Vehicle cover transfers to buyer on registration

The National Commission ruled that the insurance policy is deemed to be automatically transferred to the purchaser when the vehicle is registered in their name

Harmanpreet Singh purchased a vehicle from Sandeep Kumar who had insured it with Iffco Tokio General Insurance for Rs 7,37,134 under its private vehicle package policy valid from December 1, 2016, to November 30, 2017.
 

After purchase on September 4, 2017, the vehicle was transferred to Singh’s name by the Ambala Regional Transport Office (RTO) on September 5, 2017. However, the insurance policy was not transferred.
 

The vehicle met with an accident on the night between September 10 and 11, 2017. A police complaint was lodged and the insurer was also promptly informed. The surveyor who was appointed inspected the vehicle and opined that it was beyond repair, and declared it a ‘total loss’. However, the insurer refused to make any payment on the ground that the insurance policy had not been transferred in Singh’s favour.
 

Singh filed a complaint before the Chandigarh District Commission for a direction to pay Rs 7,37,134 towards the depreciated value of the vehicle as recorded in the policy. He also sought interest, compensation, and litigation costs.
 

The insurer contested the case, stating that the claim had rightly been rejected due to lack of insurable interest as the policy did not stand in Singh’s name. The District Commission upheld the insurer’s stand and dismissed the complaint.
 

Singh appealed against the order. The Chandigarh State Commission set aside the order of the District Commission and directed the insurer to collect the wreckage of the vehicle and pay Rs 7,37,134 towards total loss, along with 9 per cent interest from the date of repudiation of the claim. It also awarded Rs 30,000 towards compensation and Rs 15,000 as litigation costs. A period of 30 days was given for compliance, after which the interest rate would stand raised to 12 per cent for the period of delay.
 

The insurer filed a revision petition against the order, contending that the law was well settled that upon sale of a vehicle, the coverage would be restricted to only third-party risk, and would not extend to own damage unless the policy is transferred. The insurer argued that since the policy was not transferred and the loss was for own damage, the claim would not be payable.
 

Singh’s lawyer, Dhruv Dwivedi, argued that the interpretation of the law had changed after the 1994 amendment to the Motor Vehicles Act of 1988. He contended that upon registration of the vehicle by the RTO in favour of the purchaser, there would be a deemed transfer of the comprehensive insurance policy in favour of the purchaser under the amended Section 157, without any bifurcation of third-party risk and own damage.
 

The National Commission observed that the amended provision provides for deemed transfer of the policy from the time the registering authority registers the ownership of the vehicle in favour of the purchaser. Hence, the Commission concluded that the earlier interpretation of the law by the Supreme Court would no longer be applicable after the 1994 amendment to Section 157 of the new Motor Vehicles Act, 1988.
 

Accordingly, by its order of July 12, 2024, delivered by J Rajendra, the National Commission dismissed the insurer’s revision, holding that a purchaser is not required to get the insurance policy transferred to his name as it would be deemed to be automatically transferred when the vehicle is registered in the name of the purchaser.

The writer is a consumer activist