Question: How has liability changed over the years in the case of motor vehicle legislation?

How has
insurance affected issues of liability? Has the 2019 amendment effectively settled issues related to
liability or is there further room for improvement?

Answered by:
Abhikesh
Roll no 1990

The question of liability in Indian motor vehicle legislation has evolved significantly over the years,
particularly with the introduction and amendments of the Motor Vehicles Act, 1988. Initially, liability
for motor vehicle accidents was predominantly based on fault, meaning that the injured party had to
prove negligence or wrongful action by the injurer to claim compensation. However, substantial
changes were introduced through the 1988 and 1994 amendments to the Act.

The 1988 amendment shifted from fault-based liability to strict liability in some instances. Under
Section 140 of the amended Act, the motor vehicle owner became strictly liable to compensate
victims in the case of death or permanent disablement, regardless of whether any wrongful act or
negligence caused the accident. This meant that compensation was now available without the need to
prove fault, simplifying the process for victims. The 1994 amendment further expanded this with
Section 163A, which eliminated the need to prove fault altogether in cases of death or permanent
disablement. This no-fault liability was revolutionary because it ensured compensation to victims
under a structured formula, significantly simplifying the claims process and allowing quicker redress
for those affected. Under Section 163A, the burden of proving negligence or wrongful action was
wholly removed. The victim or their legal heirs could claim compensation without engaging in a
lengthy process of establishing fault, which often prolonged cases under previous fault-based regimes.

Indian courts have played an active role in refining and expanding liability, particularly concerning
the liability of insurance companies. Courts have liberally interpreted various legal doctrines to
increase protection for victims, especially in ambiguous situations. For instance, courts have expanded
the interpretation of "third-party risk," covering not just individuals explicitly named but others who
may be impacted, including gratuitous passengers (passengers who are not paying for transport).
While there was initial ambiguity on whether insurers should cover such passengers, landmark
judgments have clarified that insurance companies can be liable for injuries to gratuitous passengers
in certain circumstances. In cases where drivers lack valid or authentic licenses, the courts have ruled
in favor of victims, determining that insurance companies are liable unless it can be proven that the
license breach was directly linked to the cause of the accident. This has increased insurers' liability,
even in minor or technical breaches by the insured.

Indian courts have adopted a victim-centric approach in cases of motor vehicle accidents. This is seen
in the Kamla case (2001), where the Supreme Court held that while an insurance company may
recover compensation from the insured if there was a policy violation, it cannot avoid paying
compensation to third-party victims. This judgment reinforced the principle that the welfare of the
victims comes first, and technicalities such as invalid licenses or minor policy violations should not
deny compensation. In the Swaran Singh case (2004), the Supreme Court similarly ruled that the
driver's breach of minor licensing conditions would not absolve insurance companies from their
liability towards third-party victims. This ruling emphasized that only "material" or "fundamental"
breaches that directly contribute to the accident could be used as defenses by insurance companies.

The 1994 amendment further clarified the roles and responsibilities of insurance companies by
strengthening their obligations. Insurance companies were now required to cover accidents more
broadly, even in complex cases such as those involving transfer of vehicle ownership without
informing the insurer within the stipulated time. For example, in the United India Insurance Co.
Ltd. v. Hargian Devi case, the court held that even if the transferee failed to inform the insurance
company about the ownership transfer, the insurance policy would still be valid for third-party
liability. The responsibility of verifying driver qualifications has also been a contentious issue. The
courts have ruled that vehicle owners if they perform due diligence in hiring drivers by checking their
licenses, cannot be held liable if it later turns out that the license was fake. This limits owners' liability
and shifts the burden of compensation onto insurance companies, ensuring that victims are
compensated regardless of the driver’s licensing status.

Despite the introduction of no-fault liability, fault-based liability still exists and is used in conjunction
with the no-fault regime. In fault-based cases, victims can pursue compensation beyond the amounts
fixed under Sections 140 and 163A, but they must prove negligence or wrongful conduct on the part
of the injurer. This dual system allows for flexibility, offering victims a quicker, simpler path to
compensation while still enabling larger awards in more serious cases where fault can be clearly
established.

The Indian legal system has recognized that efficient and accessible compensation mechanisms for
motor vehicle accidents are crucial, given the increasing number of vehicles on the road and the rising
number of accidents. As a result, the law has adapted to ensure that victims are not left
uncompensated due to technicalities, and insurers bear a larger share of the responsibility.
Insurance has significantly impacted liability in motor vehicle accidents by shifting the financial
burden from individual drivers to insurance companies, while also altering the dynamics of fault and
compensation. In jurisdictions with compulsory motor vehicle insurance, such as third-party liability
insurance, victims of accidents are more likely to receive compensation, regardless of the driver's
financial status. This system ensures that injured parties are compensated without the need for lengthy
litigation, as insurance policies often cover medical expenses, property damage, and sometimes even
legal costs. However, the availability of insurance can also affect the legal landscape by incentivizing
claims and potentially leading to disputes over fault and settlement amounts. In no-fault insurance
systems, the emphasis on fault is reduced, with each party's insurer covering their own policyholder's
damages. This can simplify compensation but may limit an injured party's ability to sue for damages
beyond what insurance covers. Thus, while insurance offers financial protection and ease of
compensation, it also introduces complexities in determining liability and negotiating settlements in
motor vehicle accidents.

In recent years, the Motor Vehicles (Amendment) Act, 2019, brought further changes to strengthen
penalties for traffic violations, increase the amount of compensation for accident victims, and tighten
the rules surrounding third-party insurance. It introduced several provisions to enhance accountability,
improve safety standards, and modernize regulations. However, it is of belief that the amendment has
not fully settled the issue of liability, leaving room for further improvements.

One of the significant strengths of the amended MVA is the emphasis on deterrence through heavy
penalties. The substantial increase in fines for offenses like drunken driving, driving without a license,
over-speeding, and dangerous driving is intended to instill a "fear of the law." This, in theory, would
lead to better compliance with traffic rules and a subsequent reduction in road accidents. The
provision for recalling defective motor vehicles also introduces a much-needed level of accountability
for manufacturers, ensuring that unsafe vehicles are taken off the road. This measure helps protect
drivers, the environment, and other road users.

Another significant advancement in the amendment is the protection of good Samaritans. By

defining such individuals as persons of good faith and shielding them from civil or criminal liability,
the Act encourages people to assist accident victims without fear of legal repercussions. This
provision addresses a critical loophole in the previous law, which often discouraged bystanders from
helping due to concerns about being entangled in legal proceedings.

However, while the amendment has introduced measures that tighten enforcement and encourage road
safety, the question of liability still needs to be solved. The heavy penalties, though well-intentioned,
have led to public discontent, particularly regarding the perception that the fines are excessive and
punitive. For example, raising fines for drunken driving from Rs 2,000 to Rs 10,000 or imprisonment
for dangerous driving may not be feasible for all citizens, especially in a country with significant
income disparities. This highlights the need to balance enforcement with social realities. Hefty fines
could lead to resentment and a lack of cooperation from the public, potentially undermining the law’s
effectiveness.

Additionally, the Act’s centralized approach to implementing road safety regulations may not be
universally applicable across all states due to regional circumstances, infrastructure, and local
governance differences. States have the autonomy to adopt or modify the provisions based on local
needs, which is crucial for effective enforcement. The amendment has not fully addressed the
complexities of federalism, particularly in areas where road transport and law enforcement fall under
the jurisdiction of state governments. While the law's model nature allows for flexibility, its uneven
implementation across states suggests that more coordination and collaboration between the central
and state governments are needed.

In conclusion, the evolution of motor vehicle liability in Indian legislation marks a significant shift
towards enhanced victim protection and social welfare. Amendments to the Motor Vehicles Act of
1988 and subsequent judicial interpretations have reshaped accident compensation and road safety
measures. The transition from a fault-based system to one incorporating strict and no-fault liability
has simplified claims processes, ensuring quicker redressal for victims. Indian courts have played a
crucial role in expanding liability, particularly for insurance companies, consistently ruling in favor of
victims even in ambiguous situations. This victim-centric approach, exemplified by landmark
judgments, prioritizes victim welfare over technical policy violations. Compulsory third-party
insurance and broader insurance company obligations have strengthened this protective framework.
The system maintains flexibility by retaining fault-based liability alongside the no-fault regime for
cases warranting more enormous compensations. The Motor Vehicles (Amendment) Act of 2019
introduced stricter penalties and increased compensation amounts for intentions of betterment but
these changes present implementation challenges and have led to public discontent over hefty fines.
The centralized regulation approach has also highlighted complexities in India's federal structure.