The Insurer: Duties, Defences and Pay and Recover

In one line

The insurer must offer settlement within thirty days, must satisfy the award even if it could have avoided the policy, may resist only on a closed list of grounds, and if it proves one of them it still pays the victim and recovers from the insured.

The numbers moved. Until 31 March 2022 the insurer's duty to satisfy awards, and the list of defences, were section 149, and every judgment before that date says so. Since 1 April 2022 they are section 150, and section 149 is the new provision on settlement. Section 170 was amended to follow the change. When you read Swaran Singh speaking of section 149(2), read section 150(2).

Section 149: settlement, in thirty days

(1) On receiving information of the accident, from the claimant, through the accident information report under section 159, or otherwise, the insurance company shall designate an officer to settle the claims relating to that accident.

(2) The designated officer may make an offer to the claimant for settlement before the Claims Tribunal, giving such details, within thirty days, and following such procedure as the Central Government may prescribe.

(3) If the claimant

• accepts the offer, the Claims Tribunal records the settlement, the claim is deemed settled by consent, and the insurance company pays within a maximum of thirty days from the date of receipt of the record of settlement;
• rejects it, the Claims Tribunal fixes a date of hearing to adjudicate the claim on merits.

Section 149 is the hinge of the 2022 reform. Read it with the second proviso to section 166(1), by which a claimant who accepts compensation under section 164 through this procedure has his claims petition lapse, and with section 153(2), by which the Tribunal must satisfy itself that a settlement is bona fide, was not made under undue influence, and follows the section 164 schedule.

Section 150: the duty to satisfy awards

Sub-section (1). Where a certificate of insurance has been issued under section 147(3) and a judgment or award is obtained against a person insured by the policy, in respect of a liability required to be covered under section 147(1)(b) and covered by the terms of the policy, or under section 164, then notwithstanding that the insurer may be entitled to avoid or cancel, or has avoided or cancelled, the policy, the insurer shall pay to the person entitled to the benefit of the award any sum not exceeding the sum assured, as if that person were the decree holder, together with costs and interest.

"Notwithstanding that the insurer may be entitled to avoid or cancel the policy" is the heart of compulsory insurance. As between insurer and insured the policy may be worthless; as against the victim it still pays.