Buying a Secondhand Vehicle?

Must Get Insurance Transferred In Your Name

When you buy a secondhand car, the first thing you want to do is to get it legally in your name. So you ask the first owner to get the no-objection certificate from registration authorities so that you can register the vehicle in your name. Once all the registration formalities are complete, you go for the vehicle insurance policy transfer, as it cannot happen unless the registration process is complete. However, what if the vehicle meets with an accident in this transit period?

The vehicle is in your name, but the policy is still in the first owner’s name. How do you get the claim? Who should be held responsible in such situations? Well, as far as the legal rules go, you may find yourself at the receiving end if you have not informed the insurance company and have failed to transfer the insurance policy in your name.

Looking at the number of vehicles on road and the ever-increasing road mishap and theft rates, you can very well imagine how many such cases could be pouring into the various courts across the country. Courts, as they always do, have made different observations and decisions after thoroughly understanding the facts and circumstances of each case.

The Case of a Lost Truck

In February this year, a similar case came before the National Commission. The commission relied upon previous judgements pronounced by the Supreme Court while delivering its judgement.

This was Sandeep Gupta versus United India Insurance Company, wherein Jit Singh and Prem Singh were the owners of the truck that was insured by United India Insurance for a period of one year.

The Singhs sold their truck to Sandeep Gupta in November 2005 and it was stolen exactly after six months in April 2006. Gupta lodged the complaint on the same day and intimated the insurance company. When he submitted the claim papers, his claim was repudiated by the insurance company on the grounds that the transfer of vehicle was not informed to the insurance company.

The matter came before the district consumer forum and complainant pleaded that vehicle was automatically insured as per Section 157 of The Motor Vehicle Act and, hence, repudiation of claim by the insurance company was illegal. The district forum agreed with the complainant’s plea and directed the insurance company to pay the claim amount. The court also awarded compensation to the complainant.

However, the insurance company went to the State Commission. Now, the commission rejected the order of the district forum and held that the insurance company was right.

Contesting the order of the State Commission, a revision petition was filed by the original purchasers Jit Singh and Prem Singh against the insurance company. Complainant submitted that as per Section 157 of The Motor Vehicle Act, the policy automatically stood transferred in the name of the subsequent registered owner of the vehicle. Section 157 (2) of Motor Vehicle Act was only procedural provision, so complainant could not be deprived of the benefits of policy merely because insurance policy was not transferred in his name.

The core question to be decided in this revision petition was whether insurance company was liable to make payment to the subsequent registered owner without transfer of insurance policy in his name. The National Commission went into the details and the earlier judgements were thoroughly discussed.

Reference Cases that Were Discussed in the Court

Referring to the older judgements, the court observed that in 1996, in the matter of Complete Insulations versus New India Assurance Company, as well as in the 2007 case of United India Insurance Company versus Harinder Kaur, the National Commission had concluded that subsequent purchaser of vehicle was ‘not entitled to get compensation for loss of the vehicle in the absence of transfer of insurance policy in his name.’

The court further observed that as the vehicle had already been sold by Jit Singh and Prem Singh to Sandeep Gupta, they too were not entitled to any insurance claim.

In the Complete Insulations case, the insured vehicle was burnt but the vehicle was not transferred

in the name of the new purchaser at the time of the incident. Since the registration certificate (RC) of the vehicle could not be provided by the complainant, the case was closed by the insurance company. The court held that the insurance company was justified in repudiating the claim as it could not even get the registration certificate.

In the case of United India Insurance Company versus Harinder Kaur, the same stand was taken by the National Commission on the issue. In this case, one Jaswant Singh was the original owner of a car that he sold to Punjab Singh, husband of the complainant Harinder Kaur. While the registration was transferred in the name of Punjab Singh, the insurance policy was not. It may be noted that no steps were taken by Punjab Singh to get the insurance transferred to his name.

Unfortunately, the car met with an accident and Punjab Singh succumbed to the injuries. An FIR was lodged against the driver of the truck with which the vehicle met with the accident. The wife of Punjab Singh filed a complaint before the District Consumer Disputes Redressal Forum, Fatehgarh Sahib, claiming the assured sum of two lakh rupees from the insurance company. The district forum in its judgement and order dated 30.3.2005 allowed the complaint. The State Commission too confirmed the order but the National Commission did not agree and the complainant was not held entitled to claim.

Further Interpretations of Law

In the ‘Rikhi Ram versus Sukhrania and others’ case, the Supreme Court while interpreting the provisions of Section 157 held that although with the transfer of vehicle the insurance company remained liable towards third-party claims, the transferee could not get any personal benefit under the policy unless there was a compliance with the provisions of the Act.

The court held that the insurance company would remain liable to third parties, but it would be open to the insurance company to recover the said amount either from the insured or from the transferee of the vehicle. The court further observed: ‘ On an analysis of Sections 94 and 95, we further find that there are two third parties when a vehicle is transferred by the owner to a purchaser. The purchaser is one of the third parties who cannot get any personal benefit under the policy unless there is a compliance of the provisions of the Act. However, so far as the third party is injured or victim is concerned, he can enforce liability undertaken by the insurer.’

To simplify: If the vehicle’s policy is not in your name but in the first owner’s name and you lose the vehicle – it is stolen or damaged – you do not get the claim, neither does the first owner. However, if somebody (third party) is injured due to an accident caused by your vehicle, the insurance company may be held liable, provided you have complied with all the other laws and rules.

If the purchaser fails to inform the insurance company about

transfer of the registration certificate in his name and if the policy is not transferred in the name of the purchaser, then the insurance company cannot be held liable to pay the claim in case of own

damage of vehicle.

The Final Verdict

The National Commission concluded in the case of Sandeep Gupta – in view of the provisions of The Motor Vehicle Act and the decisions of the Supreme Court – that if the purchaser failed to inform the insurance company about transfer of the registration certificate in his name and if the policy was not transferred in the name of the purchaser, then the insurance company could not be held liable to pay the claim in case of own damage of vehicle.