SC relief for self-employed accident victims

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Family members of self-employed road accident victims have a reason to celebrate, finally. The Supreme Court (SC) which recently passed a judgment that even these people’s families would be entitled to compensation considering ‘future prospects’ of the victim. Until now, victims with a permanent job were eligible to get benefits of ‘future prospects’. In a way these guidelines by the SC bring in parity among all the three sets of victims. In addition, the apex court has also extended the same benefit to fixed-income employees. 

Industry participants believe this move could bring relief to the families or dependants of victims who pass away in an accident and are self-employed or have a fixed salary. “The SC judgment clearly lays down the rules to decide on compensation for death cases clearing ambiguities arising out of differing judgments in the past,” says G Srinivasan, chairman-cum-managing director, New India Assurance. The ruling judgment clearly lays down how income is to be calculated and how the multiplier is to be applied.

Earlier, in the case of self-employed or fixed-income person, the courts had discretionary power to decide the compensation payable. “With the new guidelines, the future prospects of self-employed or fixed-income person will be taken into account while calculating the claims. This has brought much needed clarity,” says Shailaja Lall, partner, Shardul Amarchand Mangaldas & Co. 

Families of older people get benefits: The guidelines, issued on October 31, include several sweeping measures. Besides the above, the benefit of ‘future prospects’ has also been given to victims in the 50-60 age group. Earlier, no compensation was given to the families of people of this age group. This regulation is for third-party insurance under motor insurance. Third-party insurance is compulsory for all vehicle-owners according to the Motor Vehicles Act. Third-party insurance covers legal liability for the damage caused to a third-party only — bodily injury, death and damage to third-party property — while using the policyholder’s vehicle. To make third-party claims, the victim has to file a case at the Motor Accident Claims Tribunal.

In 2008, a two-judge Bench of the SC had said future prospects should be taken into account while calculating compensation for  those with permanent jobs. A specific percentage of the last drawn salary, over and above the last pay, were laid down for different age groups. However, there was no clarity on the self-employed and people with fixed salaries.  

Standardised criteria: The verdict has also laid down standard criteria for computation of claims. For example, if a 40-year-old with a permanent job dies in a road accident, an additional 50 per cent of the actual salary (salary less tax) towards future prospects should be made, along with a multiplier (see table: Computation of claims). Now, the SC has said that in case of a deceased self-employed or on a fixed salary, an additional 40 per cent of the established income should be taken if his age is below 40 years. Earlier, future prospect was at the discretion of the concerned authority to make the claims. In addition, it has also increased the figures of loss of estate and funeral expenses to Rs 15,000 each and loss of consortium to Rs 40,000. The SC also said amounts should be enhanced at the rate of 10 per cent after three years.

These new guidelines will increase the claims amount and liability of the insurance company, as earlier there was no fixed ‘future prospect’ for self-employed and fix salaried person. But, this could also result in more money in the hands of family members or nominee of deceased who passed away in an accident.

However, for the self-employed people or fixed-income person who doesn’t have income proof, minimum wages, according to  state norms, will be considered while computing the final claim amount. “Future prospects calculation will now be applied for people with no income proof, where they will consider minimum wage according to the state’s norms. From an insurance perspective, I would say this will increase the burden on third-party liability, because insurers will have to calculate new adjustments for all future cases,” says Puneet Sahni, assistant vice-president, product development at SBI General Insurance.

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