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How ‘Pay and Recover’ Policy Helps you Get the Compensation if you Get Hit by a Biker?

Wondering what is ‘Pay and Recover’ Policy?

Well, the Doctrine of “pay and recover” implies the liability of the insurer if there is any breach in the condition of the policy due to certain disqualifications of the driver or an invalid driving license of the driver.

Moreover, in the case of third-party risks, the insurance provider has to guarantee the amount of compensation to the third-party and the insurance provider may recover the same amount from the policyholder.

Now, Let’s See How it Worked in the Past:

Last year, the two-Judge Bench explained the ‘Doctrine of Pay and Recover’ in the Motor Vehicle Compensation cases. The Supreme Court took this Doctrine into consideration in the case of Swaran Singh and others Vs. National Insurance Company Ltd.

Referring to this case, the Supreme Court perceived that the obligation is always upon the insurer to provide evidence that the driver had an invalid driving license or no driving license and that there was a violation of the policy conditions.

The SC also witnessed that in such cases, the Apex Court is required to take into account whether the owner took reasonable care to figure out whether the driving license provided by the driver doesn’t fulfil the necessary requirements of the law.

Recently, one such case from 2013 was highlighted in Mumbai with similar circumstances. However, the Mumbai case made history as it is one of those cases where the highest amount of compensation was awarded in the recent past.

Can you make a random guess what the amount could be?

Well, you’ll be shocked to know the compensation amount was Rs. 1 Crore.

Well, Let’s Explore the Demon by Getting into Its Detail:

The insurance provider was ordered to pay the total compensation of about Rs. 1 Crore inclusive of interest to the family of the BMC ambulance driver – Ramachandra Zore. The ambulance driver died after a speeding 18-year-old bike rider, without a DL, bumped into him while he was crossing the road in the year 2013.

The Apex Court found out that Khubal Prajapati, the owner of the bike, allowed Mohammad Ashraf Qureshi to ride the bike despite knowing the fact that he did not hold a driving license. The SC held this was a violation of the conditions of the two-wheeler insurance policy, and therefore, it was vindicating the insurance provider from the liability.

Nevertheless, the application of ‘Doctrine of Pay and Recover’, directed Oriental Insurance Company Ltd to give money to the victims' wife and his two minor kids.

The Tribunal said, ‘the insurance provider has the right to recover the amount of compensation from the opposite party and they don’t have file a separate suit. They just have to initiate the proceedings before the executing court if the conflict is between the insurance provider and the opposite party.’

An FIR was filed right after Zore’s death on April 5 against the bike rider, and he was charged for causing death by negligence.

The Apex Court referred to documents such as the panchnama, FIR, post-mortem report, and the death certificate. After going through these documents, the tribunal said these documents pointed out to the mishap occurring due to Qureshi’s fault.

There were several factors that were taken into consideration by the Tribunal while calculating the amount of compensation like the salary of the victim at the time of his demise, victim’s age, future income prospects, funeral expenses, and loss of consortium (in the case of the spouse).

Let’s See what Calculations were Made by the Tribunal:

As per the court, the amount of compensation was Rs. 75.60 Lakh and also levied an interest rate of 7.5 per cent per annum from October 7, 2013, i.e. the date of filing the complaint.

The Apex Court said that the wife of the victim must be given Rs. 37.60 Lakh together with the interest and the kids must be given Rs. 18.75 Lakh each with interest. Moreover, the SC also directed that the kids’ compensation must be invested in FDs in a nationalized bank until they become a major.

So, this was it. Now, being a victim here can be beneficial. But, what if you’re the biker?

Here, you must be well-aware about the third-party policy.

But, Wait!

Third-party insurance will only be helpful if you do not commit mistakes like giving your bike to someone without a driving license.

Also, now that traffic rules have changed in India as per The New Motor Vehicles (Amendment) Act, 2019. You cannot afford to make mistakes as Khubal Prajapati did. This will not only lead you to pay huge compensation under the Doctrine of Pay and Recover but also levy heavy ‘Challan’ in accordance with the new traffic rules policy.

Key Takeaway:

Go through the new traffic rules thoroughly and make sure you have third-party insurance and you’re aware of all the terms and conditions of your policy.

Happy Driving!

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