Insurance companies find themselves in a tight corner in motor accident claims.
Though the insurance company normally pays the damages awarded by the Motor Accident Claims Tribunal (MACT) to the aggrieved person, the insurer is handicapped in several ways. According to the Motor Vehicles Act, the insurers have a very limited right to become a party to the proceedings of the tribunal. This is unfair to the insurance company, which ultimately has to pay the compensation amount. Since the law is somewhat imbalanced, the tribunals routinely implead the insurance companies to the proceedings though it is strictly not permitted. This anomaly was discussed by the Supreme Court in a recent judgement in the case of National Insurance Company vs Meghji Naran Soratiya. It asked Parliament, the Law Commission and other stake-holders to seriously consider this problem.
According to Sections 149 and 170, the persons claiming damages need not call the insurance company to the proceedings. They may merely provide the name and address of the company. It is for the tribunal to call the insurer. Even then, the insurance company can take only a few defences. It can allege that the owner had violated the terms of the contract, that the policy was not valid because material facts were not disclosed to the insurer, that there was collusion between the other parties against the insurer, or that the owner failed to contest the claim.
When there is an accident, the driver is the key person involved. But he is also the least interested in the claim proceedings. If he had caused death or injury due to rash and negligent conduct, he would be more worried about the criminal consequences than the claim for compensation. Normally, he would be financially incapable of defending himself before the tribunal. So the owner has to defend him. If the owner loses before the tribunal, it is for the insurance company to satisfy the award made by the tribunal. But the insurance company cannot enter the fray and contest the claim automatically. The tribunal has to see that the above four circumstances exist before the insurer is allowed to join the proceedings.
In many cases, even the owner of the vehicle involved show lukewarm interest in the proceedings. They do not defend the claim effectively, cross-examining witnesses and leading defence evidence. They are complacent because they have insurance cover and know that the insurance company will bear the liability. In practice, according to the Supreme Court, the insurance companies have to keep on goading the owners to contest the cases and place necessary evidence.
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The two cases dealt with by the Supreme Court in the common judgement illustrated the problem typically. In the first case, both the driver and the owner remained absent and did not present themselves before the tribunal despite a notice being served. In the second case, the name of the driver was deleted. Though the owner appeared in the court, he did not contest the claim. The tribunal allowed the intervention of the insurer, but the Gujarat High Court, on appeal, denied permission to the insurer on a technical ground. Ultimately, the insurer succeeded in the Supreme Court. These two cases thus brought to light the unsatisfactory position in the law.
The unenviable situation in which the insurance companies find themselves is shown by the Supreme Court’s doubts: “What, if the driver/owner file a reply but fail to effectively participate in the proceedings? What if the counsel for driver/owner are present but resort to only cursory cross-examination? What if the driver/owner does not at all lead defence evidence? What if there is a well-planned collusion that does not meet the eye?” Such situations would lead to miscarriage of justice. The court pointed out that there have been several false claims made by claimants made in collusion with owners/drivers of the vehicles with the help of the police and even doctors. In such situations, the insurance companies would find themselves in a precarious position. They have to watch the process of adjudication of the liability and assessment of compensation without being able to intervene.
The prevalent view is that the two provisions in the Motor Vehicles Act require a second look. At present, it would seem that the insurers are at the mercy of the owners of the vehicles as the tribunals have the discretion to call them or not, and that too only under certain circumstances. Should the insurers be given a direct right to contest the claim on merits without the technical requirement of permission from the tribunals? This is the question which should be considered by the lawmakers, according to the Supreme Court. The law is two decades old, and it would be prudent to make amendments in the light of experience.