age his faculties are less keen resulting in lower reactions which may have serious consequences in the event of an emergency. Physical defects regarding vision, hearing or loss of limbs add to the exposure of risk. Common defects of vision which can be corrected by glasses or contact tens are ignored. The loss of sight in one eye is much more serious as it impairs the field of vision and judgement of distances. Deafness which can be overcome by the use of hearing aids is ignored by the underwriter. Loss of limbs introduces considerable hazards. The driving experience may indicate accident-proneness. Many accidents occur with new drivers because of their limited driving experience where as the experienced driver who is reckless take risks in over confidence. The proposal form can not indicate the temperament of
(89) an individual or his driving habits. This can be ascertained from the claims experience and history of conviction for traffic offences. Minor conviction for speeding or parking may be ignored but a number of such convictions may indicate both recklessness and indifference to the law on the part of the proposer. in such cases, comprehensive cover may not be granted. The risk is closely associated with the occupation of the proposer. Person engaged in the entertainment professions represent a hazardous class of risk as they use their cars for long and hurried journeys. While considering the acceptance of new proposals, it may not be easy to ascertain all the above aspects of moral hazards. But the owner's behaviour and attitude during the currency of the policy and when a claim arises may be good indication which can be borne in mind at the time of renewal. Q. Discuss the problems of motor insurance underwriting of the following : (a) Older vehicles (b) Imported cars. (c) Cars imported by foreign embassies (d) Sports Cars. Ans. (a) Older vehicles – The age of the vehicle is important from the underwriting point of view. Older vehicles are not generally maintained properly. As a vehicle becomes older, defects appear more frequently and metal fatigue sets in. The claims experience of insurers in respect of older vehicles is not satisfactory. Since T.P. Insurance is compulsory under Motor Vehicles Act, the insurers can not totally avoid covering the older vehicles. Hence they may offer restricted cover or imposition of excess. But the proposers (owners) are not satisfied with the offer of the insurers for restricted cover. Hence, another problem faced by the insurers is to convince the proposer. Still while granting cover for older vehicles insurers prefer to pre- insurance inspection and acceptance of insurance with
(90) excess and restricted cover. Even after granting cover for older vehicles, good underwriting practice on the part of the insurers requires strict watch on the claims experience so as to decide the acceptance of such older vehicles for renewal of cover. The underwriting guidelines adopted in regard to the insurance of old vehicles differ from insurer to insurer. Another problem is in regard to the acceptance of the insured's estimated value declared by the proposer. Since there is no pro rata condition of average in motor policy, careful attention has to be paid to the insured's estimated value in relation to age of the vehicle. This is also essential to avoid dispute in the event of Total Loss. (b) Imported cars - Motor insurance underwriting of the imported cars poses several problems to insurers. Imported cars present problems to insurers both at the time of acceptance of business and also at he time of loss There is the problem of obtaining spare parts. The cost of repairs of an imported car is also high because of the cost of the materials and intricate design which requires more time spent on dismantling or assembling. Valuation of imported cars at the time of insurance would also pose a problem. The policy covering such cars is invariably subject to the Endorsement to the effect that in the event of loss or damage necessitating the supply of a part not obtainable from stocks held in the country in which the Motor Vehicle is held for repair, the Company shall pay in cash the amount of the loss or damage in respect of any such part plus the reasonable cost of fitting. However the liability of the Company for the cost of such part in the country in which the Motor Vehicle is held for repair, shall be limited to i) the price quoted in the latest price list issued by the Manufacturer or his Agents for the country, or ii)if no such price list exists, the price last obtaining at the Manufacturer's Works plus the reasonable cost of transport (otherwise than by air) to the country and the amount of the relative import duty. .
(91) Such cars not older than 10 years are accepted on comprehensive terms subject to an 'excess'. Some insurers exclude damage to the windscreen. Imported cars over 10 years and less than 15 years old are accepted on comprehensive terms with a higher excess. Such cars over 15 years old are accepted for Third Party risks only. (c) Cars imported by foreign embassies – Motor Insurance of Cars imported by foreign embassies pose a special problem. The embassies are exempted from paying customs duty on the imported cars and at much less price than market price. To obviate the difficulties like under-insurance in case of insurance of such cars, the Tariff provides loading the O.D. premium on such cars by 15%. (d) Sports Cars - Insurance of Sports cars poses following problems: i) Sports cars are considered to be heavier risks than other cars of the normal type. ii) The repair costs are likely to be higher. iii) These cars which are specially designed for high speed are usually driven by young drivers from affluent families. iv) The loss severity will be high because of the high speed. Proposal for insurance of these cars is to be considered on the individual merits. The acceptance is subject to an excess, exclusion of personal accident benefits and loading of premium. Q. What are the model guidelines regarding age considerations for fresh acceptance and renewals of proposals requiring comprehensive cover on following vehicles: a) Taxis b) Goods Carrying Vehicles. Ans. a) Taxis -Following are the model guidelines regarding age considerations for fresh acceptance of proposals requiring comprehensive cover on Taxis: i) Upto 3 years – Comprehensive cover may be granted
(92) without much considerations . ii) Upto 5 years - Subject to inspection and satisfactory claims experience. iii) Over 5 years but upto 7 years - Subject to inspection with a further compulsory excess of Rs. 5000. iv) Over 7 years - Act only cover should be granted. Upto 10 years old vehicles renewal may be done on normal terms subject to satisfactory claims experience. Over 10 years renewals should be offered for Act only. b) Commercial Vehicles - Following are the model guidelines regarding age considerations for fresh acceptance of proposals requiring comprehensive cover on Commercial Vehicles: 1) Goods Carrying Vehicles (Own Goods) i) Upto 5 years - Comprehensive cover may be granted without much considerations . ii) Over 5 to 7 years - Subject to inspection and satisfactory claims experience. iii)Over 7 years and upto 10 years - Subject to satisfactory inspection and a compulsory excess of Rs. 2,500/ -; iv) Over 10 years - Act only cover should be granted. v)Disposal vehicles - On inspection and subject to further compulsory excess of Rs. 500/Upto a period of 12 years Renewal to be offered with normal terms subject to satisfactory claims experience. Over 12 years Act only cover should be granted on renewal. 2) Public Carriers i) Upto 5 years - Comprehensive cover may be granted without much considerations . ii) Over 5 years and upto 6 years - Subject to inspection and satisfactory claims experience or additional compulsory excess iii)Over 7 years Act only cover should be granted. Upto a period of 10 years Renewal to be offered with normal terms subject to satisfactory claims experience. Over 10 years Act only cover should be granted on renewal.
(93) What are the constituents of statistical structure for motor insurance? Ans. Rates of premium for any class of insurance are based on past loss experience. So is the case with Motor Insurance. In view of this it is most essential to maintain a detailed statistical structure for premium and claims cost for Motor insurance. Following are the constituents of statistical structure for motor insurance1)Collection of Statistics- The tariff provides classification and sub-classifications of vehicles. Statistics of premium and claims are also be maintained and collated on the same basis. The second aspect is the nature of the cover provided as different rates are provided for Own Damage, and Act only covers. This aspect is also to be incorporated in the statistical structure. 2) Correctness of Statistics – Like any statistics the value and use of motor insurance statistics depends upon the correctness of the figures and the speed with which they can be produced. 3)Interpretation of statistics - Interpretation of statistics is as important as collation. The claims cost reflects not only the paid claims but outstanding claims. Therefore, it is essential that an effective system is adopted for proper estimates of outstanding claims be devised. The result of past loss experience have to be interpreted in the light of changing conditions surrounding motor insurance business. 4) Action on statistics - Once the claims cost is known, it is possible to develop incurred claims to premium ratio over a reasonably long period in each classification to consider effecting appropriate underwriting measures by the Companies and rate revisions by the Tariffs Advisory Committee. Q. What are the primary factors responsible for Road accidents? Ans. –Following are the four primary factors responsible for Road accidents :
(94) 1)The driver – The largest number of accidents is attributable to driver’s fault. This is ‘Human Cause’ of accidents. Drunken driving, over-speeding and other violations of traffic law etc, are responsible for road accidents. 2)The vehicle – This constitutes 'Physical Cause' for road accidents and can be summarised as bad maintenance. overloading etc. 3)The road – This is 'Environmental Cause' and consists of bad road conditions, inadequate lighting, insufficient traffic signs and signals etc. 4) The pedestrian – Reckless or indifferent behavior and disregarding road traffic rules by pedestrian cause accidents. Q. Discuss the Role of Insurers in promoting Road Safety Ans. Although the Insurers have no direct way to play any role in road safety, indirectly they play significant role in promoting road safety and preventing road accidents. The following activities of General Insurance Industry throw light on this role: 1) The premium rating structure encourages loss prevention on the part of the motoring public as substantial discounts in the premium are offered if the insured establishes an accident free record. Again, premium discounts are offered if the insured is willing to bear a certain portion of the loss himself. These incentives not only result in reduced cost of insurance but also encourage careful driving. 2) Underwriting system followed by insurers involves careful 'risks selection' and 'risk improvement'. This makes indirect contribution to road accidents prevention. 3) The Loss Prevention Association of India established by the General Insurance Industry is actively engaged, amongst its other activities, in promoting prevention of road accidents. The Association's involvement in road-safety programmes has the objective to reduce and contain the rapidly accelerating rate. The intensive programmes of the Association are aimed at creating awareness of road safety measures and traffic
(95) rules for pedestrians and include driver education programmes with special emphasis on defensive driving techniques and specially designed programmes for child-safety on the roads. Q. What are the remedial actions for the reduction of road accidents? Ans. Following remedial actions can be suggested for reduction of road accidents: 1) The elimination or minimisation of driver error – For this purpose driver education assumes crucial importance. The training imparted by the motor training schools must be intensive and adequate to provide the skills needed in complex traffic situations. The training should aim at developing in the driver a strong sense of personal and social responsibility for safe operation of motor vehicies. It is also essential that testing standards of Road Transport Authorities must be of a stringent order. 2) Improving pedestrian behaviour - Reckless or indifferent behavior and disregarding road traffic rules by pedestrian cause accidents. To ensure Road Safety behaviour of pedestrian is to be improved. This is a long term process. It is essentially a matter of self discipline. Safety consciousness and civic sense will have to be fostered right from the elementary school level. Secondly, enforcement of traffic laws by the police and the law courts, will bring about more responsible pedestrian behaviour. 3) Elimination of Physical Cause - Defective vehicle which is the physical cause, ranks second among the causes contributing to road accidents. The question has following dimensions i) Regular maintenance of the vehicle by the owner on a voluntary basis, ii) Compulsory maintenance through strict enforcement of rules regarding periodical inspection of vehicles by Road Transport Authorities iii) Tachograph to provide irrefutable evidence in case of
(96) accidents by giving relevant information about the speed, time and place of accident. It promotes good driving habits and this results in saving of fuel and maintenance costs and reduction of road accidents. iv) Post accident repair inspection of the vehicle by both the Insurance Surveyors and the road transport authorities in case of major damage. 4) Road safety – Transport Development Council of the ministry of shipping and Transport has made following recommendations having a bearing on road safety: a) strengthening or creating facilities for highway testing, control and research for consideration of State Governments in whom is vested the bulk of road construction. For example, a model scheme for organising State testing and control laboratories prepared by the Central Road Research Institute has been circulated to the States for their implementation. b) Planning, design and construction of road facilities. c) Adequate, proper and systematic maintenance of the National Highways and other roads in the country, through regular re-surfacing, routine maintenance operations and "Special Repairs" and "Flood Damage" repairs. d) Creation of separate Traffic Engineering cells in the Public Works Department to serve as a focal agency to analyse all the traffic and accident data on a continuing basis, enabling identification of the vulnerable accident:- prone spots and the remedial measures to be adopted.
(97)
CHAPTER 9
MOTOR CLAIMS OWN DAMAGE CLAIMS Q. What are the documents required for processing a motor own damage claim? Ans. The documents required for processing the claim are: (1) Claim Form (2) Survey Report / Officer's Inspection Report (3) Driving Licence (4) Registration Certificate Book (5) Fitness Certificate (6) Permit (7) Police Report (8) Final Bill from repairs (9) Satisfaction Note from the insured; where it is required. (10) Receipted bill from the repairer, if paid by insured. Q. Write a short not on Motor Loss Survey Report. Ans. - A Motor Loss Survey Report contains following information: i) The Accident: a) Date of Occurrence, Time and Place: (street, Road, Town) Under Policies Station: b) Cause of accident: c) Any special features: d) No. of photographs attached: ii) The Assessment of loss: Repairer's Surveyor's Estimate Assessment (1) Labour (2) a) Parts b) Less Depreciation (at....%) (3) Excess, if any (4) Salvage
(98) iii) Net Liability of InsurerLabour + Parts (less Depreciation) - Excess/Salvage Rs. iv) General Observation - These would relate to compliance with policy condition, warranties, etc. This would be followed by surveyor's recommendation regarding the payment of the claim. If adverse features are involved, the surveyor would leave the settlement question to the insurers, giving his reasons. Q. Describe the types of Losses (Own Damage) under Motor Policies. Ans. - There are three types of losses described as under: i) Total Loss 1) Whenever a surveyor finds that a vehicle is either beyond repairs or the repairs are not in economic proposition, he negotiates with the insured to assess the loss on a Total Loss basis - for a reasonable sum representing the market value of the vehicle immediately prior to the loss. If the market value is more than the insured value, the settlement will be brought about for the insured value. The Insured will be paid in case and the Insurers will take over the salvage of the damage vehicle which will thereafter be disposed off for their own benefit calling tenders through advertisement in newspapers. 2) Total losses can also arise due to the theft of the vehicle and its remaining untraced by the police authorities till the end. For arriving at the market value of untraced vehicles, Insurer take the opinion of 2 or 3 automobile surveyors after giving them necessary information such as make, year of manufacture, past claims, improvements carried, if any, etc. If, say, three surveyors indicate three different figures, the average amount is worked out, which will be taken as the market value, and accordingly the claim will be finalised, depending upon the Sum Insured being equal to or more than the market value. ii) Cash Loss Settlement - Under certain circumstances, Ins-
(99) -urers are forced to settle Total Loss Claims without claiming the salvage or reimburse the Insured with his repairs bill without submission of repairs bill or without even verifying whether the vehicles is or will be repaired or not. These types of settlements are in the nature of compromise mode and are known as 'Cash Loss' settlements, which are usually resorted to in the case of Commercial Vehicle claims payable on repair's basis. This mode of settlement is adopted in following circumstances. 1) When the claim is assessed for Total Loss but difficulties are encountered in disposing off the salvage or when a reasonable amount is not forthcoming as value of the salvage. In such cases, the value of the salvage is mutually agreed upon, as recommended by the Surveyor, and this is deducted from the amount of Total Loss as assessed by the Insured. In other words the Insured is reimbursed the net Total Loss and allowed to retain the salvage. 2) When the insured insists on repairs even though Total Loss settlement adjusting the salvage value available is more economical to the insurer. 3) When the Insured purchases spare parts from market without bill and is not in a position to furnish bills these losses are settled 'Cash Loss' without insisting on bills for an amount, which is suitable, scaled down. The cash loss settlement is generally offered at 60% to 80% of insurers' liability for the loss on repair basis. Following example will make this clear: Suppose net liability (after adjusting Salvage value) on repair basis is Rs. 65000 and on total loss basis it is Rs. 55000. The suggested cash Loss Settlement may be (Rs. 65000 less 30% Rs. 19500) Rs. 45500 since the liability of insurers is the least among all the three modes of settlement. iii) Repair Basis - The amount of loss in this mode of settlement consists of repairer's labour plus cost of parts replaced less depreciation. Excess if any is also deducted. The salvage is collected by insurers.
(100) CLAIM PROCEDURE - OWN DAMAGE Q. Describe in brief the procedure involved in Own Damage Claim. Ans. - The procedure involved in Own Damage Claim can be summarised as under: i) Preliminary Steps - On receipt of notice of loss, the policy records are checked to see that the policy is in force and that in covers the vehicle involved. The loss is entered in the Claim register and a claim form is issued to the insured for completion and return. The Insured is required to submit a detailed estimate of repairs from any repairer of his choice. Generally, these repairs are acceptable to the insurers but they at times ask the insured to obtain repair estimate from another repairer, if they have reason to believe that the competence, moral hazard or business integrity of the repairer first chosen is not satisfactory. ii) Assessment - Independent automobile surveyors are assigned the task of assessing the cause and extent of loss. They are supplied with a copy of the policy, the claim form and the repairer's estimate. They inspect the damaged vehicle, discuss the cost of repair or replacement with the repairer and submit their survey report. In respect of minor damage claims, independent surveyors are not always appointed. The insurers' own officials or their own automobile engineers inspect the vehicle and submit a report. In major losses Spot Survey is also arranged. iii) Settlement - The survey report is examined and settlement is effected in accordance with the recommendations contained therein and keeping in mind the terms, conditions, exclusions etc. of the policy. Sometimes the repairer is paid directly by the insured in which case the latter is reimbursed on submission of a receipted bill from the repairers. In either case, discharge voucher or receipt
(101) is obtained. The claims Register and the policy and renewal records are marked that the claim is paid indicating the amount of claim and the amount of salvage, if any. Q. Describe the general procedure for settling Motor Total Loss (Theft) Claim. Ans. Procedure for settlement of motor total loss (Theft) claims -Motor total loss claims can also arise due to the theft of the vehicle and its remaining untraced by the police authorities till the end. The procedure for settlement of such claims is as under: 1) First Information Report lodged with the Police - These losses will have to be supported by a copy of the First Information Report lodged with the Police authorities immediately after the theft has been detected. The police authorities register the complaint allotting it a number of the entry made in the Station Diary. This number, which is usually known as SDE No. or C.R. NO. (Crime Register) has to be quoted by the Insured in the claim intimation to the Insurers. 2) Documents - The insured has to submit a claim form giving narration of the incidence of theft. After lodging the F.I.R. the police keep the investigations going until the vehicle is traced and delivered to its owner. However, if they do not succeed in recovering the vehicle after a period of, say 3-4 months, they file away the case certifying that the case is classified as true but undetected. This certificate is essential before the insurers settle a total loss following theft. The Insured has to submit to the Insurer the Registration and Taxation books, ignition keys and blank TO. and T.T.O. forms duly signed by the insured, so that the stolen vehicle when recovered and sold can be transferred in the name of the buyer. If the R.C. book and Taxation Certificate are also stolen along with the vehicle, it will be necessary for the insured to obtain duplicate ones from the Registering Authority and thereafter
(102) deposit them with the Insurers. The insured will address a letter to the R.T.O. informing about the loss of the vehicle due to the theft along with a Non-user Form so that he is not made liable to pay the taxes. Copy of such letter shall be given to the insurer. It is always prudent to inform to concerned Registering Authority by a Registered A/D/ letter that a total loss claim is being processed for payment in respect of the stolen vehicle and to request them not to transfer the ownership of the vehicle to any one. This will prevent the thief from disposing off the stolen vehicle. 3) Assessment of Loss - For arriving at the market value of untraced vehicles, Insurers take the opinion of 2 or 3 automobile surveyors after giving them necessary information such as make, year of manufacture, past claims, improvements carried, if any, etc. If, say, three surveyors indicate three different figures, the average amount is worked out, which will be taken as the market value, and accordingly the claim will be finalised, depending upon the Sum Insured being equal to or more than the market value. 4) Settlement - The usual procedure of obtaining the discharge, payment to the financier if any etc., as done in case of settlement of any own damage claim is adopted while settling the claim. The ignition keys, R.C. Book etc. are preserved by the Insurer in their custody so that these are made readily available if the vehicle is traced at a later date. Q. Write a short note on Knock-for-knock agreement. Ans. Knock-for-knock agreement - Insurers have entered into an agreement called the 'knock for knock' agreement. According to this agreement when two vehicles insured (under B Policy) with two different insurers are involved in an accident, each insurer will indemnify his own insured. In other words the Own Damage Claim shall be settled under the respective policy. The insurers covering own damage will not
(103) exercise subrogation rights against the other party involved. This is in order to avoid litigation to decide the question of negligence on the part of the vehicles and the consequent delay and expenses. This agreement is applicable for private cars insured separately with two different insurers for comprehensive risks. The agreement is not applicable to cases where one/or both the vehicles are used for hire or reward. THIRD PARTY CLAIMS Q. What are the documents required for processing motor claims? Ans. Following are the documents required for processing motor claims are: a) For All Claims (Both own damage and third party): i) Completed Claim Form. ii) Vehicular documents such as Registration Certificate, Permit and Trip Sheet for verification and return. iii) Driving Licence of the driver who drove the vehicle at the time of the accident for verification and return. b) Additional Documents required for Own Damage Claims: i) Estimate of Repairs. ii) Survey Report. iii) Police Investigation Report (for major accidents and for theft claims). iv) Final Bill from repairers, v) Satisfaction Note from the insured if the payment is to be made to the repairer. vi) Receipt and Bill from the repairer, if paid by the insured. c) Additional Documents required for Third Party Claims: i) Police Investigation Report. ii) Post Mortem Report for fatal claims. iii) Legal Heirship Certificate for fatal claims. iv) Injury Certificate for injury claims. v) Vouchers/Receipts for medical expenses if any incurred for injury claims.
(104) vi) Employer's Certificate regarding salary and/or loss of pay. vii) Certificate of proof of age. viii) In case of property damage claim Proof of ownership of property, Certificate for value of property and Estimate of repairs for rectification of damage to the property. Q. Explain briefly the procedure followed in handling Third party Motor Claims. Ans. - Following is the procedure of handling T.P. Claims 1) The first step on receipt of notice of claim from the insured or tribunal is to ascertain whether the vehicles insured on the date of accident. The entry is made in the claims register. 2) The case is entrusted to a panel advocate immediately so that the insurers are represented at the very first hearing. 3) A letter is addressed to the insured to furnish the information as to O.D. Claims details if lodged, name of the Police Station where the accident was reported, driver's name and address, name of the advocate if the insured has appointed one etc. The insured is also sent a claim form for completion and return. 4) Insurers estimate their liability. In case of death claims, status of the deceased, his monthly income, age, contribution to family, relationship with claimant etc. are taken into consideration. In the event of injury claims Medical Report, evidence of medical expenditure, age of injured, his occupation and income etc. are taken into consideration. The aspect of contributory negligence, if any, is also taken care of. 5) On the basis of above information, the advocate's opinion is obtained. . Defences available to insurer under the M.V.Act. are examined. The advocate depending upon the facts of the case then files a written statement. 6) If the liability is certain, an attempt is made to compromise the claim. The claim can be compromised in Lok Adalat. 7) The insured and or the driver are required to co-operate with the insurers while regular hearing of the case is going on.
(105) If they do not, they may be called as witness under Section 169 of the Act. 8)On completion of the hearing, the tribunal decides upon the claims and award is given. The amount awarded is paid to the claimant as directed by the tribunal. 9) If the insurers are aggrieved by on award of a tribunal, they may prefer an appeal to high court within ninety days from the date of the award. Q. What are the informations required to determine the question of third party liability of the insured and the liability under Motor Policy? Ans. Following informations are required to determine the question and extent of third party liability of the insured and the liability under Motor Policy: a) Information required for all types of T.P. Claims: i) Statements of the driver and witnesses to the accident. ii) Details of the driver's prosecution, charges, depositions during the criminal proceedings and judgement. iii) Details of the accident to decide negligence of the parties involved for deciding the aspect of contributory negligence. b) Information required for Fatal Claims: i) The post mortem report. ii) The age and status of the deceased, his monthly income, his contribution to the family and the status of the claimant and his relationship with the deceased. iii) Dependency. c) Information required for injury claims: i) The age, occupation and income of the injured. ii) The nature and extent of the injuries and whether the injury has resulted in permanent disability. iii) The period and expenses for medical treatment. c) Information required for third party property claims: i) The estimated cost of repairs. ii) The depreciation in value of the property. iii) The cost of hiring alternate property or alternatively loss
(106) of house or loss of profit during the period of repairs. In addition to the above the following information is required to determine the question of the insurers' liability for third party claims under the Motor Policy: a) Existence of valid insurance cover. b) Limit of liability under the Policy. c) Defences under the Motor Vehicles Act, whether available or not Q. Define Negligence. What are the conditions for sustaining civil action for negligence? Discuss the circumstances in which liability for accidents through negligence in the use of motor vehicles usually arises. Ans. Negligence - Negligence means 'absence of care'. It is defined as the breach of a duty caused by the omission to do something, which a reasonable man, guided by those considerations, which ordinarily regulate the conduct of human affairs, would do, or doing something, which a prudent and reasonable man would not do. In simple words, negligence means 'absence of care'. A civil action for negligence can be sustained when the following conditions are satisfied: i) There must exist a duty of care towards the injured party. ii) An action for negligence can proceed only if there is a breach of that duty of care. iii) The plaintiff must prove that he has suffered injury or damage as a consequence of the breach of duty of care. vi) The injury or damage should be a consequence of the negligent act. There has to be a close causal relationship between the breach of duty and the injury or damage. Liability for accidents through negligence - Liability for accidents through negligence in the use of motor vehicles usually arises in the following circumstances: (1) Dangerous and reckless driving without proper regard to the safety of the pedestrians. (2) Non-observance of the traffic rules and regulations.
(107) (3) Leaving a motor vehicle unattended on the road or highway without taking proper precaution for its safety. (4) Defective vehicles. However, latent defects of which the owner was unaware do not constitute negligence. The onus is on the defendant to prove that the vehicle was defective or unfit. Q. Write a short note on Contributory negligence/ Ans. Contributory negligence - Contributory negligence is the existence of negligence on the part of the affected third party in respect of motor vehicle accidents. If the injured person has also contributed to the accident there is contributory negligence on the part of the injured. The damages will be reduced according to the degree of blame attaching to each person. Contributory negligence is one of the defences available to the insured except in case of no fault liability in respect of motor accident third party claims. Contributory negligence cannot be attributed to any child victim. The result of successfully establishing contributory negligence on the part of the affected third party is the reduction of compensation. Q. What are the Defences against Negligence? Ans. Following are the Defences against Negligence: a) Volenti Non-fit Injuria.- This legal maxim denotes that if a person voluntarily consents to run the risk, the question of negligence does not arise. This defence may arise in passenger claims. When a person has of his own willingness and consent decided to become a passenger in it public service vehicle, then he cannot complain of matters ordinarily incidental to traffic in such vehicles. b) Inevitable Accident - This is an accident which occurs inspite of ordinary care, caution and skill. The burden to prove that accident was inevitable rests upon the driver. He must establish the cause of the accident and also that the result of that cause was inevitable.
(108) c) Act of God - This has been defined as an event due to 'natural causes directly and exclusively without human intervention'. Examples of acts of God are storms, earthquake, lightning etc. d) Emergency- If a person in a moment of imminent danger, acts in a way which causes injury to another, he will not be held liable in negligence if his act was not unreasonable in the difficult situation in which he was placed. Sometimes a pedestrian using a road may unexpectedly cause the driver of oncoming vehicle, to swerve and thereby cause injury to another pedestrian, then the driver would be able to raise the defence of emergency. Q. Distinguish between Special Damages and General Damages. Ans. Damages are the pecuniary compensation recoverable by civil action for breach of contract or for tort. Damages for personal injury claims fall into two categories: 1) Special damages- These are the damages, which can be calculated accurately from records of actual expenses incurred, or financial losses (e.g. loss of salary etc.) suffered. 2) General Damages – These are the damages, which cannot be calculated from record and therefore estimated by the Courts taking into account a number of factors relevant to individual cases. General Damages comprise compensation for pain, suffering and distress, loss of enjoyment of life and loss of amenities etc. Q.Describe the principle applicable in computation of damages for death, personal injury and property loss due to an accident. Ans. 1) Computation of damages for death – The principles adopted for the assessment of general damages in death cases have been well settled in three decisions of the Supreme Court
(109) which are based upon famous English decision in Davis Vs., Powell. As per these decisions, the following basis is adopted: a) The amount of wages earned by the deceased (ascertainment to some extent may depend upon the regularity of his employment). b) The amount that would have been spent by the deceased for his personal and living expenses, had he been alive. c) Number of years of purchase or multiplier in regard to the remaining life of the decreased had he not died in the accident. d) Uncertainties relating to claims, for instance that the widow might have remarried and thus ceased to be dependent or other like matters of speculation. The balance amount of income after deducting the estimated personal and living expenses for the deceased per year would be turned into a lump sum, multiplying the stun by the number of years of purchase. This lump sum, however, has to be taxed down having due regard to uncertainties as stated against factor (d) above. Lord Wright's MethodThis method involves multiplying the dependency amount of what the deceased would have spent on the dependents by the common accepted multiplier of 12 to 15 which is known as the Year Purchase Factors. 2) Computation of damages for personal injury - Damages for personal injury claims fall into two categories: a) Special damages - Special damages comprise the following expenses: actual loss of earnings, suffered as a result of injury; medical, nursing or other expenses necessarily incurred as a result of the injury and funeral expenses in case of fatal injury. The above expenses are computed up to the date of settlement of judgement.
(110) b) General Damages - General Damages comprise compensation for the following: i) pain, suffering and distress, ii) loss of enjoyment of life and loss of amenities, iii) loss of recreational ability; and/or iv) loss of reduced expectation of life General damages may also be awarded for i) the on-going net loss of earnings (prospective loss of income) ii) the on-going medical nursing or other expenses likely to be incurred in the future as a result of the injury suffered. (future medical expenses. iii) loss of opportunity in the job market iv) loss of matrimonial prospects e.g. a young unmarried woman suffering severe facial disfigurement may lose her matrimonial prospects. The courts suitably adjust the value of future losses, upwards or downwards, to reflect; i) Immediate receipt of money with potential for earning investment income. ii) Other benefits received by the legal heirs through succession to properties or moneys of the deceased. iii) The changing circumstances of life. For example, the widow remarrying or the risk of early death due to other causes. iv) Inflation or the falling value of money. 3) Property Damage -In respect of damage to property (e.g. goods) the measure of damages is the cost of restoration of the property to the original position. The measure of damage takes into consideration the depreciation in the value or loss of use or loss of profit or the cost of hiring another property during the repair. In other words, if the property is totally destroyed, the measure of damages is the value of the property. But if it is
(111) only damaged the measure is the depreciation in its value supplemented by the amount representing the loss of use of the property when it is being repaired or replaced. However, in practice, its application may vary according to circumstances of each case. Q. What are the loss control measures adopted in Motor Portfolio? Ans.- Following measurers can be suggested to control motor losses – a) O.D. Claims: i) Empanelment of Surveyors - Surveyors having automobile back drown should only be impaneled. The panel should be classified into major, medium and minor categories depending upon the experience, quality of work and efficiency of the surveyor. ii) Appointment of Surveyor - Appointment should be done immediately. The same surveyor should not be appointed for successive claims. iii) Estimates - Estimates of professional estimate makers should not be entertained. iv) Survey - Final survey should be done at the workshop from where the estimate has been obtained. Surveyor should give identification numbers or marks of the radiator, battery and major assemblies like chasis, front axle etc. For cabin and body the surveyor should mention material costs and labour charges separately. Where necessary, surprise inspection of vehicles under repair at workshop should be done by the officer of the company. Surveyor should submit his report immediately with photographs initialed and dated. v) Reinspection - Reinspection of the vehicle after repair should be done by a surveyor other than the final surveyor who assessed the loss. vi) Verification of bills - To ensure the accuracy and bonafides, bills submitted by the insured should be scrutinised
(112) by the surveyor. vii) Salvage - In small losses, fair value of salvage should be deducted from the assessed loss. Where salvage is collected it should be disposed off immediately. Perfect record of Salvage should be maintained. viii) Review of Pending Claims - Periodical review of pending claims should be done. If the claims are pending for compliance from insured, noticed should be given to comply within a stipulated time. Giving second notice the insured should be informed that the claims shall be treated as No claim in case of non-compliance of formalities in stipulated time and thereafter the file should be closed. ix) Strict underwriting control - While accepting motor business, strict underwriting control should be exercised. b) Loss control measures for T.P.Claims - Since in third party claims the tribunal awards the compensation, loss can be minimised by defending the claim in effective manner. Following measures may also be taken: i) Investigation- Any officer assigned this function should make 'on the spot' investigation and obtain information about the age, occupation, income etc. of the deceased/injured. Wherever necessary, correct insurance particulars from the RTO should be obtained and furnished to the advocate for the insurance company. ii) Proper Use of Advocates- ‘Preparation of panel of advocates and entrustment of cases to them on a rotation basis, ensuring that no Advocate should have more than 10 cases at any given time. The advocate appointed to defend on behalf of the company and the insured, should be furnished a certified true copy of the related policy. iii) Performance appraisal - The annual performance appraisal of the advocates for defending the cases before MACT. iv) Statutory defences- Furnishing the particulars of statutory defences available to the insurers under Sec. 149(2) of M.V.
Act 1988 to the panel advocate and ensuring that the plea in regard to proper defence is taken in the written statement filed on behalf of the insurer, v) Compromise settlement of the TP Claims, especially through Lok Adalats. vi) Expeditious settlement of awards which do not warrant appeal and there by save payment of further interest. In view of the deteriorating experience of the motor insurance portfolio which is causing concern to the industry, it is necessary to adopt effective loss control measures.
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CHAPTER 10
PRACTICAL PROBLEMS Q. Due to sudden breakage of steering rod, a private car, driven by a paid driver, goes off the road and collides with the compound wall and gate of a factory. The insured has submitted a claim under a private car comprehensive policy in respect of the following : a) Repair of damage to the radiator and engine. b) Replacement of left front tyre totally damaged. c) Replacement of steering rod. d) Replacement of windscreen, which was smashed to pieces. e) Claim from the paid driver (Under W.C. Act) for temporary total disablement due to injuries sustained in the accident. Indicate how you would deal with each of the above items of claims from the point of view of: i) Liability under the policy. ii) Amount of claim payable. Ans. a) Repair of damage to the radiator and engine Insurers are liable under the policy and actual cost is payable. b) Replacement of left front tyre totally damaged - Insurers are liable under the policy and actual cost is payable. c) Replacement of steering rod - Being mechanical breakdown not covered under the policy, hence not payable. d) Replacement of windscreen which was smashed to pieces - Insurers are liable under the policy and actual cost is payable if this being an extra fittings is covered. e) Claim from the paid driver - Policy covers W.C. Liability. Hence the following amount shall become payable as per provisions of W.C. Act: A half-monthly payment of sum equivalent to 25% of monthly wages. This payment shall be payable on the 16th day (i) from the date of disablement where such disablement lasts for a period of twenty-eight days or more: or (ii) after the expiry of waiting period of three days from the
(115) date of disablement where such disablement lasts for a period of less than twenty-eight days. On the ceasing of the disablement before the date of which any half monthly payment falls due, there shall be payable in respect of that half-month a sum proportionate to the duration of the disablement in that half month. The compensation under this clause is payable for maximum 5 years. Q. Discuss the insurer's liability under Standard Motor Policies ‘B’ for following claims. a) Loss of horn by theft from a motor cycle. b) Accident damage to an ornamental hub-cap of a private car. c) Damage to the cabin due to an accident to a public carrier, the estimated repair cost of which is Rs.1475/-. d) Death of an employee of the owner of the goods carrier who was travelling in the lorry at the time of the accident. Ans. a) Standard Motor Cycle Policy does not cover the loss of or damage to accessories by burglary, house-breaking or theft unless the Motor Cycle is stolen at the same time. Hence the insurer is not liable, for the loss of the horn, an accessory by theft from a Motor Cycle. b) Extra fitting are to be covered specifically. The ornamental hub cap is an extra fitting. Insurer is not liable under the standard Motor Car Policy B for its loss of or damage unless it is got covered by specifically adding this hub cap as extra fitting. c) The standard Motor Policy B covering a public carrier is subject to a compulsory excess of Rs. 1500 as per the endorsement No.26. Since the estimated repair cost is less than Rs. 1500, there is no liability under the Policy. d) Under the Motor Vehicles Act in respect of a lorry (goods vehicles) it is required to cover employees being carried in the vehicle. Hence the insurer is liable for employee of the owner of the goods carrier who was travelling in the
(116) lorry at the time of the accident. Q. The insured gives the car keys to his watchman every day for cleaning the car. One day the watchman, after cleaning the car, drove it outside the building compound without a valid driving licence and met with serious accident, resulting into damage to car and serious injuries to a pedestrian. The insured is having Private Car Policy 'B' for the Car. Discuss the Insurer's Liability. Ans. - For admission of liability under the policy, the watchman driving the car at the time of accident must hold a valid driving licence entitling him to drive LMV. In the instant case the watchman who drove the car at the time of accident was without a valid driving licence. Hence the insurers are liable neither for damage to car nor for personal injuries to the pedestrian. Q. A Luxury Tourist Bus 1987 Model carrying 35 passengers was involved in a serious accident on 5.6.90 resulting in death of Driver and two passengers and injuries to 15 passengers. Bus was insured under policy 'B' with unlimited liability to passengers. Other details are as under: a) Insured of Rs. 400000 b) Fatal injuries to paid driver Rs 80000 c) Fatal injuries to two passengers Rs. 135000 (each) d) Minor injuries to 15 passengers Rs. 80000 (total e) Repairs Rs. 50000 f) Replacement of parts Rs. 25000 g) Salvage Rs. 3000 i) Discuss the insurer's liability. (ii) Would the position be different in case the driver was holding LMV driving licence and had applied for HMV licence on 31.12.89 to the R.T.O. Ans. - (i) Presuming that the driver was holding valid driving licence – with an endorsement to drive transport
(117) vehicle and was also possessing badge, the insurers are liable under the policy to pay the claim as under: a) No relevance except in the case of total loss. b), c) and d) payable under Section II of the policy presuming the amount is awarded by the court or compromised. e, f) and g) - The amount payable will be as under: Repairs Rs. 50000 Replacement of Parts Rs. 25000 Less: depreciation for the age of vehicle being between 3 to 4 years: 50% for rubber, Plastic Parts, and battery and 25% for other parts replaced. If the damages include tyres, lamps, mudguards, bonnet side parts, bumpers and paintwork they are excluded under Endt. No. 26. Less: Excess as per Endt. No 26 Rs. 1500 Less: salvage Rs. 3000 (ii) Presuming that the driver applied for HMV licence The vehicle in question is H.M.V. The driver is holding LMV licence. Mere applying for HMV licence does not entitle the person to drive Bus. Hence unless there is a pucca driving licence, insurers are not liable. Q. How do you deal with the following enquiries in respect of Motor Policies? (a) Comprehensive Policy for a public carrier with extra cover for loss or damage to tyres. (b) Act policy for Motor Cycle with the additional benefit of PA. cover to the owner. (c) Comprehensive Policy for a private car in the joint names of the registered owner and financier. (d) Liability to the public risk Policy for a scooter owned by private company with a request for A.A. Membership discount.
Ans. (a) Endorsement No.26 does not cover the loss of or damage to tyre. However by paying extra premium it can be covered under IMT 74 (b) No additional cover /extra benefit can be granted under an Act Policy. PA. cover to the owner can be granted in
(118) Conjunction with B Policy only. (c) It is not permissible as per the Motor Tariff to issue Policies in joint names. The financier's interest can be recorded in the Policy be way of endorsement. (d) The A.A. Membership discount can not be allowed on vehicles owned by firms or companies as it is available only for vehicles owned by individuals and joint owners. Q. A goods carrying vehicle (general cartage) is insured under Commercial Vehicle B Policy without extra benefit. It met with an accident inside a factory compound. Following claims have been lodged: a) Damage to the mudguard and/or bonnet side parts, head light and bumper the estimated loss of which is Rs. 2000/-. b) Death of a coolie carried in the vehicle. c) Damage to the car of the owner of the goods carrying vehicle which happened to accompany the lorry inside the private place at the material time of the accident. d) Injury to the driver's friend travelling in the vehicle. e) Damage to stereo. How will you deal with claims? Ans. Although the accident occurred inside a factory compound which is not a public place it is covered under the B Policy. The claims shall be dealt as under: a) Damages to the mudguard and/or bonnet side parts, head light and bumper are excluded under IMT No.26. Hence there is no liability under the policy. b) The insurers are liable under Section II of the policy. c) Section II of the Policy excludes liability in respect of damage to property belonging to the insured. Hence no liability. d) The driver's friend was travelling in the vehicle as a nonfare paying passenger and not in the course of or arising out of any employment. The insurers are not liable for his injury claim as policy is without extra benefit for legal liability to non-fare paying passengers.
(119) e) Extra fitting are to be covered specifically. The stereo is an extra fitting. Insurer is not liable under the Policy B for its loss of or damage unless it is got covered by specifically adding it as extra fitting. Q. State, with reasons, the extent of liability of an insurer under appropriate standard forms of Motor Policies "B":a) Insured was driving his own Goods Carrying Vehicle General Cartage, and suffered personal injury due to accident. He claimed for Workmen's Compensation. b) Theft of a rear left tyre of contract carriage from the parked place. Policy is subject to Endorsement 26. c) Tape Recorder-cum-Radio stolen from a Private car at the spot of accident. d) Damage to a motor cycle whilst the insured was participating in organised racing. e) Due to a mechanical defect, the steering rod of a Tourist Taxi, breaks and meets with an accident. Insured claimed damages to steering rod, head lamps, front bumper and right mudguard. f) Loss of the insured's limb due to accident whilst travelling in his car. Ans. a) Though the insured was the driver of the vehicle, he is not employee. So he can not claim for Workmen's Compensation. b) Under IMT 26 Except in case of Total Loss the insurers are not liable for loss of or damage to lamps, tyres, mudguards and/or paint work. Hence there is no liability for theft of a rear left tyre of contract carriage from the parked place. c) e) Electronic items and Extra fitting are to be covered specifically. The Tape Recorder-cum-Radio is an extra fitting. Insurer is not liable under the Policy B for its loss of or damage unless it is got covered by specifically adding it as extra fitting. d) Damage to a motor cycle whilst the insured was participating in organised racing is not payable as policy
(120) excludes organised racing e) Damage to the steering rod is mechanical break doen which is excluded under the policy. However loss of head lamps, front bumper and right mudguard is payable as Policy for Tourist Taxi is not subject to IMT 26. f) The policy is not extended to cover personal accident risk. Further Section II of the policy covers liability to third parties and not to the insured. Hence insurers are not liable.
