What Does Third Party Insurance Actually Cover?

A third party cover is a short document with long consequences. Section 49(2) describes what it insures, and every damages claim against MVIL is ultimately a claim on that description.

Death and bodily injury only

The cover responds to one kind of harm: death or bodily injury to a person. Damage to property is outside it entirely. If a PMV runs into your trade store, or writes off your car, the Act gives you no claim against MVIL; you sue the driver and owner in the ordinary way, and any recovery depends on their own means or their own comprehensive policy. The Supreme Court’s decision in Motor Vehicles Insurance Ltd v Tambo [2024] PGSC 73; SC2604, which concerned a seized hire car, arose from MVIL’s own conduct as a litigant, not from the third party cover.

“Bodily injury” has been read to include psychiatric consequences of physical injury — post-concussion syndrome, brain damage and the psychological effects of a back fracture all appear in the reported awards — but the injury must be caused by, or arise out of the use of, the vehicle. What that phrase means is examined later in the series.

The limits: K150,000 and K750,000

The figures have moved three times. The 1974 Act set K30,000 per person and K200,000 per event; a 1975 amendment raised them to K100,000 and K500,000; and the consolidation in force from 2002 states them as K150,000 and K750,000. The reported cases show the change: Motor Vehicles Insurance (PNG) Trust v Payne [1981] PGLawRp 572; [1981] PNGLR 114 applied a K30,000 limit to a 1975 accident; Kandaso v Motor Vehicles Insurance (PNG) Trust [1992] PGNC 22; N1074 capped a paraplegic village woman’s award at K100,000; and Yakupi v Motor Vehicles Insurance Ltd [2006] PGNC 214; N2981 assessed a paraplegic pedestrian’s damages at K412,000 and awarded K150,000.

The per-event figure matters when one crash injures many. A bus that overturns with twenty passengers produces twenty separate claims, each capped at K150,000, but MVIL’s total exposure for the event is K750,000. Where the total assessed exceeds that, the excess is a matter for the owner and driver under section 54(5), explained in a later article.

Interest and costs are not caught by the cap

The limit applies to damages. In Kerr v Motor Vehicles Insurance (PNG) Trust [1979] PGLawRp 676; [1979] PNGLR 251 the Supreme Court held that the Trust, as a party to the litigation, is liable for costs in the ordinary way, and that the statutory maximum does not limit them. In Motor Vehicles Insurance (PNG) Trust v Reading [1988] PGSC 23; [1988-89] PNGLR 236 the Court extended the point to interest: “interest is not damages”; it is compensation for being kept out of money, awarded under a separate Act, and is payable on top of the capped sum. Every modern cap case follows Reading: Yakupi, for example, awarded K150,000 plus K11,103.20 interest plus costs.

When the cover starts and ends

Section 49(2)(b) and (c) tie the cover to registration. It becomes effective on the date of registration or re-registration. It continues, if registration is renewed within 15 days after the previous period expired, until the date of renewal; in any other case it continues until 15 days after the registration expires. There is, in other words, a fifteen-day grace period. Section 48(2) adds that the cover cannot be revoked during the registration period unless the registration itself is cancelled or surrendered.

Change of ownership

Section 52 provides that the cover “enures in favour of the owner for the time being and the driver of the vehicle, notwithstanding any change in the ownership of the vehicle”. A buyer who takes over a registered vehicle mid-year is covered without any endorsement. The definition of “owner” in section 1 follows the registration: the registered owner, or the purchaser once notice of the sale has been given under the traffic regulations, or, for an unregistered vehicle, the person entitled to immediate possession.

The premium

The premium is the consideration MVIL or its agent receives for undertaking the liability (section 1, as amended by the 1996 amendment Act). The amount is fixed under the regulatory arrangements administered by the ICCC rather than by the Act itself. Whatever it is, section 50 makes payment a condition of registration, and section 63 obliges an owner against whom a claim is made to state on demand whether the vehicle was insured.