To claim or not to claim

Motor Third-Party Liability (TP) insurance is a cover under which the insured does not get to make a claim, but is covered for any claims that others may make on him.

The claimant will be the victim of a vehicle accident who sustained injuries or damage to his vehicle or other property. In the case of death, his legal heirs can make the claim against the offending vehicle’s owner and, due to the transfer of such liability through the TP policy, the insurance company will step in to pay the claim as per the policy terms. If there is no TP cover, the owner of the vehicle is directly responsible for the liability.

We saw the procedures for making a TP claim in the previous instalment of Cover Note. It is essentially petitioning a special court called the Motor Accidents Claim Tribunal (MACT), set up under the Motor Vehicles Act and functioning all over India under the supervision of the respective High Courts. MACTs have a huge caseload leading to time-consuming legal proceedings.

In view of this, here are some things you should consider before making a TP claim and undertaking a long and difficult journey. Even in cases where claims are filed before the MACT, out of court negotiated settlements are encouraged which will be recorded by the court. Both time and penal interest are saved by this.

If your vehicle was damaged in the accident, remember that you may be entitled to claim for repairs from your insurer provided you have an Own Damage (OD) cover. This can be a standalone cover or part of a Comprehensive Motor Insurance policy which is a combination of a TP and an OD cover.

There is a provision that, in the case of a collision of vehicles, each vehicle’s insurer pays under the respective policy without any need to establish fault.

So, if your vehicle is damaged, claiming from your company is a simpler process. You can avoid long drawn-out legal procedures and get on with your life. In any case the TP policy has a cap of Rs 7.5 lakh as compensation for third party property damage. Claims above that you have to collect from the vehicle owner which may well lead to another round of complication.

If you are making an OD claim it will be for actual repair expenses, let us say Rs X. You will receive Rs Y factoring in depreciation and allowable costs for repairs and parts as applicable. If you go to your insurer’s network garage this process is simpler.

To this net compensation you have to make one more adjustment – you will lose your no-claim bonus (NCB) when you claim from your insurer.

Depending on the number of your claim-free years, your NCB could be up to 50 per cent of your OD renewal premium. You can start accumulating this again with every future claim free year. Suppose you have 3 years’ worth NCB, make a calculation of its quantum through 3 future years until it is reinstated. Reduce this from Rs Y and you will arrive at the actual compensation you get.

Damage to your property other than your vehicle that was part of the accident is another matter as your OD policy will not cover it. In this case your recourse is to file a TP claim with the MACT as outlined earlier.

If it’s an injury pretty much the same reasoning applies for deciding where to make a claim. If your own hospitalisation or personal accident policies cover your expenses, then consider that route first. The purpose of the exercise is to see if it’s really worth the trouble to pursue a liability case against the offending vehicle’s owner. If disablement bars you from working and earning then filing a TP case becomes more justified in terms of efforts vs outcomes.

In the case of injury, especially leading to disablement, and in the case of death, there are no caps on compensation awarded by MACT. Guidelines under the Motor Vehicles Act are broadly followed and they depend on medical expenses incurred, age of victim, earnings, number of dependents and, in the case of injury, the extent of disablement.

In the case of death and grievous injury there is a stronger reason to seek compensation through the TP route over and above claims through the victim’s life or personal accident policies.

A word of caution though. The world of TP claims harbours slick operators who promise the moon so they can take a generous slice of it. In the bargain they make families who don’t know better hold out for years for a ‘large’ claim when the insurance companies are ready to negotiate a fair settlement and pay out promptly.

There are cases where the offending vehicle’s TP policy will not be liable to pay a compensation. If the driver was drunk while the accident happened or if he was driving without a valid driving licence or learner’s licence with a valid licence-holder on the front passenger seat.

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(The writer is a business journalist specialising in insurance & corporate history)