What Does Third Party Insurance Not Cover?

People are often surprised by what the compulsory cover leaves out. The list below is short, but each item has caught a claimant who assumed that “third party” meant “everything that happens to anyone else”.

Damage to vehicles and property

The cover in section 49(2) insures against liability “in respect of the death of or bodily injury to a person”. Nothing else. The written-off car, the demolished trade store, the dead pigs on the road, the cargo lost when a truck overturns — none of it can be claimed from MVIL under the Act. The owner of the damaged property must sue the negligent driver and owner directly, in the District Court or the National Court depending on the amount, and will recover only if they can pay or have their own insurance. Where personal injury and property damage arise from the same accident, the injured person sues MVIL for the injury and the driver and owner for the property; the two claims are commonly pleaded together, as in Kiak v Tora Enterprises Pty Ltd [1986] PGLawRp 371; [1986] PNGLR 265, where the plaintiff recovered for his vehicle and other property against the first defendant only.

The owner-driver’s own injuries

An owner who is injured while driving his own vehicle has no claim on the cover. In Kiak v Tora Enterprises the National Court held that “liability” and “indemnity” in sections 49 and 51, read in context, can only mean liability to another person; a person cannot be indemnified against his own loss. A driver injured through his own fault, or through a mechanical failure nobody else caused, therefore bears his own loss. If the accident was caused by another vehicle, the owner-driver is a third party in relation to that vehicle and claims against MVIL on that vehicle’s cover — but must then prove that vehicle’s registration and insurance, as Kilte v Motor Vehicles Insurance (PNG) Trust [1992] PGNC 28; N1085 shows. The permutations are set out in a separate article.

The section 51 exclusions

Contractual liability. If a driver promises, by contract, to pay more than the law of negligence would require — a guarantee of safe arrival, a fixed sum on injury — the cover does not respond to the extra. It responds only to the liability that would have existed anyway in tort. This is why section 62, which voids terms in PMV contracts that reduce liability, and section 51(b), which excludes terms that increase it, sit comfortably together: the cover tracks the law of negligence in both directions.

Workers’ compensation. An employer’s statutory liability to pay workers’ compensation to its own employee under the Workers’ Compensation Act (Chapter 179) is not insured. That is a no-fault liability of the employer, separately insured under that Act. But the exclusion is narrower than it looks, because of section 54(7).

Section 54(7): compensation treated as damages

Section 54(7) provides that if the owner becomes liable in damages for the death or injury of a person who is a worker, then compensation under the workers’ compensation law “in respect of which a person is entitled to be indemnified by the owner or his estate is damages”. The effect is that an employer, or its compensation insurer, who has paid statutory compensation to an employee injured by a negligently driven insured vehicle can recover that payment from MVIL as part of the damages. The Supreme Court applied the principle in Motor Vehicles Insurance (PNG) Trust v Job Builders Pty Ltd [1992] PGLawRp 642; [1993] PNGLR 272: the employer’s right of indemnity arises at the time of the accident and becomes enforceable when the compensation is paid to the dependants. In Post & Telecommunication v Motor Vehicles Insurance (PNG) Trust [2003] PGNC 30; N2479 the National Court added that the indemnity provision in the Workers’ Compensation Act is not self-executing: the employer must plead and strictly prove the amounts paid.

No cover without fault

This is not an exclusion in the Act, but it is the gap most often misunderstood. The cover insures liability. If the driver was not negligent — a tyre burst without warning and the driver did all a competent driver could, as the plaintiff failed to disprove in Temai v Motor Vehicles Insurance (PNG) Trust [1994] PGNC 1; N1442 — there is no liability and nothing for MVIL to pay. The only no-fault payment in the scheme is the fixed Basic Protection Compensation on death, described later in the series.

Railways, the State and exempted vehicles

Vehicles used on a railway or tramway are outside the definition of “motor vehicle”. Vehicles owned by the State or a government authority are not “uninsured motor vehicles” even though no premium is paid for them; the State stands as its own insurer, and, where the Basic Protection Compensation Act applies, pays the award itself. The Act also allows classes of persons to be exempted from the duty to insure, and their vehicles are likewise excluded from the definition of uninsured vehicle.