SC: Third Party Insurance Deemed To Be Transferred With Effective Control Over Vehicle In Hire Agreement

Factual Background

• The name of the case was Uttar Pradesh State Road Transport Corporation v. National Insurance Company.
• A bus was hired by the UP State Road Transport Corporation.
• The bus had a fatal accident which resulted in the death of a person.
• The legal heirs of the deceased claimed for compensation.

Court’s Observation

• The Motor Accident Claim Tribunal decided that the insurance company should pay the compensation with interest to the claimants after the Corporation filed the written statement and contract along with the insurance and the Insurance Company accepted the existence of such insurance.
• The Tribunal approached the High Court against the decision of the Tribunal claiming that the Corporation was operating the bus and it is liable to pay the compensation.
• The High Court accepted the contention and held that there was no liability on the Company to pay the compensation.
• The Corporation approached the Supreme Court for relief.

Court’s Orders

• The Supreme Court stated that upon the motor vehicle being hired for use from registered owner by a transport corporation, the insurance coverage is also transferred along with the vehicle transfer.
• The person having control and command of a vehicle would be regarded as owner so the insurance is also deemed to have been transferred for that period of hire.
• When the Corporation became owner for a time and the insurance has been insured for the owner, then both the vehicle and insurance is transferred along with the ownership for that period.
• The insurance is only for third party benefit and not for property damage.
• The Insurance Company was directed to pay the compensation decided by the Tribunal.

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