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The Motor Vehicles Act, 1988

149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.

  1. If,  after  a certificate of  insurance has  been issued  under sub-section  (3)  of section 147 in favour  of the  person  by  whom  a  policy  has  been effected, judgment  or award  in respect  of any  such liability as is required to be covered by a policy under clause (b) of sub-section (1) of section  147 (being a liability covered by the terms of the policy)  is  obtained   against  any   person  insured  by  the  policy,  then, notwithstanding that the insurer may be entitled to avoid or cancel or may have  avoided or  cancelled the policy, the insurer shall, subject to the  provisions of  this section, pay to the person entitled to the benefit of  the decree  any sum  not exceeding the sum assured payable thereunder, as  if he  were the  judgment debtor,  in respect  of  the liability, together  with any  amount payable  in respect of costs and any sum  payable in  respect of  interest on that sum by virtue of any enactment relating to interest on judgments.
  2. No  sum shall  be payable by an insurer under sub-section (1) in respect of any judgment or award unless, before the commencement of the proceedings  in which  the judgment  or award is given the insurer had notice  through the  Court or,  as the  case may  be,  the  Claims Tribunal of  the bringing  of the  proceedings, or  in respect of such judgment or  award so  long as  execution is stayed thereon pending an appeal; and  an insurer  to whom  notice of  the bringing  of any such proceedings is  so given  shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely:--
  1. That there has been a breach of a specified condition of the policy, being one of the following conditions, namely:--
  1. a condition excluding the use of the vehicle--
  1. For hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or
  2. For organised racing and speed testing, or
  3. For a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a Transport vehicle, or
  4. Without side-car being attached where the vehicle is a motor cycle; or
  1. a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who  has been disqualified for holding or obtaining a driving licence during the period of disqualification; or
  2. A condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or Civil commotion; or
  1. that  the policy  is void  on the  ground  that  it  was obtained by  the non-disclosure  of  a  material  fact  or  by  a representation  of   fact  which   was  false  in  some  material particular.
  1. Where  any such judgment as is referred to in sub-section (1) is obtained from a Court in a reciprocating country and in the case of a foreign  judgment is,  by virtue  of the provisions of section 13 of  the Code  of Civil  Procedure, 1908  (5 of 1908.) conclusive as to any  matter  adjudicated   upon  by  it,  the  insurer  (being  an  insurer registered under  the Insurance  Act, 1938 (4 of 1938.) and whether or Not he is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the manner and to the extent specified in sub-section (1),as if the judgment were given by a Court in India:

Provided that  no sum  shall be payable by the insurer in respect  of  any   such  judgment   unless,  before  the  commencement  of  the proceedings in  which the  judgment is  given, the  insurer had notice through the Court concerned of the bringing of the proceedings and the insurer to whom notice is so given is entitled under the corresponding law  of  the  reciprocating  country,  to  be  made  a  party  to  the proceedings and  to defend  the action  on grounds  similar  to  those specified in sub-section (2).

  1. Where  a certificate  of insurance has been issued under sub- section (3)  of section  147 to  the person  by whom a policy has been  effected, so  much of the policy as purports to restrict the insurance  of the  persons insured  thereby by  reference to any conditions other than those  in clause  (b) of  sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub-section (1) of section 147 be of no effect:

Provided that  any sum  paid by  the insurer  in or  towards  the discharge of  any liability  of any  person which  is covered  by  the policy by  virtue only of this sub-section shall be recoverable by the insurer from that person.

  1. If the amount which an insurer becomes liable under this section to pay in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person.
  2. In this section the expressions "material fact" and "material particular" means,  respectively a fact or particular of such a nature as to  influence the  judgment of  a prudent  insurer  in  determining whether he  will take  the risk and, if so at what premium and on what conditions and  the expression  "liability covered by the terms of the policy" means  a liability  which is  covered by  the policy  or which would be  so covered  but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy.
  3. No  insurer to whom the notice referred to in sub-section (2) or sub-section  (3) has  been given  shall be  entitled to  avoid  his liability to  any person  entitled to the benefit of any such judgment or award  as is  referred to in sub-section (1) or in such judgment as is referred  to in  sub-section  (3)  otherwise  than  in  the  manner provided for  in sub-section  (2) or  in the  corresponding law of the reciprocating country, as the case may be.

Explanation.--For the purpose of this section, "Claims Tribunal" means a Claims Tribunal constituted under  section 165 and  "award" means an award made by that Tribunal under section 168. Rights of third parties against insurers on insolvency of the insured.

Motor Vehicles Act, 1988 Back

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