Report No. 85
3.25. Flaw in Patna ruling. -
This plea for reform of the law itself shows that the present position is different. The flaw in the Patna decision1 referred to above (which dispenses with proof of fault) lies in the assumption that car insurance policy covering third party risk is a contract of indemnity even as between the insurer and the third party. This is not so. The policy is a contract of indemnity only as between the owner of the vehicle and the insurer. The liability of the assured to pay compensation in respect of death or bodily injury to a third party-and thus the right of the third party against the insurer-can arise only out of some tortious act of the assured. There is, therefore, no strict liability on the part of the Insurance Company to pay compensation, as the law now stands.
1. New India Assurance Co. Ltd. v. Sumitra Devi, 1971 AC) 58 (Pat) (para. 3.24, supra).