Cross Border Motor Accident – SC Fastened Liability on Insurer
The vehicle bound from Durg to Nepal suffered collision with a hill resulting in death of three persons.
Before the journey to Nepal, the owner had obtained special permit from RTO under Section 88(8) of the Motor Vehicles Act.
The Tribunal fastened the liability on the owner of the vehicle. However, the High Court had shifted the liability to the Insurance Company.
Whether the accident which occurred outside India will be covered by the Insurance Policy issued under the Motor Vehicles Act 1988 in the absence of any payment of additional premium as required by General Regulation 4 of the India Motor Tariff 20026?
6.2 Whether the driving license possessed by the driver authorized him to drive the vehicle in Nepal at the time of the incident?
“Geographical Area: India” “Area of Extension: [Blank/Nil]” “Limitation as to Use: The Policy covers use only under a permit within the meaning of the Motor Vehicles Act, 1988, or such a carriage falling under Section 66(3) of the Motor Vehicles Act, 1988.”
The Insurance Policy provided coverage for use under a ‘permit’. The clause “Limitations as to Use” is cast in general and unqualified terms; and does not impose any geographical limitation as to its use. Once this permit is issued, the insurance company will cover the vehicles having valid permit irrespective of their geographical location where they are plied. Thus, by inserting this clause, the insurance companies restricted its coverage to only one condition, that is the existence of a permit under the Act.
Article 7 of the Treaty of Peace and Friendship between India and Nepal, signed on 31st July 1950, grants nationals of one country the same privileges as nationals of the other “in the matters of residence, ownership of property, participation in trade and commerce, movement and other privileges of a similar nature”. Authorizations and licenses carried by Indian nationals, including a valid driving license, issued in India, are recognized for the purposes of such movement. Appellant-insurer has not adduced any evidence to show that the driving license possessed by the driver and verified by the Authorities was not valid in Nepal. In that view of the matter, there is no reason why liability should not be fastened upon them.
It appears that there is, as of today, no clear statute, or binding precedent, or regulatory clarification, in force which clarifies the extension of insurance policies for cross-border travel. This uncertainty causes hurdles in deciding motor accident claims timely and efficiently, thereby affecting the claimants the most.
- The dispute in question pertains to the year 2010 but two recent developments which have taken place in the realm of cross-border insurance coverage need to be discussed. First, the IRDAI, with the need to liberalise the insurance market, through its notification20 dated 20th March 2024, declared the IMT to be “entirely de-notified and no longer in force effective 01.04.2024”, meaning thereby that the IMT 2002 no longer occupies the field. Second, the Inter-Country Transport Vehicles Rules, 2021 now provide a structured legal framework for Indian vehicles to travel to other countries under valid inter-country permits. It mandates that an inter-country vehicle should have a valid insurance policy, but it does not explicitly deal with extension of a domestic policy to the country in which such vehicle is going to ply.
Judgment dated 20.7.2026 of the Supreme Court of India in SLP (Civil) No.20645 of 2025 of The Oriental Insurance Co. Ltd Vs. Durg Roadways Private Limited and others
