Rajesh purchased a bus by taking a loan from ABC Limited. The bus was being used as private service vehicle and not as a public transport vehicle. It was insured under a comprehensive insurance policy issued by XYZ Insur

CS Professional · Insurance - Law and Practice · PYQS · December 2018
Rajesh purchased a bus by taking a loan from ABC Limited. The bus was being used as private service vehicle and not as a public transport vehicle. It was insured under a comprehensive insurance policy issued by XYZ Insurance Limited. The bus met with an accident, for which insurance was claimed. The insurance company appointed its Surveyor, who assessed the loss at ₹1,26,500. However the insurance company deducted ₹33,125 from the assessed amount on the ground that the driver did not have an endorsement on his licence to drive a transport vehicle. Even this amount was not paid to Rajesh, but was paid directly to the Finance Company. Advise: Is it right on the part of the insurance company to pay the claim amount directly to the Finance Company and not to the insured?

Answer & Explanation:

No, the insurance company is not right in paying the claim amount directly to the finance company without informing the claimant. Even if the insurance company intended to make the claim payment to the finance company it should have informed the claimant insured and asked for his consent to do so. The insurance company and the financier cannot act in isolation without even informing the insured who has made the claim for the loss. In such case the insurance company should have either paid the claim amount to the insured or should have properly communicated with the claimant and asked for his written consent/no objection certificate to pay the claim amount to the finance company.

Topics: Motor Insurance

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