Duty of insurers to satisfy judgements and awards against persons insured in respect of third party risks :

Where a judgement or an award has been given against a insured person in respect of a third party liability covered under the insurance policy, then, notwithstanding the rights or the insurer to avoid or cancel the insurance policy, the insurer shall be liable to pay to the person entitled to the benefit of decree (third party), as if the insurer were the judgement debtor, together with any amount payable in respect of costs and any sum payable alongwith interest.

However, no sum as above shall be payable by an insurer if notice of the bringing of any such proceedings in which the judgement or award is given, is given to insurer and the insurer can defend the action on the ground of breach of any of the following conditions in the policy document:

(a) Condition that the vehicle on the date of contract of insurance not covered by a permit to ply for hire or reward – if the vehicle was used for hire or reward

(b) For organised racing and speed testing

(c) For purposes not allowed by the permit under which vehicle is used where the vehicle is a transport vehicle

(d) Without side car being attached where the vehicle is a motor cycle

(e) Usage of car by an unlicensed person

(f) Condition excluding liability for injury caused or contributed by conditions of war, civil war, riot or civil commotion

(g) The policy was obtained by non disclosure of a material fact or by representation of a fact which was false in some material particular

A settlement between the insurer and insured shall be valid only if the third party is also made a party to the settlement contract. Insolvency of the insured person will not affect the liability of the insured or claims by third parties.