SC order on compensation may affect general insurers

THIRD PARTY MOTOR INSURANCE

- MITHUN DASGUPTA

THE RECENT JUDGMENT of the Supreme Court in a motor insurance compensation case may adversely impact general insurance companies as compensation payout to victims in third-party insurance claims are likely to go up, according to industry insiders.

Moreover, the SC's observation on loss of earning capacity of a person because of physical disability caused by an accident could also impact compensations paid by insurers in cases of public liability insurance. The court said physical disability has to be judged with reference to the nature of the work the person used to do, and the award of compensation has to be assessed accordingly.

"In fact, any physical disability resulting from an accident has to be judged with reference to the nature of the work being performed by the person who suffered disability," a division bench of the SC observed on July 4.

"The same injury suffered by two persons may affect them in different ways. Loss of leg by a farmer or a rickshaw puller may be the end of the road as far as his earning capacity is concerned. Whereas, in case of persons engaged in some kind of desk work, the loss of leg may have a lesser effect," the Supreme Court said.

The compensation outgo for general insurers is likely to increase in third-party motor insurance claims after this judgment, industry insiders said.