Motor Insurance: Provisions under Motor Vehicles Act regarding Transfer of Certificate of Insurance in India

The 1988 Act requires issue of a Certificate of Insurance by the insurers as proof of Third party insurance to satisfy the requirements of Chapter XI of the Act.

The Certificate of Insurance Form 51 must be in the form prescribed under the Motor Vehicles Rules framed under the Act. Certificate is to be issued by the “Authorized Insurer and Authorized Government insurance Fund” who are authorized to do general insurance business in India. Certificate of insurance includes Cover Note and Policy of Insurance includes ‘Certificate of Insurance.”

 

Section 157 of the M.V. Act 1988 provides that where  a person in whose favor a Certificate of Insurance has been  issued, transfers to another person the ownership of the motor  vehicle in respect of which the insurance was taken, then the  Certificate of  Insurance and the  relative  Policy shall  be  automatically deemed to be transferred in favor of the new  owner from the date of transfer of ownership of the vehicle.  Such deemed transfer include transfer of rights and liabilities of the said Certificate of Insurance and Policy of Insurance.

The transferee should apply within 14 days from the date of transfer on the prescribed form to the insurer for making the necessary changes in the Certificate of Insurance and in the Policy, and the insurer is obliged to make such changes in the said documents to give effect to the transfer of insurance.

Under Sec. 157 if the Act, on transfer of ownership of the Vehicle the Certificate of Insurance is automatically transferred in favour of new owner from the date of transfer of ownership of the vehicle.

The Motor Vehicles Amendment Act, 1994 added an explanation in Sec. 157 (1) stating that such deemed transfer shall include transfer of rights and liabilities of the said Certificate of Insurance and Policy of Insurance. However Supreme Court of India has held in 1996 that the automatic transfer is only for Third Party risks and not the full policy where policy covers insurance of Own damage i.e. damage to the vehicle cover.

For transfer of insurance under Own damage section takes place only when the procedure of transfer of insurance under para 29 is completed with insurer. Certificate of Insurance is to be produced when demanded by traffic policy/Road Traffic Authority.

On sale of vehicle certificate of insurance gets transferred to the new owner automatically, however such transfer of insurance is only  for Third Party insurance and not for Motor OD insurance (SC. 1996).

The owner of a car who voluntarily and freely transferred possession of it against a cheque, he has no claim under motor policy, if cheuqe is turned out to be worthless.  It is loss of money and not the car (Eisinger Vs. General Accident UK 1955).

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