What the Motor Policy Must Cover: Section 147 and Limits of Liability

Section 146 compels a policy; section 147 writes its contents. The statutory policy must issue from an authorised insurer and must insure against liability for the death of or bodily injury to a third party, including passengers the section specifies, and damage to third party property. Around that compulsory core the market sells the package policy, and the difference between the two layers decides which doctrines govern a claim.

1. The statutory requirements

• The issuer: a policy under the Chapter must be issued by an authorised insurer.
• The risks: liability for death or bodily injury of any person, including the owner of goods or his authorised representative carried in the vehicle and passengers of a transport vehicle (the text itself excepting gratuitous passengers of a goods vehicle), and damage to the property of a third party, caused by or arising out of the use of the vehicle in a public place.
• Employees: liability to the driver and specified employees engages the cover to the extent of workmen's compensation law, the interface the section preserves.
• Limits of liability: for death and bodily injury the measure has long been the amount of liability incurred, unlimited in effect; the substituted section now has the Central Government prescribe the base premium and the insurer's liability with the IRDAI, the 2022 rules continuing to price the cover as unlimited. Third party property damage carried a modest statutory cap of 6,000 rupees in the earlier text, and realistic property cover is bought contractually as the market standard.
• Form and proof: the policy is of no effect for the Chapter unless a certificate of insurance in the prescribed form issues, the document the roadside and the tribunal both read.

Figure 1: Section 147's fixed points

2. The layered policy in practice

Figure 2: From statutory core to full package

• The Act only policy carries the compulsory third party cover and nothing else, the legal minimum for using the vehicle.
• Personal accident cover for the owner driver is mandated through the regulator's framework at a substantial assured sum, patching the oldest gap, the owner driver who is no one's third party.
• The package policy adds own damage, theft and fire, with endorsements for paid drivers, employees and accessories; this layer is pure contract.
• Long term third party cover for new vehicles, multi year at first sale, entered practice under the Supreme Court's road safety directions, attacking the lapse problem at the point of purchase.

3. Why the layers matter in claims

Figure 3: Two regimes in one document

• Doctrine follows the layer: the statutory cover attracts the victim protective rules, defences confined by statute, pay and recover, wilful breach requirements; the own damage layer is governed by the contract, where non-disclosure, declared use and depreciation operate with ordinary force.
• The same breach can cut differently: an unlicensed driver may not defeat the third party's award yet may defeat the owner's own damage claim, the classic examination contrast.
• Premium and section 64VB: non receipt of the premium is a statutory defence, the cheque bounce cases turning on whether cover ever attached, with the third party protected where cancellation came after the accident.
• Reading a claim, the first two questions are therefore: which layer is engaged, and whose claim is it, the third party's or the insured's.

4. Quick Revision

1. Identify the layer before the doctrine.
2. Read the certificate with the policy.
3. Keep employee claims on the compensation interface.
4. Treat property limits as topped up by contract.
5. Separate the third party's rights from the insured's.

5. Frequently Asked Questions

Is the owner of the vehicle covered if he is injured in his own vehicle's accident?

Not by the third party cover, which is the trap the mandated personal accident cover now closes. The statutory policy insures the owner's liability to others; the owner driving his own vehicle is not a third party to himself, so his own death or injury raises no liability for the policy to meet, a line the Supreme Court has enforced in the cases of owners driving or travelling in their own vehicles. The regulator's compulsory personal accident cover for the owner driver, at a substantial assured sum, answers exactly this gap as first party accident insurance, and families of owner drivers claim on it rather than on the liability cover. Passengers who are not the owner remain within the third party net, and the gratuitous passenger questions belong to their own line of authority.

What is the limit of the insurer's liability for a death claim?

In practical terms, there is none. The scheme's historic design measures the cover for death and bodily injury by the amount of liability incurred, so whatever just compensation the tribunal awards, the statutory policy answers it in full; the old schedules of limited cover belong to a repealed past, and policies sold as unlimited for death and injury state the law's effect. Property of third parties is the exception, carrying a modest base cover, 6,000 rupees under the earlier text, that insurers routinely raise by contract to realistic figures. For exams, frame it as the pairing: unlimited in effect for the person, modest and topped up by contract for property, with the certificate and policy read together to find any contractual enhancements.

Does a policy taken by fraud or on a bounced cheque protect the victim?

Usually yes, with the insurer's remedy pushed to recovery. Non receipt of premium and material non disclosure are statutory defences, but the courts have confined their effect against third parties: where the insurer had issued the policy and cancellation for the dishonoured cheque came only after the accident, the third party's claim has been protected, the insurer paying and recovering from the insured; fraud defences similarly operate principally in the recovery relationship rather than against the victim. The logic is the chapter's constant: the compulsory cover exists for the public, and failures in the owner insurer relationship are priced between them. The insured, by contrast, gets no indulgence: his own damage claim on a void or unpaid policy fails on ordinary contract principles.

6. Related Topics and Provisions

• Compulsory insurance: section 146
• Insurer's statutory defences: section 150
• Gratuitous passengers and pillion riders
• Pay and recover: the Swaran Singh doctrine
• Transfer of vehicles and insurance: section 157
• Just compensation and the multiplier method