Indian Kanoon - Search engine for Indian Law

8. Section II of the insurance policy deals with liability to third parties. Under that section the insurance company agreed to indemnify the insured in the event of an accident arising out of the insured vehicle against all the sums which the insured would become legally liable to pay in respect of death or bodily injury to 'any person' including occupants carried in the insured vehicle. This liability is under Section 147 of the M.V. Act. Consequently, under that clause the insurance company agreed to indemnify any driver who drove the vehicle on the order of the insured (respondent No. 2) or upon his permission and who followed the terms, exceptions and conditions of the policy. This was the indemnity against the third party liability. Consequently, it was to indemnify for any liability to any third party. This indemnity was towards any act of the driver. Such indemnity means and includes a contract or promise to save the insured from the loss caused to him by the act of the driver. Hence, if the driver was liable to any third party and consequently the owner incurred vicarious liability, the insurance company would indemnify the owner of the vehicle, provided the driver fell within the terms, exceptions and conditions of the policy. This necessarily implies that the driver was at fault. He would, therefore, incur liability. That would be tortious liability. The insurance company would, therefore, indemnify the owner against any third party liability. This indemnity is the statutory liability of the insurance company in case of contracts of such insurance. The purpose of the indemnity is to pay compensation to a third party, i.e., a party who is an outsider--other than the two parties to the contract of insurance--the insurance company and the insured or any other person capable of being insured under the contract of insurance. Since the 'others'--the world at large, viz., the pedestrians, passers-by, etc., who can never be one of the contracting parties, but who may be involved in an accident, the insurance company owes a statutory liability to indemnify the owner/driver due to whose act some other innocent party has suffered death or injury. Such a third party, therefore, can never be the person who could have been one of the contracting parties or who could have been covered under the contract of insurance/policy, by way of payment of additional premium.

11. It is contended on behalf of the respondent No. 1 that the driver of the motor cycle who is not the insured would be the third party. It will have to be seen whether the term 'third party' or 'any person' would mean and include the driver of the motor cycle at the relevant time, i.e., the deceased. For the liability to third parties section II of the contract of insurance covers occupants carried in the vehicle. Under the aforesaid section 'any person' is shown to be the owner of the goods or his representative carried in the vehicle. The indemnity of the insurance company necessarily implies damage caused by the driver which can be indemnified. Hence, unless there is primary liability of the driver, the liability of the insurance company as the indemnifier would not arise. Consequently, under that section and as per the aforesaid clauses of the contract of insurance, the driver who owes certain liabilities to third parties by a tortious act can be indemnified. Consequently, he himself cannot be compensated as a victim; he would be only indemnified. Similarly, the driver would not also be an 'occupant carried in an insured vehicle'; that occupant would necessarily be someone other than the driver. In this case that other person would be only the pillion rider. The pillion rider is specifically covered under the contract. A premium of Rs. 35 is paid for personal accident cover for pillion passengers. The pillion rider has been compensated.

30. In the case of Minu B. Mehta v. Balkrishna Ramchandra Nayan 1977 ACJ 118 (SC), considering Section 95 (1)(b)(i) of the M.V. Act, 1939, which is analogous to Section 147(1) of the M.V. Act, 1988, it has been observed that the policy of insurance must be a policy which insures the person against any liability which may be incurred by him in respect of the death of or bodily injury to any person or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place. The liability for death or bodily injury must be covered by the insurance. In that case only upon proof of negligence, can an owner be held liable vicariously for the acts of his servant and only if the insurance cover extends to such liability arising out of the use of the vehicle by the person driving the vehicle could the insurance company be made liable. In that case, the deceased was observed to be in the position of the owner himself, in the sense that he was driving the vehicle belonging to his brother who was the owner of the vehicle. The insurance company covered third party risk. It was held that the driver of the vehicle would not constitute a third party for the purpose of Section 95 of the Act. Drawing from the case of Cooper v. Motor Insurance Bureau 1985 QB 575 (AC), it was held that 'A policy covering him' in respect of third party risks does not include the actual driver of the vehicle at the time of the use of the vehicle which give rise to the damage under Section 145 of the Road Traffic Act, 1972. Hence, the driver of the vehicle was held excluded from the expression 'third party' in Section 147(1)(b)(i) of the M.V. Act, 1988.

38. In the case of Oriental Insurance Co. Ltd. v. Meena Variyal , the claim was made under Section 166 on behalf of the deceased employee driver of the owner of the car upon the negligence of the driver of the car. In that case there was no special contract covering the deceased driver who was driving along with his companion. It was observed that though the M.V. Act is a beneficial legislation and summary procedure alone may be followed by a Tribunal in dealing with a claim, the contract of insurance is a contract of indemnity. Consequently, when a car belonging to an owner and driven by the driver employed by the insured meets with an accident, the primary liability is that of the driver. Hence, the owner becomes vicariously liable to compensate the victim. That vicarious liability of the owner is indemnified by the insurance company. Under Section 166 of the M.V. Act the third party is entitled to show the negligence of the driver and consequently the owner's vicarious liability and claim indemnity from the insurance company. Upon considering the necessity for insurance against third party risk under Section 146 of the M.V. Act, as well as the ambit of Section 147 of the M.V. Act, it has been held in para 11 of the judgment that compulsory cover required under Section 146 is only for liabilities relating to the person and property of third parties. Consequently, it has been held that the insurance company cannot be held liable to indemnify the owner for the death of one of his employees who was the driver of the vehicle when the liability does not arise under the Workmen's Compensation Act. Consequently, it was held that except for third parties, the third party cover would not extend to any person, and the insurance company cannot be made automatically liable to cover the driver of a vehicle.