All about law relating to Motor Accident Claims and Compensation

The Author, Sneharghya Saha is a student of 3rd year, B.A. LLB(H) at Amity University, Kolkata. He is currently interning with LatestLaws.com.

Background of the Evolution

With the evolution of civilization of human beings, the actions of negligence have become an actionable error. In English law, any individual or legal associate of the deceased who has passed away because of the negligent action of others may recoup damages under tortious law in addition to initiating criminal proceedings. Consequently, the carrying on of negligence by losses to the other individuals paving the way for institution of action.

Fatal Accidents Act, 1885 was enacted by the British Government in India in order to provide equal rights to the person wounded or deceased in an accident. The Act provisioned for a process and the right of designated legal heirs to seek relief from the negligence committer. The law worked for a considerable period of time. Due to the rise in automation and far-reaching damage of life and asset in the event of an accident, it was recognized that an efficient law should be introduced in order to provide for respite to the victims of accident claims.

In order to encourage this, arrangements have been enacted for mandatory third-party insurance and to establish an adjudication process for claimants under the Motor Vehicle Act by amending Act No.110 of 1956, under which sections 93 to 109 relating to third-party insurance and sections 110(A) to 110(F) relating to the establishment of the Motor Accident Appeals Tribunal and the procedures for adjudication of claimants have been catered. Originally, the responsibility was limited to a single amount, but after 1982, the responsibility of the Insurance Corporation was made unrestricted and even the protection of the Insurance Industry were reduced in order to ensure that third parties are provided with award of indemnity. 

In 1982, the extension of Section 92(A) and 92(E) created a new principle of granting temporary relief on the grounds of No Fault’. Many people that die from hit and run collisions have since been provided coverage under the same provision, where the offending vehicles are not classified.[1]

Enactment of the present day Legislation governing motor accidents

The Motor Vehicles Act, 1988 was passed with a view to consolidating and amending the legislation relating to motor vehicle accidents. When a statute is passed to reform and change the law, the Legislature takes into account not only the law when stood but also the legislation that occurred before it. In 1988, a revised Law on motor vehicles was enacted and Chapter 10 of the new Motor Vehicles Act provided for temporary relief. Chapter 11 administered for motor vehicle insurance against third party danger, and Chapter 12 furnishes for the creation of Claims forum and the adjudication of demands through lawsuits and related cases.

Furthermore, this legislation seeks to regularize the use of Motor Vehicles and to reward people who are wounded or killed in a crash and family associates and dependents of the victim if applicable. It is well established that an attempt is made to place the plaintiffs in the pre-accidental situation in case of motor accident lawsuits. The relief to be awarded are to be sufficient in terms of cash so that the injured or claimants are placed in the same situation if they had not suffered the loss due to the respondent's error, however, no amount of indemnity can recover the accident of limb or sense of pain or damage of life.[2] In 1994, this Act was further modified. The legislation is still in a time of extreme transition.

The Supreme Court has ruled on several occasions that this is a statute for the interest of the citizens and that it is appropriate to clarify the provisions of law in order to benefit the individual. Throughout this process, in the recent past, the Supreme Court passed numerous judgments which limited the substantive defences of the Insurance Company to a greater extent as the law relating to the onus of proof was fully amended. Restricted protections in the absence of a valid driving licence, the use of a car for rent and compensation, the use of a transport vehicle for reasons not permitted by a license must be demonstrated in such a clear way that the claimant does not benefit from such defences.[3]

Enforcing of claims of damages due to motor vehicle accidents

An operation for claiming compensation may be made by the individual who sustained the damage or by the proprietor of the vehicle or where death has been caused by the accident by every or anyone of the deceased's legal associates or by an officer deservedly empowered by the injured person or by everyone or anyone of the deceased's legal associates. Those individuals not being dependants but are the legitimate heirs do have the right for getting compensated. But a person's legal associate, who himself is responsible for reckless and careless driving, is not entitled to claim compensation.[4]

In the light of the judgment given by Supreme Court in Manjuri Bera v. Oriental Insurance Company, the father or the brothers of the deceased party would be eligible to claim compensation under section 140 of the Motor Vehicles Act, 1988 since the burden under section 140 of the Act does not desist because there is no dependence. Yet his legal heirs can't continue an appeal filed by the injured claimants for personal injury.[5] There is provision in the Motor Vehicle Act, 1988 for claiming losses to self or Other (Third Party) as a result of an accident with the motor vehicles. Two kinds of accidents could happen:-

(i) Where Third Party is affected, in terms of injuries or damage to its properties

(ii) Where self-damage is done, including damage to the insurer's own vehicle.

The accident must be addressed to police with immediate effect and then to insurance corporations in the event of claims by third parties. The person must apprise the insurance officers and police officers for own injury claims before he or she gets his damage settled. To recover the damage under the Act, the owner himself must record the complaint or, in the event of the owner's demise, his closest kin could file the petition demanding compensation. If the injured parties of the accident are younger than 18 years of age, they cannot claim for damages by themselves, they have to file through a lawyer. An applicant may file an application for a settlement with the Motor Accident Claims Tribunal at the place where the complainant lives or conducts his business.

The records which are mandatory to be produced while making a provision of claim due to motor accidents are FIR copy disclosed to the closest police station, Copy of Medico Lawful Credential/ Post Mortem Certification/ Death Certificate, Identification Documentation of Claimants as needed, Original Expense Records as incurred in hospital along with medical record, Injury Certificate as appropriate, Documentation in relation to the claimant, Cover document of third party insurance scheme and Statement of facts specifying a claimant's relationship with the deceased.

Chapter X of the Motor Vehicle Act provides for No-Fault responsibility, which specifies that the owner of a motor vehicle is responsible for negligence, even though there is no negligence about the crash examined by the Court. That kind of responsibility exists primarily in situations where the survivor of the crash is injured or seriously incapacitated.[6]

The extent of compensation due in respect of any person's death shall be a fixed sum of Rs. 50,000/- and a fixed sum of Rs. 25,000/- in respect of permanent disability. Claimant shall not be allowed to plead to show that the death or permanent injury on which the claim was brought was due to any unjust act, negligence or misconduct on the part of the claimant or the claimants and the amount of compensation for such death or permanent disability shall not be reduced on the ground of that person's part of responsibility for such death or permanent disability.

In this case, once this compensation option has been exercised the claimant is not eligible for compensation under section 163-A on the basis of a structured formula.[7] Section 167 of the MV Act gives the claimants the option of seeking compensation under either the Workers ' Compensation Act, 1923 or the Motor Vehicle Act, 1988 or claiming compensation under section 163-A of the Motor Vehicle Act. Under the terms of both the Acts, they claimants cannot lodge a legal complaint. In a related situation, Justice Sarvesh Kumar Gupta claimed that petitioner Dalby Lal, who had already obtained compensation under the Motor Vehicle Act for his road crash and was seeking court to further claim compensation under the Workers Compensation Act, experienced an incident after he had left his workplace and was on his way home. Pursuant to section 167 of the Motor Vehicle Act, the judge rejected his appeal, saying that he did not appeal under both Laws.[8]

Under section 159, a police officer inspecting a matter involving death or physical damage to a person in a road crash must file a report to a Claim Adjudicating Board within 3 months in the correct format. Section 161(1)(b) of the MV Act provides for the Hit and Run matters where the proprietor of the motor vehicle cannot be determined even after feasible attempts. In the event of a hit and run vehicle crash, the Act provides for the award of a fixed sum of Rs.2 lacs insurance in the event of death and Rs.50,000 in the case of grievous injury.[9]

Provision for Fault Liability

The person who is bringing the compensation petition must present that the respondent was negligent. It is essential to have evidence that he is at fault for himself and is legally responsible for his actions. For the intent of such a proceeding, as there is no specific meaning of negligence, it would usually mean breach of obligation induced either by omission which a reasonable man directed on certain grounds which he would usually do or be obliged to do because of the conduct of public interests, whether by doing things which a decent or conscientious man would not do. The Supreme Court held that, ‘rashness’ should be defined as, "Rashness" consists in hazarding a dangerous or wanton act with the knowledge that it is so, and that it may cause injury. The criminality lies in such a case in running the risk of doing such an act with recklessness or indifference as to the consequences."[10] ‘Negligence’ has been defined by Supreme Court as, "Negligence means omission to do some-thing with reasonable and prudent means granted by the consideration which ordinarily regulate human affairs or doing something which prudent and a reasonable means guided by similar considerations would not do."[11]

Appraisal of Claim and Compensation

However, the compensation assessment can be made good but cannot be said to be fool proof. There are certain hypotheses to be made in each such determination and there is every probability of difference of opinion among judges in applying from time to time the various fundamentals affirmed by the Courts. Lord Viscount Simon developed an evaluation system "Nance's method" more widely known as "discounting system." Lord Wright developed the other prominent form, known as the “Davis method”.

Existence cannot be taken for granted. Similarly, no human being will place monetary worth of his leg or of any other human being. How does one evaluate the amount of the damage of all faculties when some victim loses his mental faculties due to accident and lives in a vegetal state. Hon'ble Supreme Court evolved a formulation while dealing with a matter. Annual Revenue Annual spending on deceased provides the amount paid on legal associates. If this balance is capitalized due to other limitations, the family’s monetary loss can be estimated.

Though refining the above formula in the case of CKS Iyer[12], the Supreme Court claimed that there is no exact universal method for calculating the worth of human life and calculating loss cannot be accomplished by a statistical equation, but the recoverable quantity depends on the prospect of life of the legal associate beneficiaries. The courts can only permit compensation for the pecuniary and monetary loss caused and some other costs, but no court can even try to allocate compensation for life-loss or limb loss. Mainly the pecuniary loss must be evaluated. Nominal losses related to funeral expenses, consortium and conventional damages. Long life expectancy is tied to earning power.[13] With the development of accident claims, the Hon'ble Supreme Court of India found a solution through the milestone judgement of Susamma Thomas[14] and has started to give recognition to the deceased's yearly income. It includes some guesswork, some hypothetical consideration, some amount of compassion associated with the nature of the ailment caused, in its very nature whenever a Tribunal or a Court is needed to settle the quantum of compensation in accident matters.[15]

This recognition varies from doubling earnings depending on the nature of employment, sex, career opportunities etc. The Supreme Court held that 1/3 should be subtracted from the costs to be borne on the deceased after examining and doubling the annual income, and that the leftover amount should be multiplied by a multiplier depending on the age of the deceased and the legal heir. The multiplier, accepted as 16 in the matter of Sushma Thomas, had been increased to a maximum of 18.

But, in a recent Supreme Court judgment, in order to make compensation fair and take into account the overall multiplier factors was reduced from 16 to 12 in the case of 38-year-old deceased. In the light of the above case laws, it can be said that the compensation appraisal should be governed by exercising precedents to the facts and circumstances of a particular matter.

Compensation payment in matters related to death or permanent disability

In all such cases, the governing principles of ascertaining the amount of compensation came to an amount which the deceased would have received if he had lived his natural life and supplied to his family. The concept of 'just compensation' has to be seen through the rule of equality's spectrum of fairness, due process and non-infringement. The legitimate heirs cannot anticipate a windfall in the event of death. At the same time, however, the compensation allowed cannot be inadequate. A tribunal though has broad prudence in appraising the quantum of compensation but should always be governed by the phrase "just compensation."

The Supreme Court in State of Haryana v. Jasbir Kaur observed that, “It has to be kept in view that the Tribunal constituted under the Act as provided in Section 168 is required to make an award determining the amount of compensation which is to be in the real sense "damages" which in turn appears to it to be "just and reasonable". It has to be borne in mind that compensation for loss of limbs or life can hardly be weighed in golden scales. But at the same time it has to be borne in mind that the compensation is not expected to be a windfall for the victim. Statutory provisions clearly indicate that the compensation must be "just" and it cannot be a bonanza; not a source of profit; but the same should not be a pittance. The courts and tribunals have a duty to weigh the various factors and quantify the amount of compensation, which should be just.”[16]

Motor Accident Claim Tribunals (MACT) is bound to dispose of any claim for compensation concerning the death or physical damage of persons in a road crash resulting from the use of a motor vehicle. MACT must provide the parties with a convenience to be heard, inspect the claim and calculate the amount of compensation that appears to be fair and mention the person(s) to whom compensation is payable. The party responsible for paying the amount so determined by the MACT shall also be specified as to whom. The Tribunal shall forward a copy of the award to the party in question within 15 days of the award date. The party ordered to make the reimbursement of compensation shall deposit the entire quantum of money within 30 days as per the directives of the Tribunal. The magnitude of losses in fatal accident litigation is the pecuniary loss incurred and probability to be sustained by each claimant as a result of demise.

Obviously it is true that determining a just compensation cannot be tantamount to a bonanza. Around the same time, the definition of 'Just Compensation' clearly implies the implementation by the Tribunals and Courts of equal and equitable standards and a rational solution. On the part of the Tribunal and the Court, that reasonableness must be on a large peripheral field. Both the courts and tribunals should be governed by principles of good conscience in the cases of this application, so that the ultimate outcome becomes just and fair.[17] This Court ruled that, it must be pragmatic in deciding the quantity of reward, and not niggardly in as much as it would respect life and property on a reasonable basis in the law of a free country.[18]

The Courts have formulated definitive forms of determining compensation. The measures are as follows:-

[a] Measure the deceased’s profits towards potential expectations.

[b] Reduction for personal and contemporary expenses of the deceased

[c] Choice of Multiplier

[d] Estimation of Compensation

Compensation payment in matters related to death or grave injury

Under Section 165, Motor Accident Claim Tribunals (MACT) were established in all districts to facilitate the victim or a victim's survivors to demand compensation against the vehicle's proprietor and/or driver or insurer. Usually a district magistrate level judge administers over an MACT. A claim for compensation may be made to a claim adjudicating body having authority over the area in which the accident took place or to the MACT within whose administration the   Claimant lives, at the option of the claimant. An application for insurance must be made within ideally 6 months of the date of the incident. The right of the deceased's legal associate in an accident case endures regardless of whether the reason of death is related or whether or not the damage had any connection.

The Supreme Court held that deductions should not be made frantically. It ruled in Santoshi Devi v. National Insurance Company Limited that, It is also not possible to approve the view taken by the Tribunal which has been reiterated by the High Court albeit without assigning reasons that the deceased would have spent 1/3rd of his total earning, i.e., Rs. 500/-, towards personal expenses. It seems that the Presiding Officer of the Tribunal and the learned Single Judge of the High Court were totally oblivious of the hard realities of the life. It will be impossible for a person whose monthly income is Rs.1,500/- to spend 1/3rd on himself leaving 2/3rd for the family consisting of five persons. Ordinarily, such a person would, at best, spend 1/10th of his income on himself or use that amount as personal expenses and leave the rest for his family.”[19]

Choice of Multiplier for the enforcement of Compensation

Multiplier shall be used as provided for by law in Sarla Verma v. Delhi Transport Corporate. Multiplier selection must be based on the age of the deceased or of the claimant whichever has the higher magnitude and the subtraction for the deceased's personal costs often hinges on the number of dependent family representatives. In Royal Subdram Alliance Insurance Co. Ltd. v. Mandala Yandagri Goud & Ors, the Court ruled that the age of the deceased is applicable to the adoption of the multiplier rather than the age of the dependent.

The Supreme Court put more emphasis on the Multiplier Table but also reiterated that it should not be frantically followed. In Naina Thakur v. Punjab Women’s Welfare Colleges Board, it pronounced that, "The choice of multiplier has to be based on the age of the deceased or the claimants whichever is higher. Therefore, if the parents are the claimants, it is age of the parents which will have to be taken into consideration while fixing the multiplier.

This table is also not to be blindly followed and the Tribunal may well be within its jurisdiction to make departure from this table in particular cases. For example if the deceased was aged between 41 to 45 years as per this judgment multiplier of 14 is to be used. However, the deceased if he had married late, may have left behind a very young widow and two small children. The Tribunal in such a case may be justified in increasing the multiplier to 15. On the other hand there may be a case where the deceased who was aged between 41 to 45 years has not left behind a widow and the claimants are sons who are majors and are not dependents. The multiplier may be suitably reduced in such cases. This has to depend on the facts of each case.”

Potential growth in profit of the deceased

The deceased's definite income following taxes has to be examined. The Supreme Court also recognized the fact that his profit would potentially rise when the person was occupied. Accordingly it was ruled in the matter of Sarla Verma that arrangement was made, when measuring the multiplicand, for potential hike in profit. The Apex Court relied on various cases in this judgement such as in Susamma Thomas, the SC escalated the profit by nearly 100%, in Sarla Dixit, the income was boosted by closely 50% and in the matter of Abati Bezbaruah the profit was raised slightly by 7%.

The Supreme Court opined that, “in view of imponderables and uncertainties, we are in favour of adopting as a rule of thumb, an addition of 50% of actual salary to the actual salary income of the deceased towards future prospects, where the deceased had a permanent job and was below 40 years. Where the annual income is in the taxable range, the words `actual salary' should be read as `actual salary less tax'. The addition should be only 30% if the age of the deceased was 40 to 50 years.”[23]  

Relying on the age and the type of profession of the deceased, the potential forecast of the deceased are to be contemplated in the manner set out in the table below:

The Supreme Court in K.R. Madhusudhan v. Administrative Officer found that there could be a divergence from the rule of thumb, it was ruled, “The present case stands on different factual basis where there is clear and incontrovertible evidence on record that the deceased was entitled and in fact bound to get a rise in income in the future, a fact which was corroborated by evidence on record. Thus, we are of the view that the present case comes within the `exceptional circumstances' and not within the purview of rule of thumb laid down by the Sarla Verma (supra) judgment. Hence, even though the deceased was above 50 years of age, he shall be entitled to increase in income due to future prospects.”[24]

Enforcement of compensation in relation to the demise of a child

The question occurs as the payout in case of a child's demise is to be paid, since the infant earn nothing and may be studying. Hence the parents cannot be assumed to be dependent on their child or children in such matters. But even then the parents will endure the casualty of the child, and deserve to be properly paid for that. The SC in R.K. Malik v Kiran Paul[25] pronounced that in surplus to remuneration for monetary damages, the compensation was also to be permitted in respect of the child's future prospects.

In the matter of Lata Wadhawa v. State of Bihar, where the accident happened on 03.03.1989 where many people, including children, were killed in a fire crash, the Court awarded considerable compensation. The Court noted with no ambiguity, that the children who all passed away were studying in an extravagant school, had bright future and hailed from upper middle class families, still it cannot be said that the higher compensation granted was for hardship of life and the misery and anguish endured as an outcome of destruction of life as a result of pecuniary condition. Reference was made to the multiplier method for the approval of its adoption. The Court pronounced that, “in cases of children between 5 to 10 years of age, compensation of Rs.1.50 lakhs was awarded towards pecuniary compensation and in addition a sum of Rs.50,000/- was awarded towards `conventional compensation. In the case of children between 10 to 18 years compensation of Rs.4.10 lakhs was awarded including "conventional compensation.” In the aforementioned matter, the term "conventional compensation" has been implemented for non-monetary compensation payable for agony and adversity by the virtue of demise.[26]

References

[1] Kunal Mehta, ‘An analysis of law relating to Accident Claims in India’ <http://www.legalserviceindia.com/articles/km.htm>  

[2] Settlement of Motor Accidents Claim with special reference to Kerala,

[3] Justice Deepak Gupta, ‘Award of Compensation under the Motor Vehicles Act, 1988 Guiding Principles for Motor Accidents Claims Tribunals’ <http://hpsja.nic.in/jaarticle.pdf>

[4] Oriental Insurance Co. Ltd. v Raji Devi (2008) 5 SCC 736

[5] Manjuri Bera v Oriental Insurance Company (2007) 10 SCC 643

[6] Claims under Motor Vehicle Act 1988, <https://www.taxmann.com/blogpost/2000000563/claims-under-motor-vehicle-act-1988.aspx>

[7] Accidents Claims under The Motor Vehicles Act, 1939, <http://www.helplinelaw.com/govt-agencies-and-taxation/ACMV/accidents-claims-under-the-motor-vehicles-act-1939.html>

[8] Section 167 of The Motor Vehicle Act bars dual claim of compensation <https://www.taxmann.com/blogpost/2000000561/section-167-of-the-motor-vehicle-act-bars-dual-claim-of-compensation.aspx>

[9] Vikas Goel – Singhania & Partners LLP, ‘The Motor Vehicles Act, 1988’ <https://www.lexology.com/library/detail.aspx?g=19ac66a2-e1d2-4a85-a86c-d51ec3aaf281>

[10] Rathnashalvan v State of Karnataka AIR (2007) SC 1064

[11] State of Karnataka v Muralidhar AIR (2009) SC 1621

[12] C.K. Subramonia Iyer & Ors v T. Kunhikuttan Nair & Ors AIR (1970) SC 376, (1970) SCR (2) 688

[13] B.T Krishnappa vs. Divisional Manager, United Insurance Company Ltd. (2010) 12 SCC 246 & Leela Gupta v State of Uttar Pradesh (2010) 12 SCC 37

[14] General Manager, Kerala State Road Transport Corporation, Trivandrum v Mrs. Susamma Thomas AIR (1994) SC 1631, (1994) 2 SCC 176

[15] R. D. Hattangadi v Pest Control (India) Pvt. Ltd. (1995) 1 SCC 551

[16] State of Haryana v Jasbir Kaur (2003) 7 SCC 484

[17] Mrs. Helen C. Rebello and others v Maharashtra State Road Transport Corporation & another AIR 1998 SC 3191

[18] Hardeo Kaur and others v Rajasthan State Transport Corporation & another (1992) 2 SCC 567

[19] Santoshi Devi v National Insurance Company Limited (2012) 6 SCC 421

[20] Sarla Verma (Smt.) & Others v Delhi Transport Corporation & Another (2009) 6 SCC 121

[21] Royal Subdram Alliance Insurance Company Limited v Mandala Yandagri Goud & Others (2019) 5 SCC 554

[22] Naina Thakur v Punjab Women’s Welfare Colleges Board HLJ 2009 (HP) 1449

[23] Sarla Verma (Smt.) & Others v Delhi Transport Corporation & Another (2009) 6 SCC 121

[24] K.R. Madhusudhan v Administrative Officer (2011) 4 SCC  

[25] R.K. Malik v Kiran Paul (2009) 14 SCC 1

[26] Lata Wadhawa v State of Bihar (2001) 8 SCC 197

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