Five Year Bumper To Bumper Insurance Mandatory For New Vehicles From September 1: Madras High Court

In a significant ruling, the Madras High Court has directed that whenever a new vehicle is sold after September 1, it is mandatory for coverage of bumper to bumper insurance every year, in addition to covering the driver, passengers and owner of the vehicle, for a period of five years.

Justice S Vaidyanathan passed the direction while setting aside the award by the Motor Accident Claims Tribunal (MACT) wherein a sum of Rs 14,65,800 was directed to be paid by the insurance company to the claimants who were relatives of the deceased, as compensation for his death in an accident.

"The owner of the vehicle must be cautious in safeguarding the interest of driver, passengers, third parties and himself/herself, so as to avoid unnecessary liability being foisted on the owner of the vehicle, as beyond five years, as on date there is no provision to extend the bumper to bumper policy, due to its non-availability", the Court observed.

Such a hefty compensation had been awarded by the MACT on the ground that the policy conditions in its entirety had not been produced by the insurance company although the policy taken was 'Act only' (otherwise known as 'third party') policy and that under the policy, the driver/owner of the vehicle would only be entitled to a sum of Rs 1,00,000.

Furthermore, the insurance company had submitted that the deceased was not the driver of the vehicle at the time of the accident. However, rejection such a contention, the MACT had held that since the entire policy conditions had not been produced, it was difficult to ascertain whether the insurance company was liable to pay the compensation.

The Court dismissed the order of the MACT and held that since no premium had been paid with regards to the driver and the other passengers who were travelling in the vehicle at the time of the accident, MACT had erred in granting such a compensation merely on the ground that the conditions of the concerned policy had not been produced.

"The Tribunal completely erred in granting compensation only on the ground that the conditions of the policy have not been produced. In fact, the Tribunal should have rejected the claim petition for non-filing of the details of the Policy by the Claimants, as it was claimants, who had approached the Tribunal, with unclean hands, by taking a different stand", the Court further opined.

However, the Court clarified that the instant order would not preclude the the claimants from seeking compensation from the owner of the car.

Enumerating upon the practice of car owners who are often oblivious to insurance policy conditions, the Court observed,

"It is saddening to point out that when a vehicle is sold, the purchaser / buyer is not clearly informed about the terms of policy and its importance. Similarly, at the time of buying the vehicle, the buyer is also not interested in thoroughly understanding the terms and conditions of the policy, as he/she is more concerned about the vehicle's performance and not about the policy. When a buyer is ready to pay a huge amount for purchase of a vehicle, it is really shocking as to why the buyer is not interested in spending a paltry sum to take a policy so as to safeguard himself/herself and others"

Thus, in order to ensure safety a vehicle's passengers, Justice Vaidyanathan made bumper to bumper coverage mandatory.

The Court also directed the Additional Chief Secretary, Transport Department, Chennai to circulate the order to all insurance companies so that the aforementioned directions are 'followed scrupulously in letter and spirit without any deviation'.

The matter has been listed for a report on compliance on September 30.

Case Title: The New India Assurance Co. Ltd. v. K. Parvathi

Click Here To Read/Download Order