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MVA 1988 (Amended 2019)ORIGINALChapter VII

Section 151-153

Settlement Between Insurer and Insured; Bankruptcy of Insured; Effect of Death on Claims

Insurance of Motor Vehicles Against Third-Party Risks
Fine: N/ACompoundable: N/AEndorsement: No
BARE ACT PROVISION

Legal Text

Section 151: Where under any contract of insurance effected in accordance with the provisions of this Chapter, a person is insured against liabilities which he may incur to third parties, then — (a) in the event of the person becoming insolvent or making a composition or arrangement with his creditors, or (b) where the insured person is a company, in the event of a winding-up order being made or a resolution for a voluntary winding-up being passed with respect to the company, the rights of the insured in respect of the liability shall, notwithstanding anything in any law for the time being in force relating to insolvency, vest in the third party. Section 153: Where any person who has effected a policy of insurance dies, the policy shall not be cancelled by reason only of his death, but shall, in case of his personal representatives or of any person in whose favour the policy has been issued under the provisions of this Chapter, be of the same effect as if the insurance had been originally effected by or in favour of such personal representatives or person.

Simplified Explanation

Sections 151–153 address continuity of insurance protection through disruptions to the normal contractual framework. Section 151 protects third-party rights when the insured becomes insolvent or bankrupt — the third party's rights vest directly in the insurance policy proceeds, preventing them from being swept up in general creditor claims. A crucial protection: accident victims are not ordinary creditors who must queue in insolvency proceedings — their rights are directly protected in the insurance contract. Section 153 addresses death of the insured — the insurance policy does not terminate on the insured's death. The policy continues in force for the personal representatives of the deceased or persons in whose favour it was issued. This means a deceased vehicle owner's estate can still rely on the insurance policy for accident liabilities that arose during the policy period.

Historical Context

The protections in Sections 151–153 prevent insurance becoming illusory when the insured's circumstances change — the entire framework is designed to ensure that the ultimate beneficiary (the accident victim) is protected regardless of what happens to the vehicle owner.

Practical Scenarios

"A vehicle owner who goes bankrupt after causing an accident — victim's MACT claim still paid from insurance under Section 151."
"A vehicle owner who dies before MACT award — insurance policy continues; heirs/estate covered under Section 153."

Common Queries

No — under Section 153, an insurance policy does not terminate on the insured's death. The policy continues in force for the personal representatives of the deceased owner.
Yes — Section 151 specifically vests the third party's rights directly in the insurance policy when the insured becomes insolvent. Accident victims rank above general creditors with respect to the insurance policy proceeds.