Insolvency of insured persons not to affect liability of insured or claims by third parties
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Summary
A valid insurance certificate keeps the insured’s liability to third parties intact even if the insured becomes insolvent or a similar event occurs. Third-party claims for death, injury or damage arising from the vehicle remain enforceable, and the person entitled to compensation can still pursue the insurer under the law.
Example
Arjun owns a motorbike and has an insurance certificate in his name. After a collision Arjun becomes insolvent and cannot pay the injured pedestrian. The pedestrian can still claim compensation from the insurer under the policy.
Bare Act
Enacted textWhere a certificate of insurance has been issued to the person by whom a policy has been effected, the happening in relation to any person insured by the policy of any such event as is mentioned in sub-section (1) or sub-section (2) of section 150 shall, notwithstanding anything contained in this Chapter, not affect any liability of that person of the nature referred to in clause (b) of sub-section (1) of section 147; but nothing in this section shall affect any rights against the insurer conferred under the provisions of sections 150, 151 and 152 on the person to whom the liability was incurred.
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