Duty of insurers to satisfy judgements against persons insured in respect of third party risks
112. (1) If, after a certificate of insurance has been issued under sub section (2) of section 110 in favour of the person by whom a policy has been effected, judgement in respect of any such liability as is required to be covered by a policy under clause (b) of sub section (1) of section 110 being a liability covered by the terms of the policy is obtained against any person insured by the policy, then, notwithstanding that the insurer
may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder as if he were the judgement debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgements.
(2) No sum shall be payable by an insurer under sub section (1) in respect of any judgement unless before or after the commencement of the proceedings in which the judgement is given the insurer had notice through the Court of the bringing of the proceedings, or in respect of any judgement so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely:-
(a) that the policy was cancelled by mutual consent or by virtue of any provision contained therein before the accident giving rise to the liability, and that either the certificate of insurance was surrenderd to the insurer or that the person to whom the certificate was issued has made an affidavit stating that the certificate has been lost or destroyed, or that either before or not later than fourteen days after the happening of the accident the insurer has commenced proceedings for cancellation of the certificate after compliance with the provisions of section 122; or
(b) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely-
(i) a condition excluding the use of the vehicle-┬¼
(a) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or
(b) for organised racing and speed testing, or
(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or
(d) without side car being attached, where the vehicle is a motor cycle; or
(ii) a condition excluding driving by a named person or persons or by any person is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or
(iii) a condition excluding liability, for injury caused or contributed to by condition of war, riot or civil commotion; or
(c) that the policy is void on the ground that it was obtained by the non disclosure of a material fact or by a representation of fact which was false in some material particular.
(3) Where a certificate of insurance has been issued under sub section (2) of section 110 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons insured thereby by reference to any conditions other than those in clause (b) of sub section (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub section (1) of section 110, be of no effect:
Provided that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the policy by virtue only of this sub section shall be recoverable by the insurer from that person.
(4) If the amount which an insurer becomes liable under this section to pay in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person.
(5) In this section the expressions “material fact” and “material particular” mean, respectively, a fact or particular of such a nature as to influence the judgement of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions, and the expression “liability covered by the terms of the policy" means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy.
(6) No insurer to whom the notice referred to in sub section (2) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgement as is referred to in sub section (1) otherwise than in the manner provided for in sub section (2 ).