Skip to main content

Motor Insurance: Comprehensive insurance covers car occupants and pillion riders

INSURANCE companies have been capitalising on the misperception that a comprehensive motor insurance policy (CIP) does not cover persons travelling in a car or sitting astride the pillion of two-wheelers. Most consumers believe the policy only covers loss or damage to the vehicle and third party accident claims.

When vehicle owners want passengers to be insured, the insurer charges an additional premium, although they get covered, by default, under a CIP. There have been instances when the vehicle owner has been personally held liable to pay compensation to the injured passengers. This because the insurer misled the courts about the scope of a CIP.

This deceit got exposed when the Delhi High Court looked into a judgement passed by Justice JR Midha in the case of Yashpal Luthra & Anr versus United India Insurance Co Ltd & Anr.

Vinod Luthra, 24, was sitting astride the pillion of a motorcycle being driven by his friend, Umed Singh Mateyee. Their bike got hit by an unknown vehicle. Luthra fell down, suffered fatal injuries and died. The bike was covered under a CIP issued by United India Insurance. Luthras parents and widow filed aclaim before the Motor Accident Claims Tribunal (MACT) against the insurer and the vehicle owner.

The insurer defended by contending that a pillion rider could not be termed as third party. Hence, the CIP did not cover the pillion rider. Accepting this, the MACT exonerated the insurer, but held the vehicle owner solely liable to pay the claim, pegged at `453,300. The Luthras appealed to the Delhi high court against this order, urging the insurer also be liable. They also pleaded for increasing the amount awarded by the MACT.

The high court framed the case thus: Whether, under a CIP, the insurer is liable to compensate for the death or injury of a pillion rider or the occupants in acar? This was to be considered in the light of the policy terms and conditions, which provide that, subject to the limits specified, the insurer would indemnify the insured in respect of death of, or bodily injury to, any person, including the passengers. In case the occupants are being carried for hire, the insurer would not be liable. Similarly, if the passenger is an employee (or driver), the insurer would also not be liable.

To determine this issue in accordance with the directives of the Tariff Advisory Committee (TAC) and that of the Insurance Regulatory Development Authority (Irda), the high court considered it necessary to examine officers from the insurance company, TAC and Irda.

The court also examined M A Kharat, general manager of United India Insurance, who admitted the company was liable. Kharat further stated that on 16.11.2009, Irda had issued a circular to all insurers, reiterating that under CIP, they were liable in respect of a pillion rider and the occupants in a car. Kharat admitted to another wrong stand taken by the insurer before the Supreme Court in another matter. He said he would instruct the companys advocate to clarify to the court the correct legal position, thus admitting the liability of the insurer.

The Irda informed the court it had convened a meeting of all public and private insurers, where this issue was discussed, and a consensus reached that insurers were liable for claims of occupants of vehicles and pillion riders under a CIP. So, it was decided, in cases where a contrary plea had been taken, the lawyers and the operating officers would be informed within seven days to correct their stand.

Justice Midha also expressed hope that a large number of pending cases all over the country would come to an end, and the claimants who have been denied compensation shall get their legitimate due.

The impact can be best summed up in the courts observation that a non-issue had been turned into an issue.

Popular posts from this blog

How to Decide your asset allocation with Mutual Funds?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) How to Decide your asset allocation ? The funds that base their equity allocation on market valuation have given stable returns in the past. Pick these if you are a buy-and-forget investor. Small investors are often victims of greed and fear. When markets are rising, greed makes the small investor increase his exposure to stocks. And when stocks crash to low levels, fear makes him redeem his investments. But there are a few funds that avoid this risk by continuously changing the asset mix of their portfolios. Their allocation to equity is not based on the fund manager's outlook for the market, but on its valuations. Our top pick is the Franklin Templeton Dynamic PE Ratio Fund, a fund of funds that divides its corpus between two schemes from the same fund house-the...
Read more

Zero Coupon Bonds or discount bond or deep discount bond

A ZERO-COUPON bond (also called a discount bond or deep discount bond ) is a bond bought at a price lower than its face value with the face value repaid at the time of maturity.   There is no coupon or interim payments, hence the term zero-coupon bond. Investors earn return from the compounded interest all paid at maturity plus the difference between the discounted price of the bond and its par (or redemption) value. In contrast, an investor who has a regular bond receives income from coupon payments, which are usually made semi-annually. The investor also receives the principal or face value of the investment when the bond matures. Zero-coupon bonds may be long or short-term investments.   Long term zero coupon maturity dates typically start at 10 years. The bonds can be held until maturity or sold on secondary bond markets.
Read more

NFO Review: Edelweiss Select Midcap Fund

      Edelweiss Mutual Fund has announced the launch of another equity fund after a gap of nearly two years. This fund will be focused on mid cap stocks.   Investment Strategy The primary investment objective of the scheme is to generate long term capital appreciation from a portfolio predominantly comprising of equity and equity related securities of mid cap companies. The scheme may invest upto 100% in equity and equity related securities of companies falling in top 101 to 300 companies by market capitalization. However, it may also invest upto 20% in other listed companies as well as in debt and money market instruments.   Fund Manager Mr. Paul Parampreet and Mr. Nandik Mallik will co-manage the scheme. Mr. Paul Parampreet has done PGDM (IIM – Calcutta) and B.Tech (IIT-Kharagpur). With overall experience of 6 years, he has worked with Edelweiss Securities Ltd. SDG India Pvt. Ltd. ICICI Bank and BG India Pvt. Ltd. Mr. Nandik Malik has done MS-Finance (London Business Schoo...
Read more

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...
Read more

DSP BlackRock US Flexible Equity Fund - New DSP BlackRock Fund

  DSP BlackRock US Flexible Equity Fund is a feeder fund which will give Indian investors access to US equities by   predominantly investing in the BlackRock Global Funds–US Flexible Equity Fund (BGF - USFEF). BGF - USFEF invests at least 70% of its total assets in the equity securities of companies having economic activity in the US.BGF - USFEF normally invests in securities that, in the opinion of the Investment Adviser, exhibit either growth or value investment characteristics, placing an emphasis as the market outlook warrants. BGF – USFEF's investment strategy is based on the belief that incorporating growth/momentum and valuation factors with disciplined security selection and portfolio construction will provide consistent and repeatable investment success.   Why should one invest in this Scheme?   By investing in DSP BlackRock US Flexible*Equity Fund, investors can get access to: The world's largest country by GDP at USD 15.1 trillion^ ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now