International practices of Motor insurance and world scenario of settling motor third party liability

There are different practices of dealing with motor third party liability across the world.  Some practices are defined here as follow:

England: Motor insurance in India has followed the practice of Motor insurance in England.  The difference in practice in England presently is with regard to the  formation of a Motor Insurance Bureau (MIB) comprising most insurers offering motor insurance, though Lloyds underwriters are not members they usually follow similar practices with regard to TP Liability.

Liability for injuries to third party is unlimited.  Property damage is Str.1,000,000/-. However, insurers provide wider property damage cover.

The MIB takes on responsibility to compensate Third Parties for motor accidents involving vehicles that are uninsured, or untraced.  This is possible as they maintain a fund contributed by all members.  This is similar to our system of Solatium Fund for Hit & Run cases.  The MIB goes further by paying for compensation where the vehicle is uninsured i.e. identified vehicle with no insurance.

Germany: Motor Third Party insurance in Germany is based on the German Road Traffic Acts.  The liability is based on tort i.e. negligence of the driver of the vehicle is required to be proved to claim compensation.  Insurance is compulsory.

The law specifies limits for death or injury and property damage.  It allows for payment of lump sum or annuity or step by step throughout the life of the claimant.  It is the practice to pay annuity in the case of minors and severely injured persons who may be unable to manage their finances e.g. due to brain injury.  The limits of liability presently prevalent are as follows:

Death of injury   Maximum lump sum :   Euro 6,00,000

Maximum annuity     :   Euro 30,000 pa

Death or injury to several people from same occurrence

Maximum Lum sum  :   Euro 3,000,000

Maximum annuity     :   Euro 180,000 pa

Property damage      :   Euro 1,000,000

FRANCE: Motor Third Party liability in France is a legal obligation based on strict liability.  Insurance is compulsory.  Liability for injuries is unlimited whereas property damage is limited.  Contributory negligence is applied only in the case of driver claims.  Thus third parties get claims irrespective of contributory negligence.  Unidentified and uninsured vehicles victims are compensated from the Guarantee Fund (Fonds de Garntie).

Compensation may be in lump sum or annuity for severely injured persons or minors.  Compensation settlement offers must be made within the stipulated time frame otherwise the interest rate payable on compensation amounts is doubled.

AUSTRALIA: Third party personal injury is compulsory in Australia but the practice of insurance differs across the state.  The fund and payout for such liability is maintained by the states of South Australia and Victoria.

The cost is included in the licence registration fees or vehicle registration fees.  New South Wales and Queensland require insurance through the state specified insurers.  The Queensland government controls the price for the cover.  Property damage is not compulsory and may be insured with the OD insurance.

SOUTH AFRICA: In South Africa personal injury liability is paid by the state.  A percentage on the price of motor fuel is allocated for this fund.

USA: Motor Third party differs across the states of the USA.  It may also differ based on the category of vehicle e.g. personal, commercial etc.  The term is called financial responsibility liability.  Each state has different minimum limits required but these are not binding and claimants can sue for tort liability which can be substantial.

The Department of Motor Vehicle (DMV) ensures minimum liability coverage is in place.  This coverage maybe in the form of  (a) Cash deposit with  the authority (b) Surety bond from licenced surety providers (c) Self insurance (d) Insurance through licenced insurers within the state. Proof of such coverage being in place has to be provided to the DMV. Failure to do so could result in cancellation of the registration or impounding of vehicle or fines or imprisonment.

The compensation limits would be in the following manner:

  1. Injury to one person.
  2. Injury to more than one person from one occurrence
  3. Property damage. This would be written as 25/50/25 which translated is US$ 25000/50000/25000 for each of the above heads.  These limits apply in the state of Texas. In Alaska it is 50.100/25 or California 15/30/5. New York has different limits for injury and death for one or more than one thus 25/50/50/100/10. The practice is for owners to take additional covers to the extent they can afford to cover tort liability.

Extracts from “Guide for Motor Insurance (IC-72)” by Dr. Rakesh Agarwal. Copyright of Sashi Publications, kolkata and

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