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Insurance Companies Liable To Pay Even If Accident Occurs Outside India – High Court

All Insurance companies operating in India are liable to pay the insurer even if the accident happened out of India.

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Insurance Companies Liable To Pay Out

For years, Insurance Companies have been dodging insurance claims for those accidents, which happened out of India. It seems that consumers as well insurance firms misinterpreted Motor Vehicles Act regulations, and insisted on the ‘geographical location’ of the accident as a major criteria for fulfilling their obligations.

But not any more.

Punjab and Haryana high court has made it crystal clear that every Insurance company operating in India is liable to pay the insurer even if the accident happened out of India.

Hence, ‘geographical location’ of the accident will no longer matter now.

This is certainly a breakthrough judgement, which will have some far reaching consequences for the entire industry.

The Case Which Triggered This Judgement

The case was regarding an unfortunate road accident which happened in Nepal on June 18, 1995. 54 pilgrims from Kurukshetra in Haryana were travelling a bus in Nepal, when they met with an accident, and the whole bus plunged into Nepal’s Trishuli Nadi (river).

The fault was of the driver, as he lost control of the vehicle, and insurance should have covered those victims.

When Motor Accident Claim Tribunal directed the bus owners to pay Rs 4.34 lakh as compensation to one of the deceased pilgrim, the owners of the bus approached Punjab and Haryana high court for countering and challenging the order.

Now, Motor Accident Claim Tribunal had said that insurance companies are not liable to pay the victims, as the accident happened out of India, in Nepal; and this was challenged by the bus owners, who claimed that insurance companies must pay for the compensation.

Punjab and Haryana High Court: Geographical Location Doesn’t Matter

While ruling the case in favor of the bus owners, and the victims, the Bench at  Punjab and Haryana High Court has clearly ruled that the insurance companies must settle the dues, as it doesn’t matter where this accident happened.

In their ruling, the Bench headed by Justice Sehrawat said,

“Once insured, the vehicle is insured to cover all geographical areas where the vehicle is authorized by the authorities to travel. The insurance company cannot avoid its liability to pay the compensation only on the ground that the vehicle was used in any particular city, state or a particular geographical area. The company cannot even avoid its liability qua third party… “

This clear all doubts regarding insurance claims, in case of accidents happening outside India.

Justice Sehrawat observed here that the regulations under Motor Vehicle Act were clearly misunderstood here because both the consumers and insurance companies assumed that the insurance is  “attached to the vehicle in question and not to geographical expanse of the area of operation of the vehicle.”

The judgement said,

“However, this rationale also does not exempt the insurance company from liability arising from the usage of the vehicle outside the geographical area of the Union of India. This section also implies that the Act would be applicable to all the citizens and subjects of India…,”

Hence, if the vehicle is permitted to operate in any part of the world, the accident victims can claim insurance which originated in India.

It would be interesting to observe how Insurance Companies counter-attack this judgement, as it can open a whole new segment of insurance claims, all over the world.

Do you think that the High Court has made a smart judgement here? Do let us know by commenting right here!

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