In a significant judgment towards ensuring road safety, the Supreme Court has directed the Insurance Regulatory and Development Authority and the Ministry of Road Transport & Highways (MoRTH) to evolve a pilot project whereby vehicles can be linked with insurance status to ensure that vehicles at the petrol pumps can be checked for valid third-party insurance.

A bench comprising Justice Sanjay Karol and Justice Prashant Kumar Mishra passed a slew of important directions relating to the importance of third-party insurance.

In this case, the Court formed two primary issues. First, the non-compliance with Section 146 of the Motor Vehicles Act, 1988, which requires all vehicles to have valid third-party insurance. Second, whether there should be a uniform motor-vehicle policy structure covering all occupants of the vehicles, in addition to the third-party risk coverage.

One of the important directions issued by the bench is to ensure that in the absence of valid third-party insurance, the vehicles would be refused fuel at petrol pumps until they have obtained the said insurance. Clarifying that this is not a mandamus but a recommendation, the bench directed: "As deliberated upon in Court, the IRDA in consultation with the MoRTH, to deliberate and evolve a pilot-project whereby fuel for vehicles to be linked with valid insurance status. In the absence thereof, the vehicle concerned would be refused fuel at petrol pumps, until such time that valid insurance is obtained."

In the judgment authored by Justice Karol, he stated that the benefit is two-fold because, firstly, it will assist in the identification of uninsured or unregistered vehicles. Secondly, it will prompt the owners of these vehicles to ensure that they have valid insurance status.

"Such projects would ensure ground-level compliance with the statutory mandate of Section 146 of the MVA. This may be done through the use of ANPR cameras. The Ministry of Petroleum and Natural Gas, has in principle, no objection to the same," the bench added.

The bench further noted that since it is cognisant of the number of accidents on national highways, and also the effect that long queues at the toll plazas have on such accidents, the MoRTH is to implement the pilot project on certain corridors, substituting the process of stopping at toll plazas with automatic detection of vehicles passing through toll points.

Insurance companies liable to compensate for occupant as well as vehicle in comprehensive policy

To briefly mention the background of this case, one T. Ramu was returning from Tirupathi to his village in his Maruti 800. He was hit by an unknown lorry driver in a rash and negligent manner. Ramu suffered injuries and ultimately died. His family filed for compensation before the Motor Vehicle Tribunal for Rs. 10,00,000 on grounds that the deceased was in a seafood business and was earning at least Rs. 1,00,000 per annum and that he was a sole breadwinner.

However, the tribunal held that he was not entitled to any compensation based on the testimony of the National Insurance Company, whose insurance the deceased had taken for his Maruti car. It was reasoned that no extra premium was paid to cover personal risks of the owner's vehicle. The order was challenged before the High Court, which awarded compensation of Rs. 10,00,500 along with 7.5% interest per annum. It said the insurance policy was a comprehensive policy covering the owner as well.

Upholding the High Court's order, the Supreme Court held that as per the IRDA's circular dated November 16, 2009, the insurance companies are liable to compensate any occupant in the vehicle under a comprehensive policy. Additionally, the Court has said that the comprehensive insurance policy, which covers liability for injury, death or damage to the occupant as well as to the vehicle, must be displayed in easy-to-read format on the websites of the insurance companies.

Further, the Court had directed that the third-party insurance should be increased for four years for new cars and six years for new two-wheelers in the interest of road safety. In this regard, IRDA must immediately issue appropriate directions.

The directions issued by the Court are:

1. Currently, ANPR Cameras deployed on highways and roads are equipped with a mechanism to catch and penalize road safety violations such as high speed, red light jumping, driving on the wrong side of the road, etc. Carrying this forward and as already deployed by the MoRTH in certain states, ANPR Cameras are to be integrated with data from the Insurance Information Bureau (established under IRDA) and the VAHAN portal for issuance of automatic e-challans to uninsured vehicles, in furtherance of the SOP for Electronic Monitoring and Enforcement of Road Safety.

2. This Court is informed that as on date, there is no uniform mechanism in place with State Police to verify insurance status on the ground. It is directed that State Police be provided with handheld devices or downloadable apps, linked with the data from Insurance Information Bureau (established under IRDA) and VAHAN portal be supplied to the State Police. This is to monitor real-time insurance status of vehicles and impose challans for violations, ensuring compliance with mandatory insurance on the ground.

3. Upon notification of the amendment to Section 196 of the MVA, strict compliance thereof is to be ensured.

4. As submitted by the IRDA, for private vehicles, a broad fourlayer structure is to be implemented for private vehicles. This would bring clarity to various policy options for the vehicle-owner so as to allow them to make an informed choice. The structure is as follow:

a. Third Party only policy – this policy shall be a base policy and minimum cover as required by Section 146 of the MVA. The pricing thereof will be fixed by a consultative process between the IRDA and the Central Government.

b. Additional optional cover for the occupant(s)/pillion rider (other than owner, driver and family of the insured) – this add-on will be optional and available at an additional premium, covering occupant(s)/pillion riders of the insured vehicle. The pricing thereof will be determined by the respective insurance companies.

c. Personal accident cover for the owner, driver and any occupant(s)/pillion rider – this add-on will cover personal accident i.e. death and/or permanent disability of the occupant(s)/pillion riders of the insured vehicle including owner, driver and family of the insured. The pricing thereofwill be determined by the respective insurance company.

5. Own damage cover – This add-on cover will cover liability for loss or damage to the insured vehicle itself. Consequently, every customer, at the time of purchase of insurance, will be issued a 'customer option form', whether offline or online, whereby they may 'opt in' via check box to the add-on options.

6. The IRDA in consultation with GIC and insurance companies, shall formulate uniform policy wordings for the above optional covers. Needless to add, that the insurance companies may innovate the coverage and determine the pricing of the Own Damage covers, in consonance with market forces.

7. The suggestion of the IRDA for a consumer-friendly customer information sheet will also have to be given to the prospective customers outlining the above four-layered structure, i.e., who is covered under mandatory and optional covers, is made mandatory for the sale of motor-vehicle insurance, whether offline or online.

8. We notice that despite eight years having passed from the said direction, a large number of vehicles remain uninsured. While the IRDA and GIC have recommended that this period not be enhanced, we are of the view that it is in the interest of road safety that the period be enhanced by one year. Therefore, it is directed that henceforth, third-party insurance for four years for new cars and six years for new two wheelers be required to be purchased. IRDA to immediately issue necessary directions.

9. The benefits of obtaining comprehensive motor-vehicle insurance policies to be displayed in easy-to-read format on the websites of the insurance companies.

10. Based upon the deliberations in Court, a pilot-project be implemented allowing citizens to verify insurance status, and ultimately assist with the implementation of the statutory mandate under the MV Act. The insurance status to specify the kind of insurance, whether mandatory (third party only) insurance or comprehensive policy. The benefit is two-fold. At first, it will allow citizens to know whether the vehicle they are travelling in or sending goods in or transporting employees has valid insurance. Secondly, it will allow for prompt reporting of uninsured vehicles.

Appearances: N. Venkataraman, Additional Solicitor General; Archana Pathak Dave, Additional Solicitor General; Mr. Joy Basu, Senior Counsel; Meenakshi Midha

Case Details: National Insurance Co Ltd v Smt Thungala Dhana Laxmi

Also from the judgment- Supreme Court Directs Increase Of Third Party Insurance Of Cars To 4 & Two-Wheelers To 6 Years