Intimation about an accident resulting into third party claim is received through various sources :-

a) Insured
i) directly
ii) by mention in passing whilst lodging own damage claim
b) claimant
c) MACT/Courts by notice
d) Through accident report from police in Form – 54 prescribed under Central Motor Vehicles Rules 1989.


Investigation about the accident to collect the relevant data to quantify reasonable and just compensation as per the formats enclosed in respect of all Third Party Claims is mandatory. The Companies should ensure that this investigation helps the Insurance Company in finalising out of court settlement at the earliest.


On receipt of notice from the MACT a competent advocate from the panel may be appointed if necessary. The following relevant documents and information should be given to him/ her immediately to enable him/ her to draft written statement (w/s) on behalf of the Company and ensure that proper defence is taken where necessary and no frivolous statements are made.


Duly certified true copy of the complete policy with the relevant clauses and endorsements as actually attached with the original issued covering the vehicle at the material time of accident.


In case, it has been observed that driver was not duly licensed the necessary intimation should be given to the advocate. Though under section 149(2) of the M.V. act, 1988. Insurance company has no liability if the driver is not duly licensed, the onus to prove that the driver was not holding a license rests on Insurance Company and this obligation is required to be discharged fully to the satisfaction of the court.


If a Breach of a specific policy condition has been observed it should be brought to the notice of the Advocate to enable proper defence if possible.

7. a. Written Statement on behalf of Insurance Company incorporating all defenses available as enumerated under Section 149 of M. V. Act, 1988 should be promptly filed.

7. b. Wherever necessary when there is a collusion between the insured and the claimants or when the insured fails to defend the claim, the Company’s Advocate must be instructed to obtain the MACT’s permission under Section 170 of the Motor Vehicle Act to defend the claim on merits.


If liability under affected policy is established after taking into consideration the foregoing defence. Company should take immediate steps to deposit No Fault Liability amount as per Section 140 of the MV Act 1988.


Companies must initiate action to settle such claims either through
a) Jald Rahat Yojna
b) Lok Adalats
c) Direct negotiation with the claimant through DICC & RICC

Unless conclusive proofs of defences are available which would satisfy the Courts there is no point in prolonging the case. Once an award is passed it should be satisfied immediately on its pronouncement unless of course decision is taken by the competent authority to file an appeal against judgement and aware. Before taking a decision it is essential to examine the grounds on which such appeal can be filed to ensure that a substantial point of law is involved.


Section 152 of M.V. Act. 1988, authorizes Insurance Company to settle Motor Third Party non-fatal bodily injury claims where claimant is an adult without claimants taking recourse to MACTs. Industry has already launched the Scheme since 1991.


Maximum participation and disposal of large number of claims in Lok adalat sessions should be ensured.

11.1 Companies should place the claims normally falling within the following parameters before Lok Adalat
a) Where occurrence of the accident is within the policy period
b) Where estimated liability is not expected to be exceeding Rs. 5,00,000/- per application for compensation.
c) Where no substantial point of law is involved.
d) Where no defence are available under Section 149 of the Motor Vehicles Act. 1988, such as driver not holding effective driving license and breach of policy condition relating to limitations as to use.
e) Where Police Record shows that the driver was holding effective driving license.
f) Where despite concerted efforts on the part of the insurance companies, they are not in a position to prove conclusively to the satisfaction of the Court that the vehicle was driven by a person not duly licensed.
g) Since there is a provision of automatic transfer of insurance in pursuance of Section 157 of Motor Vehicles Act, 1988, the companies cannot take defence of non-transfer of insurance of the vehicle on their books. Hence such claims may be placed before Lok Adalat for disposal.
h) Where more than one vehicle insured with different insurance companies is involved in an accident resulting into a third party claim, companies should agree for settlement on 50-50 basis to apportion the liability between them.
i) As the present Motor Tariff covers liability in respect of owner of goods when traveling in the goods carrying vehicle with his own goods without payment of additional premium, the companies may place the claims for compensation in respect of such owners before Lok Adalat.

11.2 Companies should not accept conditional settlement such as subject to verification of certain documents, production of documents, etc.

11.3 On having reached the agreement for compromise settlement concerned MACT issues a Consent Order specifying inter alia the period during which the agreed amount should be deposited. On receipt of such Consent Order, companies must deposit the amount as agreed to with the MACT, within 30 days from the date of award as per statute.

11.4 In the event of Lok Adalat for pending appeals before High Courts is organized, such claims where quantum of compensation is in dispute may be considered.

11.5 Appeals, which are filed to decide a point of law, should not be considered for placing before Lok Adalat.

11.6 Applications for compensation filed by the paid employees may also be placed before Lok Adalat, whether wider legal liability is covered or not. In case wider legal liability is not covered under the Motor Policy, compromise settlement of such claims before Lok adalat may be accepted provided the quantum of compensation is on par with the compensation payable under the W.C. Act, and is acceptable to the claimant.

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