Road accident victims may lose their lives or end up disabled. While physical abilities are irreplaceable, financial compensation would alleviate the victims’ problems.  Raj Pradhan reveals the many details of how such financial compensation can be obtained and also the best-kept secret of accidents involving drunk drivers

Raj Pradhan

Kavinaya was just two and half months old when her software engineer father and mother were fatally bumped by a rashly driven sand-laden truck in Chennai. On 27 June 2012, two and half years after the calamity that struck Kavinaya, the honourable judge of the Motor Accidents Claims Tribunal (MACT),N Gunavathi, awarded a total compensation of Rs91.78 lakh taking into account the abject condition of the orphaned child and the old age of her grandparents. The insurer, ICICI Lombard, on behalf of the lorry-owner A Sheik Mohammed, will keep Rs50 lakh for Kavinaya in a nationalised bank until she turns 18 and give Rs20.9 lakh to each of her grandparents as reparation. The beneficiaries are also eligible for a 7.5% interest per annum from December 2009 when the claim petitions were filed in the court, the judge said.

While no amount of money will bring back Kavinaya’s parents or compensate for the loss of love and affection from her parents, it will ensure that she and her grandparents have some financial solace. The lorry-owner, even though clearly at fault, did not have to personally pay for his fault. The third party (TP) liability cover taken from an insurance company at an inexpensive premium helped him walk away financially scot-free. The TP premium for trucks with 7,500kg capacity was increased from Rs8,420 to Rs9,818 in 2012. The TP premium is still under Insurance Regulatory and Development Authority (IRDA) tariff. Even after the 2012 hike and subsequent protests by different organisations, it is still good, considering that it covers unlimited liability. Yes, sky is the limit for the award that MACT can bestow. If there is proper justification, unlimited delay in claims filing is also allowed. Road accident victims, thus, have a chance of reducing the extent of their misfortune.

The TP premium for 1000cc private cars was increased from Rs880 to Rs925 and goods ferrying three-wheelers was increased from Rs2,440 to Rs3,415 in 2012. The TP premium for private cars of above 1500cc is Rs2,853 and for two-wheelers, the premium is Rs350 to Rs680 per year, depending on engine capacity. The best part is that, unlike in the US and other countries, India’s car insurance is based on just the vehicle and not on the driving record or the age of drivers. The premium deals can’t get better than this. It is triple whammy for the insurance company—unlimited compensation, TP premium under tariff and underwriting not based on driver’s profile; it means triple joy for vehicle-owners.

Considering such low premiums for unlimited liability cover, it is inexplicable that 5% of vehicles on the road do not have valid insurance. This goof-up is more for two-wheelers than cars—even more baffling, considering that the TP premium is a pittance for two-wheelers. A two-wheeler can cause as much damage as cars; there is no justification for not buying the mandatory TP liability insurance. There is no grace period after the insurance term gets over and you lose the no-claims-bonus (NCB) if you fail to renew before policy expiration.

The damages are calculated by taking into account the income, age, number of dependents of the victim, state of health, past health record and the magnitude of the injuries. Needless to say, death will pay more than disability. Even if the road victim has no life, health or personal accident (PA) insurance, they can get defrayal from the insurance company of the vehicle. It will not be immediate and, hence, will not help in immediate day-to-day expenses. The payment can take from a couple of years to about a decade after filing the claim with MACT. It is not a substitute for proper life, health and personal accident (PA) insurance; rather, think of it as a free supplement to the existing insurance cover. Even if one is covered under life, health and PA policy, the insured can also invoke the TP cover of the insurer of the vehicle involved in the accident.

In the case of Kavinaya, her father Prathap Kumar, aged 28, was working in Canada and had come to Chennai on a 10-day holiday when fate dealt a severe blow. Prathap was working as a module leader in the Canada-based Kumaran Systems, earning Rs6.53 lakh per annum. His company too confirmed in court that he had been paying tax for the amount in Canada and that he would have reached the Rs10 lakh salary mark, had he been alive now. The girl’s mother was 26 then and was working as a receptionist in a private company in the city. The judge noted that there was no delay in the filing of the first information report (FIR), no contradiction between medical records and the FIR and the witness account was also in-sync. Eyewitnesses corroborated that the lorry-driver was at fault and that he was driving the vehicle in a reckless manner.

The TP liability cover, which is mandatory in India, does not provide any benefit to the insured; however, it covers the insured’s legal liability for death/disability of third party loss or damage to third party property. MACT is a tribunal in which the cases related to road accidents are decided and appropriate compensation is given to the victims or their next of kin. MACT courts are presided over by civil judges from the state higher judicial service and come under direct supervision of the High Courts.

In another case, a compensation of Rs12 crore was awarded after seven years to the family of a top-notch nephrologist, Suresh Mahajan, aged 47, an NRI with an annual income equivalent of Rs1.01 crore, who died in a road accident in 1995.

Documents Missing/Incomplete?
If certain documents are missing, disclose the maximum you can and don’t lose sleep over finding evidence to prove that your claim is justified. On 25 July 2012, the Thane district Motor Accident Claims Tribunal (TDMACT) held that a claim can be granted even if the proof of service and income is not presented in the court by the claimant. After nine years of an accidental death of the 22-year old son of Laxman Pawar, Tribunal judge SY Kulkarni awarded a sum of Rs2,08,000 to Mr Pawar from Pimplagaon village of Murbad taluka (Maharashtra). Mr Pawar had told the court that his son Bhagwan was serving with one Vinod Vitthal Patil and was earning a salary of Rs3,000 per month.  

According to HC advocate SR Singh (who specialises in insurance cases), “Section 158 (6) of Motor Vehicle (MV) Act 1988 requires information on accidental death, or bodily injury, is to be recorded by a police officer. It must be compulsorily forwarded within 30 days to the claims tribunal having the jurisdiction, with a copy given to the concerned insurer and also made available to the vehicle-owner. The Tribunal can take cognisance of the report and convert it into a claim application. The victim can file a claim petition directly before MACT under Section 166 or 163-A of MV Act 1988 with prescribed court fees. The idea is that when there is a serious accident, the victims who may not know about their rights should not go without compensation.”

Accidents due to drunk driver—best-kept secret
Moneylife’s Cover Story titled “Personal Accident—A Must-have Cover” (17 May 2012) highlighted the case of Charu Khandal, an animator with Shah Rukh Khan’s Red Chillies Entertainment. She had just celebrated with close friends and family in Mumbai after the team she headed won a national award for the special effects in the movie Ra.One. As she was headed home in an auto-rickshaw, she was hit by a speeding Honda City car driven by a drunk driver. According to the doctors treating her at Kokilaben Dhirubhai Ambani Hospital, the cervical bones in her neck got fractured and there are severe injuries to the spinal chord. According to her family members, over Rs6 lakh had already been spent in the first 10 days, with Rs3 lakh-Rs4 lakh going towards a neck surgery.

It may be hard to believe, but she can get compensated by the insurance company. According to Avadhoot Mavlankar, principal officer, Shinrai Insurance Broking, “Motor Vehicle Act, 1988 in India is considered a strict law by the insurance companies. Insurance is a contract between the insurer and the insured. There is no privity of contract between the insurer and a third party who suffered in an accident. The law gives the insurance company a limited right to defend against a third party. Even if the car driver is drunk, and at fault in an accident, MACT will give compensation to the third party, and it will have to be paid by the insurance company. In 99% of cases, the insurer will not be able to recover the money from the insured.”

The insurance company of the drunk driver will not pay for ‘own damage’ (OD) cover but, surprisingly, they will be held liable for TP claim. According to SR Singh, “An insurance company can impose conditions on own insured, but they cannot say no to the third party liability of the drunken driver. But insurer can seek reimbursement of amount paid to third party from the insured under Section 149(4) proviso. Section 149(2) gives limited right to vital defences for which the insurer can be exonerated—use of the insured vehicle for racing and speed testing, or for other uses, not allowed by permit, such as a private car used for hire and reward, transport vehicle for goods carrying fuel in a tank.

Other reasons could be a driver without a valid drivers’ licence or void insurance policy due to non-disclosure of crucial facts. It is not a loop-hole in the law that serious breach of drunken driving is not a defence under Section 149(2) for the reason that the road accident victim should not end up uncompensated. A person owning a car may be considered reasonably affluent, but not enough to fully compensate the other party. Once motor insurance is taken, third party risk is compulsorily covered. The insurance company is made  to act as judgement-debtor  under Section 149(1) in case any award is passed against the insured. Thus if an insurance certificate is issued and there is a decree against the insured, it is as if the decree is  against the insurer.”

Take Section 149 of the MV Act with a pinch of salt. Be aware of your rights as the insurance company may try to pull a fast one. You do not want to end up fighting with the drunk driver to personally compensate you; that will be an onerous task. We got a mixed bag of responses on this issue from numerous insurers we interacted with; some flatly denying insurer responsibility and others agreeing that they may have to compensate for the TP claim arising due to a drunk driver, provided the court orders it. This means that an insurance company will try to fight it out to deflect the financial responsibility on the drunk driver. The debate that arises is whether or not an insurance company should bear the brunt of the actions of a drunk driver.

According to Vijay Kumar, head—motor insurance, Bajaj Allianz General Insurance, “Drunk driving is a menace and courts may not strictly go according to the books (MV Act) but make the drunk driver responsible for the financial liability on a case-to-case basis.” One legal expert says, “There have been conflicting judgements in the past. In one case in Indore, MACT exonerated the insurer from paying the third party victim as the vehicle did not have a fitness certificate. The requirement of fitness certificate is not mandatory for TP liability of the insurer and hence the insurance company actually did not have a right to defend.” Even if a private vehicle is overloaded at the time of accident, the insurer would be liable to pay TP claim.

Hit-and-Run Cases—You Will Be Financially Hit
A motor accident has two facets: criminal offence and compensation claim. The person responsible for causing the accident by negligent driving is liable to be booked for criminal offence and liable to pay compensation to the victim. However, if the vehicle is insured, the insurance company will pay.

In case of hit-and-run cases, you may be financially hit as the other party involved in the accident has fled the scene. KN Murali, head – motor vertical, Bharti AXA General Insurance, says, “The victim or victim’s family members can approach the District Collector (where the accident has happened) for compensation under Solatium Fund—the maximum compensation is Rs50,000. Insurers contribute to Solatium Fund based on their market share of premium.” This may be woefully low for the victim.
There could be accidents where the party at fault does not have insurance. In most cases, you will not be able to recover the money from the car driver or get low payout. According to KG Krishnamoorthy Rao, MD & CEO, Future Generali India Insurance, “The injured party has to file a case and get compensation awarded against the driver/owner of the vehicle.”

If the person crossing the road is at fault, will he be compensated? Amazingly, the answer is yes. Avadhoot Mavlankar, says, “If a person crossing a road is at fault, he can still get some compensation from MACT which will be paid by the insurance company of the vehicle involved in an accident. In India, it is difficult to prove who is at fault, unless there is confession by one party. Often, there is lack of witnesses, CCTV and other mechanisms to prove the fault.” According to KN Murali, “Motor Vehicles Act provides relief for such cases as ‘No-Fault-Liability’ and maximum compensation can be Rs50,000 under Section 140 A of Motor Vehicles Act.” It may be limited to Rs25,000 for disability.

KG Krishnamoorthy Rao, says, “Generally courts would favour the pedestrian.” If it is not proved that the person crossing the road is at fault, MACT can adjudicate the compensation which will be paid by the TP liability cover of the vehicle involved in the accident.

In the US, car-owners have to buy insurance against ‘uninsured’ vehicles by paying an annual premium. It is meant to cover accidents related bodily injury or car damage in cases of hit-and-run or being hit by someone without any insurance or low insurance. You are assured of compensation from your insurance company in these specific cases. According to Ramji Mishra, national head - claims legal and claims compliance, Tata AIG General Insurance, “Currently in India, the concept of uninsured insurance does not exist. The motor insurance policy in India is triggered even in case of No-Fault-Liability of the insured driver, although with limited compensation. Apart from that, there also exists a Solatium Fund, a pool of monies created by the insurers for one time compensation for hit-and-run cases.”

Do not let knock-to-knock agreement knock you down
In India, insurers have a ‘knock-to-knock’ agreement which means that your ‘own damage’ cover will pay for the damage to your car even if it is the other party’s fault. What happens to your no-claim-bonus (NCB)? What if you have only standalone TP and no own damage cover; who will pay for your car damages?

According to Avadhoot Mavlankar, “Unlike in US, due to knock-to-knock agreement in India between the insurers, any damage to a vehicle will be claimed from own insurance company under own damage cover. It will mean that the person will end up losing NCB without any fault of his in the accident. We find it difficult to explain this concept to foreign clients like those having a consulate car.”

While the knock-to-knock agreement makes it easy to get your damaged car repaired through reimbursement from your own insurer, you can take the hard way of making the insurance company of the party at fault to pay for it, especially if you only have standalone TP and no own damage cover. According to Ramji Mishra, “The driver can claim for damage and injury; however, he or she will have to prove before MACT that the loss suffered was due to negligence of the driver of the other vehicle, to succeed in the case.” Vijay Kumar says, “The police and courts decide who is at fault on the basis of an FIR that needs to be filed, charge-sheet, etc. Surveyors need to do an on-the-spot estimation of the extent of damage and ensure there is no fraud in the claim amount.”

KN Murali adds, “If it is established that the other party is at fault, the vehicle-owner whose vehicle is damaged and has only the third-party cover, can claim against the offending vehicle-owner. The insurer of the offending vehicle will pay for damages under the section ‘Third Party Property Damages’ up to a maximum limit of Rs7,50,000. For bodily injuries, the cover is unlimited.” The insured has the option to restrict coverage for TP property damage to Rs6,000 and this will result in a lower Liability Only premium. It is not recommended as property damage can be high considering the prices of vehicles today as well as structural damage to any shop, building, etc.

How is compensation decided?
According to SR Singh, “There is a standard formula evolved by higher courts or Apex Court to arrive at the compensation so that the judgement does not vary  from judge to judge as it would be against principle ‘equity’ & ‘equality’ and law of precedent. In case of death, it is not the calculation of human life value, but what is earned over a lifetime that may be passed to legal heirs. It is about the pecuniary loss the heirs sustained. Parents of the victim will be considered for limited dependency benefits based on their age, while spouse and children will be considered for full dependency. The damages are calculated by taking into account the income, age, number of dependents of the victim, state of health, past health record and the magnitude of the injuries and its impact on earning capacity; death will fetch more than disability. A lot of supporting documents need to be submitted to get proper damages. The victim or heirs can produce cogent evidence to show  a good job, track record of promotions and increments and can have the employer (HR department) appear at the hearing to highlight the bright prospects the victim had. Self-employed victims can also espouse future career scenario.” The lower the age of the victim, the higher will be the compensation awarded.

He adds, “Depending on the severity of the injuries, there is customary compensation awarded for pain and suffering. A higher compensation can be paid for pecuniary loss if the injury is serious or has caused disability which is hampering day to day activities, playing havoc with the career of the victim.”

Beware of Ambulance Chasers
In US, you will see TV advertisements from law firms asking accident victims to approach them for seeking justice as it can mean a windfall for the lawyers. US system allows punitive damages, which can be substantially high. ‘Ambulance chaser’ is an American slang for a lawyer who seeks to encourage and profit from the lawsuits of accident victims. It can also entail the lawyer’s touts (hireling, doctor, nurse, policeman, friend, acquaintance) who persuade the injured and his kin to hire the lawyer to sue for damages. Unfortunately, in US, the law firms make humongous money while the victim may end with peanuts.

The concept of ambulance chasers has now come to India. According to an insurance industry source, “There are many lawyers in India who specialise only in TP claims. They approach the police station to seek information on accident cases, which they then use to contact the victim’s family. Although, it is a good development because it helps the victims get their rights, some lawyers may try to keep a big portion of the compensation to themselves.”

One is not required to appoint a lawyer when one is being heard in these tribunals. At times, where stakes are very high, senior advocates may be hired. Be wary of the legal help you seek and ensure that you get most of the MACT compensation. You can negotiate the legal fees to be paid separately and not to be linked with the MACT compensation. The other school of thought encourages to link the lawyers’ fees with the compensation to make the lawyer fight vigorously for the case and also to relieve the victim of financial burden.

Settlement Vs Adjudication
In settlement, there is always give and take. Settlement does not mean that you deserve Rs100 and you get Rs100. You would get something less, if the matter is settled. Adjudication means you continue to fight till you get an MACT decision determining the rights and obligations between the parties involved which can take a few years.

SR Singh, says, “The trend is that most MACT cases  take about two years to get finalised. Due to delays in Mumbai, people prefer the alternate dispute resolution (ADR) route either through mediation or conciliation provided within MACT itself. In the western region, cases are adjudicated by MACT within six to eight months due to fewer cases. ADRs are less popular there.”     

Currently, there is no time limit for filing TP claims. According to SR Singh, “The majority of the affected people live on pavements and it is cruel to have a one and half year’s time limit for filing the case as power to condone delay was restricted to 12 months under Section 166 (3) until it was removed by deleting sub-section (3) of Section 166 of MV Act, effective 14 November 1994; however, explanation may be required in case of gross delay. The Supreme Court, in a case, said it should be done in three years, but no law was laid down for the time limit of third-party claims.”

How do insurers deal with low TP premium?
According to an industry source, “Many TP claims from commercial vehicles arise from accidents due to trucks and tempos that have an all-India permit (AIP). With such vehicles, the risk is higher compared to commercial vehicles restricted to a city. The transportation lobby is strong and they are able to keep TP premium low.”

One insurer denied that private cabs, taxis plying within the city are any less of a risk than truck or tempo with AIP. They say that it depends on the driver’s care, skill and behaviour; call centre taxis at night, running at a high speed, can hit pedestrians. Unfortunately, insurance in India is not driver specific, but vehicle specific which means good and bad drivers are not differentiated.

The TP claims for private vehicles ratio is within 100% and, hence, not a drag on insurance companies. TP claims for commercial vehicles ratio is over 200%, which means insurers pay Rs200 as claims for every Rs100 received as premium. Even with the recent hike in TP premium, it may not be enough to compensate for the losses. One way to handle the situation is to increase the Own Damage (OD) premium. According to Bharti AXA, “In the case of commercial motor segment, OD premium can move up on account of inadequate increase in TP premium. Insurers are given a minimum quota of standalone TP policies that they have to write in their books. If the quota is not met, declined risks pool will allocate business back to insurers to the extent of shortfall. We do not expect insurers to avoid risks; it is also mandated that no insurer can deny standalone TP risk. Customers should not have any issue in getting the cover freely.”

Ramji Mishra says, “Keeping in view the statutory unlimited TP cover and the fact that TP premium is still regulated and inadequate, it may harden the OD premium.” According to Krishnamoorthy Rao, “Hike in OD premium can happen since insurers need to recover their loss on the TP side from the premium of OD.”

The way forward
Unlike in the US, there are no punitive damages levied in India. In US, gross and wilful negligence can lead to culpability of negligence. It is meant to shake the foundation so that people know they have to pay a hefty price for blunders. Even with the absence of punitive damages in India, justice is properly rendered by the current system in place.


KN Murali says, “Insurer can file an appeal in the High Court. However, insurer has to deposit the amount of the award with the court and then appeal against the MACT decision. If the award is less than Rs10,000, there is no scope for appeal.” The victim or legal heirs get part of the compensation to resurrect their lives after disability or death of the accident victim. The other part is invested and will be given to the victims once the civil court makes a decision on the appeal made by the insurance company. The decision of the civil court can result in either higher or lower amount of compensation than what has already been awarded. It means that the insurance company may end up paying higher damages. In most cases, there will be some settlement between the victim and insurer; in other cases, the insurer will accept the adjudication of MACT.

We hail the justice system which protects the road accident victims, but there is a lot more that insurance can impact. Insurance can be fine-tuned in India to make it driver-specific and not just vehicle-specific. Good drivers should be incentivised and bad drivers penalised. Insurance can curb indiscipline on the road; it can be a much powerful controller than law or police. {break}

Fraud – Does it really exist?

In cases where the insurer feels that injustice or fraud exists, they will pursue to get adjudication from MACT and even go to the civil court, if needed. There may be some fraud in the system perpetrated by the victim or legal heirs to defraud the insurance company. A daily wage labourer in Madurai filed a claim in MACT accusing that a lorry insured with one insurer had hit her husband who died on the spot. The claim was dismissed as the lorry driver was able to provide proof of a weighing bridge receipt taken at Nagpur on the same day. In reality, the woman’s husband did die in an accident, but not due to this lorry. The claim becomes fraudulent when the accident does not happen due to a vehicle plying on the road at the time of the accident or when the accused is not involved in the accident. In some cases, lawyers may mislead the victim or the victim’s legal heir. Fraudulent cases will increase the overall motor insurance premium.


There is complete disagreement among insurance companies regarding the percentage of fraud cases. As per sources from Bajaj Allianz, “Around 15% of MACT claims may be fraudulent. It can be vehicle cover note fraud, swapping of driver in case the actual driver at the time of accident did not have a licence, stage-managing (no insurance at the time of accident and is taken subsequently), etc.” According to sources at Bharti AXA, “There are controls in place to prevent fraud in MACT claims—unless there is collusion between various agencies, probability of frauds cannot occur.  However, there may be some grey areas in some localities. It would not be possible to give any quantification of frauds in MACT cases.” Tata AIG is of the view that there is no recorded data available; however, they have seen that instances of fraud are high in MACT claim compensation cases. Future Generali thinks that there is no proper estimate available on this.

Documentation For a Strong Claim

•    Documents about the age of the victim
•    Documents about the educational qualifications of the victim
•    Employment information
•    Proof of income of the deceased/injured, history of promotion at job
•    An affidavit detailing the relationship of the claimants with the deceased
•    Documents of the identity of the claimants and of the deceased in a death case
•    Cover note of the third party insurance policy
•    Full details of opposite party—name, address, their vehicle number which caused accident, their occupation, etc
•    Information about the vehicle which caused the accident
•    FIR copy registered in connection with the accident
•    Copy of the post-mortem report
•    Death report (if victim died)
•    Disability certificate (if victim disabled)
•    Original bills of expenses incurred on the treatment along with treatment record
•    Original bills of car damage rectification
•    Evidence related to accident, photo taken by the police at the place accident
•    Name and address of the witnesses of the accident

Limit the compensation?

The liability for the insurance companies is unlimited. An amendment to the Motor Vehicles Act may limit the compensation awarded to accident victims to Rs1 lakh in case of injuries and Rs10 lakh in case of death. It is not clear if this is the minimum damages and whether or not the victim can still pursue for higher compensation on a case-to-case basis from the insurance company or vehicle-owner.

KN Murali says, “The MV Act could provide a cap of liability for bodily injuries and death. In railway accidents, the cap is provided at Rs2 lakh.” According to Ramji Mishra,  “Insurers should be allowed to offer limited TP cover up to a specific premium and higher TP cover for higher premium.” KG Krishnamoorthy Rao, says, “Unlimited liability puts insurers in difficulty since the maximum liability cannot be quantified. This poses problems in getting adequate reinsurance coverage for the insurer. Hence there should be a limit prescribed.”

While insurers may have a valid point, the issue seems to be pricing of TP liability cover for commercial and not private vehicles. Why should the road accident victim end up with a pathetic compensation just because commercial vehicles enjoy low TP premium? The current system of MACT considers numerous factors before deciding the level of compensation and that is a boon for the road accident victim, who in many cases is not well-off.

One insurer sheds light on the issue for private and commercial vehicle insurance. According to him, “The need of the hour is to control the motor premium which will mean a cap on the compensation amount. A small commercial vehicle-owner has limited premium paying capacity compared to a fleet-owner. Increase in the premium every year is making it unaffordable for many classes of customers. There are indications that some commercial vehicle-owners are not taking TP cover or are taking some cheap policies sold by fraudulent elements for defrauding customers. The claims ratio for private vehicles is also increasing due to changing demographics, con