Saturday, February 9, 2013

‘Pay and recover’ is the norm in case of third-party liability on insurer

It is an established principle of third-party insurance that the insurance company will have to honour the claim of the road accident victim even if the insured was remiss in not honouring the terms of the insurance contract.
Thereafter, it can proceed against the insured for violating the terms of the contract and seek reimbursement of what it had paid to the victim.
In National Insurance Company Ltd vs. Dhas and Others, the Madurai Bench of the Madras High Court reiterated the principle of ‘pay and recover’ while directing the appellant to pay up the Rs 2,12,000 ordered to be paid by the Motor Vehicles Tribunal to the family of a road accident victim.
The insured had licence for light motor vehicle but drove a two-wheeler for which he did not have a licence, and killed the victim involuntarily.
The court pointed out that the right of the victim and his family (third party) is statutory, whereas the rights of the parties — the insurer and insured — are contractual.
They are free to enforce their contractual rights but before that the insurer must honour the third parties’ statutory rights.
The third party’s agony should not be compounded by embroiling him in the contractual matters between the two.

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