Motor Third Party Liability Insurance

Motor Third­Party Liability (TP) insurance is a cover under which the insured does not get to make a claim, but is covered for any claims that others may make on him. The claimant will be the victim, of a vehicle accident, who sustained injuries or damage to his vehicle or other property. In the case of death, his legal heirs can make the claim against the offending vehicle’s owner and, due to the transfer of such liability via the TP policy, the insurance firm will step in to pay the claim as per policy terms. If there is no TP cover, the owner of the vehicle is responsible for the liability. We saw the procedure for making a TP claim earlier in these columns. It is essentially petitioning a special court called the Motor Accidents Claim Tribunal (MACT). MACTs have a huge caseload, leading to time­consuming legal proceedings. In cases where claims are filed before the MACT, out­of­court negotiated settlements are encouraged. This will be recorded by the court. Both time and penal interest are saved thus. If your vehicle was damaged in the accident, you may be entitled to claim for repairs from your insurer, if you have an Own Damage (OD) cover. This can be a standalone cover or part of a Comprehensive Motor Insurance policy, which is a combination of a TP and an OD cover. There is a provision that in the case of a collision of vehicles, each vehicle’s insurer pays under the respective policy without any need to establish fault. So, if your vehicle is damaged, claiming from your company is a simpler process. You can avoid long drawn­out legal procedures and get on with your life. In any case, the TP policy has a cap of ₹7.5 lakh as compensation for third­party property damage. Claims above that have to be collected from the vehicle owner. If you are making an OD claim, it will be for actual repair expenses, let us say ₹X. You will receive ₹Y, factoring in depreciation and allowable costs for repairs and parts as applicable. If you go to your insurer’s network garage, this process is simpler as it will be cashless. Calculating net compensation But you will also lose your no­claim bonus (NCB) when you claim from your insurer. Depending on the number of your claim­free years, your NCB could be up to 50% of your OD renewal premium. You can start accumulating this again with every future claim­free year. Suppose you have 3 years’ worth NCB, calculate its quantum through 3 future years until it is reinstated. Reduce this from ₹Y and you will arrive at the actual compensation you get. Damage to your property other than your vehicle that was part of the accident is another matter as your OD policy will not cover it. Then, your recourse is to file a TP claim with the MACT as outlined earlier. If it’s an injury, the same reasoning applies for deciding where to make a claim. If your own hospitalisation or personal accident policies cover your expenses, consider that route first. If disablement bars you from working and earning, then filing a TP case becomes more justified in terms of effort versus outcome. In the case of injury, especially leading to disablement, and in the case of death, there are no caps on compensation awarded by MACT. Guidelines under the Motor Vehicles Act are broadly followed and they depend on medical expenses incurred, age of victim, earnings, number of dependents and, the extent of disablement, in case of injury. In the case of death and grievous injury, there is a stronger reason to seek compensation through the TP route over and above claims through the victim’s life or personal accident policies. There are cases where the offending vehicle’s TP policy will not be liable to pay compensation: eg, if the driver was drunk when the accident happened or if he was driving without a valid driving licence.