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. Luthra's parents and widow filed a claim 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 Rs 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 a car? 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 company's 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 court's observation that a non-issue had been turned into an issue.
The author is a consumer activist.