The Motor Vehicles Act, 1988

147. Requirements of policies and limits of liability.

1. In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which--

1. is issued by a person who is an authorised insurer; and
2. insures  the person  or classes  of persons specified in the policy to the extent specified in sub-section (2)--

1. Against any liability which may be incurred by him in respect of the death of or bodily injury to any person or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place;
2. Against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place:

Provided that a policy shall not be required-

1. to  cover liability in respect of the death, arising out of and  in the  course of  his employment,  of the  employee of a person insured  by the  policy or  in respect of  bodily  injury sustained by such an employee arising out of and in the course of his employment other than a liability arising under the Workmen's  Compensation Act,  1923, (8 of 1923.) in respect of the death of, or bodily injury to, any such employee--

1. Engaged in driving the vehicle, or
2. If  it is  a public  service vehicle  engaged as  a conductor of  the vehicle  or in  examining tickets  on  the vehicle, or
3. If it is a goods carriage, being carried in the vehicle, or

2. To cover any contractual liability.

Explanation.--For the  removal of  doubts, it  is hereby declared that the death of or bodily injury to any person or damage to any property of a third party shall be deemed to have been caused by or to have  arisen  out  of,  the  use  of  a  vehicle  in  a  public  place notwithstanding that the person who is dead or injured or the property which is  damaged was  not in  a public  place  at  the  time  of  the accident, if the act or omission which led to the accident occurred in a public place.

2. Subject  to the  proviso to  sub-section  (1),  a  policy  of insurance referred  to in  sub-section (1),  shall cover any liability incurred in  respect of  any accident,  up to  the  following  limits, namely:--

1. Save as provided in clause (b), the amount of liability incurred;
2. in respect of damage to any property of a third party, a limit of rupees six thousand:

Provided that  any policy  of insurance  issued with  any limited liability and  in force,  immediately before  the commencement of this Act, shall  continue to be effective for a period of four months after such commencement  or till the date of expiry of such policy whichever is earlier.

3. A  policy shall  be of  no effect  for the  purposes of  this Chapter unless  and until  there is issued by the insurer in favour of the person  by whom  the policy is effected a certificate of insurance in the  prescribed form  and containing  the prescribed particulars of any condition  subject to  which the policy is issued and of any other prescribed matters;  and different  forms, particulars and matters may be prescribed in different cases.
4. Where a cover note issued by the insurer under the provisions of this  Chapter or  the rules  made thereunder  is not  followed by a policy of  insurance within  the prescribed  time, the  insurer shall, within seven  days of  the expiry of the period of the validity of the cover note,  notify the  fact to  the registering  authority in  whose records  the  vehicle  to  which  the  cover  note  relates  has  been registered or  to such  other authority  as the  State Government  may prescribe.
5. Notwithstanding  anything contained  in any  law for the time being in  force, an  insurer issuing  a policy of insurance under this section shall  be liable to indemnify the person or classes of persons specified in  the policy  in respect of any liability which the policy purports to  cover in  the case  of that  person or  those classes  of persons.

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