What Is Compulsory Third Party Insurance in Papua New Guinea?

Most people in Papua New Guinea meet the phrase “third party” once a year, as a line on the registration bill at the Motor Traffic Registry. Few know what it buys. This article explains the scheme that sits behind that line, because it decides who a person injured on the road can sue, how quickly they must act, and how much they can recover.

Who is the “third party”?

In an insurance contract the first party is the insured and the second party is the insurer. The third party is everyone else — the pedestrian, the passenger, the driver of the other vehicle, the family of a person killed. Compulsory third party insurance protects those people. It does this indirectly: it insures the owner and driver against the liability they incur to others, so that when a court finds a driver negligent there is an insurer standing behind the judgment.

It is not comprehensive insurance. It pays nothing for damage to your own vehicle, nothing for damage to the other vehicle, and nothing for your own injuries if you were the owner driving your own car. Those things need a separate policy from a commercial insurer.

Why it is compulsory

Section 48(1) puts the duty on the owner: at all times during the registration of the vehicle the owner must “indemnify himself and keep himself indemnified” with the insurer against the sums for which the owner may become liable in damages for the death of or bodily injury to a person caused by, or arising out of the use of, the vehicle. Driving an uninsured vehicle is an offence under section 59.

The Act makes compliance almost automatic by tying the insurance to registration. Under section 50 the Superintendent of Motor Traffic must not register or re-register a motor vehicle unless the third party premium has been paid, or, outside the Central Traffic Registry area, unless a certificate from the insurer’s agent shows it has been paid. A vehicle that is lawfully registered is therefore an insured vehicle. That is why the cases turn so often on proof of registration: registration is the practical proof of insurance.

One insurer for the whole country

Unlike most insurance markets, compulsory third party cover in Papua New Guinea is issued by a single body. From 1974 that body was the Motor Vehicles Insurance (PNG) Trust. Since 1 January 1999 it has been Motor Vehicles Insurance Limited, universally known as MVIL, which the Act calls the “successor company”. The next article traces that history. For the injured person the consequence is simple: there is only one insurer to notify and only one insurer to sue.

The claim goes to MVIL, not the driver

Here the Act departs from ordinary insurance law. Normally an injured person sues the negligent driver, and the driver’s insurer pays behind the scenes. Section 54(1) reverses this. Any claim for damages for death or bodily injury caused by or arising out of the use of an insured motor vehicle “shall be made against the successor company and not against the owner or driver”, and proceedings to enforce the claim are taken against MVIL, not against them. The Supreme Court described the effect in Rundle v Motor Vehicles Insurance (PNG) Trust (No 1) [1988] PGSC 28; [1988-89] PNGLR 20: the right to proceed against the insurer is a right given by statute, and its limits must be found in the statute.

Two of those limits matter more than any other. First, no action lies unless a written notice of intention to claim is given to MVIL within six months of the accident, or within such further period as the Insurance Commissioner or the court allows (section 54(6)). Second, MVIL’s liability is capped at K150,000 for any one person and K750,000 for any one accident (section 49(2)). Both are explained in this series: see the section 54 notice and what happens when damages exceed the limit.

Fault is still required

Third party insurance is not a no-fault scheme. MVIL stands in the shoes of the owner and driver, so the claimant must prove what they would have had to prove against the driver: negligence, causation and loss. The National Court put it in three steps in Moses v Motor Vehicles Insurance (PNG) Trust [1993] PGLawRp 509; [1993] PNGLR 63: there must be an accident; the vehicle must be properly identified; and there must be injury or death caused by negligence. If the driver was not negligent, MVIL owes nothing.

The one no-fault element in the scheme is separate and small. The Motor Vehicles (Third Party Insurance) (Basic Protection Compensation) Act (Chapter 296) pays a fixed sum, now K10,000, to the dependants of a person killed by a motor vehicle “without regard to any concept of negligence”. It is covered in the death claims section of this series.

The scheme in one paragraph

Every registered vehicle carries a cover issued by MVIL. The cover insures the owner and whoever is driving against liability for death or bodily injury to others, up to fixed limits. A person injured by the vehicle claims against MVIL, not the driver, must notify MVIL in writing within six months, must prove negligence, and can recover damages up to the cap, with interest and costs on top. If someone is killed, a small fixed payment is available without proof of fault, and a larger dependency claim can be made through the courts.