Deciphering the Ambiguity: The Insurer's Liability in Motor Accident Claims under Section 163A.


01 August 2025 Motor Accident >> Family Law  

The Motor Vehicles Act, 1988, is a cornerstone of legal protection for victims of road accidents, yet certain provisions continue to generate complex legal debates. A recent case, brought to light by the unfortunate death of a couple in a motor vehicle accident, has highlighted a significant point of contention: the scope of an insurer's liability under Section 163A, particularly when the deceased is the owner of the vehicle. The High Court’s initial dismissal of the claim petitions on the basis that a dead person cannot be a defendant has been deemed untenable, but the subsequent legal journey of this case raises fundamental questions about who can be a claimant under the "no-fault liability" principle.

The case involves a minor petitioner, whose parents perished in a motor vehicle accident. The petitioner’s father was the owner of the vehicle. The Motor Accident Claims Tribunal (MACT) had initially awarded compensation, but the High Court set this aside. The central argument put forth by the Insurance Company is that the petitioner, as the sole heir of the vehicle's owner, cannot simultaneously be the party responsible for the liability and the recipient of the compensation. The company's contention is that the liability to compensate for the owner's death falls on his estate, which the claimant inherits, thus extinguishing any further claim for compensation.

However, a crucial point of law is Section 155 of the Act, which stipulates that the death of the insured after an accident does not bar a cause of action against the insurer. This means a third-party claim for compensation would survive, as the insurer is obligated to indemnify the insured's estate. Therefore, the High Court’s initial reasoning for dismissing the claim was flawed.

The core of the legal challenge lies in a series of judicial precedents that have interpreted the scope of Section 163A. While Section 163A is a special provision for "no-fault liability," meant to expedite compensation without the need to prove negligence, previous rulings by two-judge benches have consistently limited its application to third-party risks.

Several key cases underscore this interpretation:

In Dhanraj v. New India Assurance Co. Ltd., the Supreme Court held that a policy under Section 147 of the Act does not require an insurer to cover the death or injury of the vehicle's owner, as the policy only indemnifies against liabilities to a third person.
Oriental Insurance Co. Ltd. v. Jhuma Saha echoed this sentiment, disallowing a claim under Section 166 for an owner-driver who was injured in an accident.
Oriental Insurance Co. Ltd. v. Rajni Devi, a case dealing with Section 163A, similarly held that an owner cannot be both the claimant and the recipient of compensation, relying on the reasoning from the aforementioned cases.

The Supreme Court has observed significant variance in these past decisions. However, a unifying principle seems to be the conclusion that statutory liability does not apply to the owner/insured, as coverage is confined to third-party risks.

This stance, however, appears to be at odds with the language and intent of Section 163A. The provision begins with a non-obstante clause, a powerful legal tool that allows it to supersede other provisions of the Motor Vehicles Act, other laws, and even instruments like insurance policies. This suggests that the liability under Section 163A should not be limited by the conditions of a conventional insurance policy or the confines of third-party risk as defined in other sections of the Act.

The argument is that Section 163A, being a beneficial social security scheme designed for a comprehensive "no-fault" liability, should apply to all victims of a motor vehicle accident, including the owner or driver, without the prerequisite of proving negligence. While other provisions like Section 166 require proof of negligence, Section 163A offers a structured formula for compensation, reflecting a legislative intent to provide a swift remedy in an era of increasing road accidents.

The conflict between the clear intent of the non-obstante clause in Section 163A and the restrictive interpretations provided by co-ordinate benches of the court has created a legal conundrum. The court, in this case, has expressed its inability to agree with the prevailing dictum that Section 163A is limited to third-party risks. It recognizes the need for a definitive and authoritative pronouncement on this issue.

Consequently, the court has directed the Registry to place the matter before the Chief Justice of India, seeking a reference to a larger bench. This is a crucial step toward resolving the long-standing ambiguity and ensuring that the compensatory provisions of the Motor Vehicles Act, particularly those designed for "no-fault" liability, are applied in a manner that is consistent with their legislative purpose and provides equitable justice to all victims of road accidents. The outcome of this referral will likely have far-reaching implications, redefining the legal framework for motor accident claims and the responsibilities of insurance companies in India.


Motor Vehicles Act, 1988