2019 Amendment To Motor Vehicles Act Doesn't Affect Insurer's Liability To Pay Claimants Or Its Right To Recover Amount From Owner: Allahabad HC

The Allahabad High Court has held that the Motor Vehicles (Amendment) Act, 2019 does not take away the liability of the insurer to pay the compensation as awarded and later recover the same from the owner. It held that the principle of “Pay and Recover” is still applicable in the Amended Act to ensure the protection of third-party rights.Justice Kshitij Shailendra held,“The Court, therefore, holds that mere omission of proviso attached to sub-section (4) of Section 149 of Motor Vehicles Act, 1988 after its replacement by Section 150 of Motor Vehicles (Amendment) Act, 2019 (32 of 2019), neither takes away the liability of the insurer to pay the claimants nor its right to recover the said amount from the owner.”Section 149 of the Motor Vehicles Act, 1988 provided the circumstances when the insurance company was liable to pay. Sub-section (2) provided the situations where the insurer was to be made a party to the claim petition and laid down the grounds for defense. Sub-section (4) provided that where a certificate of insurance has been issued a person and the policy places certain restrictions other than those laid down in Section 149(2) in respect of death or bodily harm as mentioned in Section 147(1)(b), such restrictions will be of no effect. The proviso to Section 149(4) provided that any liability discharged by the insurer under this sub-section was recoverable from the person (insured). The Motor Vehicles (Amendment) Act, 2019 (32 of 2019) amended Section 149 to be read as Section 150 and omitted the proviso to erstwhile Section 149(4) with effect from 01.04.2022.“The aforesaid provisions are expressly to give defence to the insurer and have to be read to that extent only and not to interpret as if the liability to indemnify stands washed away,” held the Court. Case BackgroundAn accident occurred on 29.05.2022 between an ECO car and the bus which was insured with the Appellant-ICICI Lombard. The driver of the ECO succumbed to his injuries. In the motor accidents claim filed by the heirs of the deceased, the Presiding Officer, Motor Accident Claims Tribunal, Kanpur Dehat awarded compensation of Rs. 20,11,800/- against the owner and driver of the bus. Liability to pay the compensation was fastened on the Insurance Company-Appellant, however, appellant was granted leave to recover the amount from the driver and the owner. The question of law before the High Court was whether the amending act of 2019, Motor Vehicles (Amendment) Act, 2019 (32 of 2019), omitting the proviso from Section 149(4),which enabled the insurer to recover the sum mentioned in the sub-section from the insured, took away the rights of the insurer for accidents occurring after 01.04.2022.High Court VerdictThe Court noted that Section 147 of the Amended Act provides that insurance policies will cover third party risks in cases of death or bodily injuries. It held that the amended Section 150 (4) (replacing Section 149(4)) provides that the insurer can escape liability flowing from the insurance policy if the conditions are met. It held that though the insurer is absolved of paying the claimant, but it will have to indemnify the insured. “Such indemnification will still continue to remain alive and the insurer shall have to first pay the compensation through indemnification and, then, it shall have a right to recover from the owner the amount paid as the ultimate liability shall have to be borne by the owner and not by insurer. In such an event, there would be no financial loss to the insurer as it would be compensated through recovery from the owner.”The Court observed that such provisions are to enable the insurer to make sure that the award of compensation is not passed against it. It was observed that non-payment of premium by the party also absolves the insurer of the liabilities. Further, the Court drew distinction between the words “paid” and “payable”. It held that the insurer can only recover the amount paid by it and not which is payable by it. It noted that Section 168 of the MTP Act lays the responsibility to pay the amount of award within 30 days not only on the person who has to finally satisfy the award but on the insurer. Accordingly, it is left open for the insurer to recover the amount later, held the Court. “The said provision does not mean that it is the liability of the Insurance Company to bear the award for all time to come but it only means that it has to pay the amount only for transitional period and the chapter is not closed forever as the right to recover is very much there. The award has to be read as a whole and not in piece-meal.”The Court held that any dispute between the insurer and the insured does not concern the claimant in so far as his right to receive compensation from the insurer is concerned.It was held that Words “no sum shall be payable by the insurer under sub-section (1)” used either in Section 149 of the Act of 1988 (prior to amendment) in Section 150 (after amendment) means that the amount...

2019 Amendment To Motor Vehicles Act Doesn't Affect Insurer's Liability To Pay Claimants Or Its Right To Recover Amount From Owner: Allahabad HC

Upasna Agrawal

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