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SC: 3rd party insurance is transferred along with effective control of Vehicle in Hire Agreement

2 min read
Car Crash

Deepali Kalia-

The Apex Court in the judgment reiterated that when a motor vehicle is hired from its registered owner by a transport corporation then the third-party insurance coverage along with the vehicle will also be deemed to have been transferred.

The present case involved an accident of a bus hired by Uttar Pradesh State Road Transport Corporation (Corporation) which resulted in the death of one person.

A claim petition, as a result, was raised before the Motor Accident Claim Tribunal, Bahraich, Uttar Pradesh by the deceased’s legal heirs.

In a written statement filed by the Corporation, it mentioned the contract between it and the bus owner and also the factum of insurance of the bus that lied with the Insurance Company.

The Insurance Company in its reply admitted to the existence of an insurance policy with regard to the bus during the relevant time period.

Consequently, the Tribunal directed the Insurance Company to pay Rs.1,82,000/- with interest at the rate of 6% per annum as compensation to the claimants.

However, the Insurance Company filed an appeal in Allahabad High Court against the liability imposed by the Tribunal stating that it wasn’t liable as at the time of the accident, the Corporation was operating the bus.

The Allahabad High Court held that the Insurance Company was not liable to pay the compensation following which the Corporation filed an appeal in the Supreme Court.

Supreme Court overturned the Allahabad High Court’s decision on the basis of the principle laid down in the 2011 precedent Uttar Pradesh State Road Corporation v. Kulsum & Ors.

A Division Bench of Justices S. Abdul Naseer and Krishna Murari stated, “If the Corporation had become the owner even for the specific period and the vehicle having been insured at the instance of the original owner, it will be deemed that the vehicle was transferred along with the Insurance Policy in existence to the Corporation and thus Insurance Company would not be able to escape its liability to pay the amount of compensation.”

The Apex Court held that the owner is the person who has effective control and command of the vehicle and that for the period of hire it must be deemed that along with the vehicle, the existing insurance policy is also transferred.

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