Third Party Insurance is deemed to be Transferred in Case of Hire Agreement

Uttar Pradesh State Road Transport Corporation-Appellant Vs. National Insurance Co. Ltd. & Others  (Supreme Court); Civil Appeal Nos. 18490-18491 of 2017; Order date : 14th July,2021

SC Held That (Motor Vehicles Act ,1988) – Third Party Insurance deemed to be transferred along with effective control over vehicle in a Hire Agreement. 

When a transport corporation hires a motor vehicle for use from its registered owner, the third-party insurance coverage will also be deemed to be transferred along with the vehicle, reiterated the Supreme Court in a recent decision. The person who is having the effective control and command of the vehicle will be regarded as the ‘owner’. Therefore, along with the vehicle it must be deemed that the existing insurance policy also remains transferred for the period of hire as agreed.

Based on this principle, which was settled in the 2011 precedent Uttar Pradesh State Road Corporation v. Kulsum & Ors, the Supreme Court overturned a judgment of the Allahabad High Court.

FACTS TO BE DECIDED ; if an insured vehicle is plying under an agreement with the Corporation on the route as per permit granted in favour of the Corporation and in case of any accident during that period, whether the Insurance Company would be liable to pay compensation or would it be the responsibility of the corporation or the owner.

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