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Automobile Insurance: General Overview
Most automobile insurance contracts are schedule contracts that permit the insured to purchase both property and liability insurance under one policy. The contract can be divided, however, into two separate parts, one providing insurance against physical damage to automobiles , and the other protecting against potential liability arising out of the ownership , maintenance, or use of an automobile.
Types of contracts: Two standard automobile insurance contracts can be used by businesses.
The first is the business auto policy( BAP), designed for corporations and partnerships insuring any type of automobile (e.g., private passenger automobiles, trucks, or taxis) or for sole proprietors insuring any automobile other than a private passenger automobile.
The second contact is the personal auto policy (PAP), designed primarily for non business automobile, but which sole proprietors can purchase to insure private passenger automobiles used in their businesses. The major provisions of these two policies are discussed below.
Vehicle Insurance against Third Party Risks
According to the preamble of Proclamation No 559/2008, at present, the occurrence of accidents caused by vehicles is escalating from time to time. For this very reason the loss of lives, bodily injuries, and damages to properties caused by vehicle accident are creating social problem, much so that it is necessary to establish a system for facilitating the provision of emergency medical treatments to victims of vehicle accidents, and to require owners of vehicles to have third party insurance coverage against third party risks.
To have clarity of understanding, article 10(10) of the Proclamation defines ―Third Party‖ as any person other than the insured person‘s family, the driver or any person employed on a vehicle to which an insurance policy applies at the time when an accident occurred giving liability under such insurance policy.
In line with the above preamble, article 3 of the same proclamation stipulates that:
1, No person shall drive or cause or permit any other person to drive a vehicle on a road unless he has a valid vehicle insurance coverage against third party risks in relation to such vehicle.
2, Notwithstanding the provision of sub article 1 of this article, the Ministry may determine vehicles to operate on the road without requiring compulsory motor vehicle insurance coverage.
As to restrictions on the scope of application of insurance policy, article 5 provides: A certificate issued in accordance with this proclamation shall not make restrictions on the obligations of the insurer to pay compensation on grounds of:
- the age, physical or mental conditions of the person driving the vehicle;
- the conditions, the horsepower, cylinder capacity or value of the vehicle;
- the number of persons, the carrying of any particular apparatus, weight or physical characteristics of the goods, that the vehicle carries; or
- the time at which or the area within which the vehicle is used.
In line to the above legal orientation of vehicle insurance against third party risks, according to article 6(1), any condition in vehicle insurance policy providing; no liability shall arise under such policy; or any liability so arising shall cease in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy, shall be no effect.
Nothing in sub-article (1) of this article shall be deemed to render void any provision in any such policy requiring the person insured to repay the insurer any sum which latter may have become liable to pay under the policy, and which have been applied to the satisfaction of the claims of third parties.
According to article 7 of the same proclamation, the following shall be excluded from the coverage of any insurance policy against third party risks:
- death or bodily injury to the insured person or member of the insured person‘s family;
- liability in respect of death or bodily injury caused to a person hired by the insured person and occurred in the course of such employment;
- damage to the insured vehicle;
- liability in respect of damage to goods carried on the basis of rent or payment on the insured vehicle; and
- damage to any property owned by or is under the custody of the insured person.
As it is clearly indicated under articles 9, 12, and 13 of the proclamation, an insurance company shall issue a certificate of insurance to third person at the same time it issues an insurance policy and insurance stickers. The absence of an insurance sticker shall constitute a prima facie evidence that the vehicle has not been insured and the police shall have the power to detain such vehicle until the appropriate certificate of insurance presented.
When we come to the obligation of the insured, article 15 provides;
The Insured shall secure insurance coverage for liabilities arising from;
1, collision, roll, fire or explosion caused by the insured vehicle; and
2, the fall of objects carried by the vehicle, its accessories or tools being used in connection with the vehicle.
As to the extent of liability, article 16 clearly stipulates that:
- the amount of compensation due to damage caused by an insured vehicle shall exceed:
- a, Birr 40,000 (forty thousand) in the case of death;
- b, Birr 15,000 (fifteen thousand) in the case of bodily injury; and
- c, Birr 100,000 (one hundred thousand) in case of damage to property.
- Any person who alleges to be entitled to compensation above the limit provided for under sub-article (1) of this article shall have the right to claim the same from the insured person in accordance with the relevant laws.
This proclamation also provides insurance fund. According to article 19 an insurance fund is a permanent financial source to be deposited in a special bank account to be opened in the National Bank of Ethiopia. The ojective of the fund shall be [article 20]:
- to provide emergency medical treatment to any person injured by any vehicle accident; and
- to provide compensation to a third party victim of an accident inflicted by uninsured or unidentified vehicle.
At this juncture it is important to note that the fund shall be drawn from insurance tariffs, and the rate of insurance tariffs to be collected as per the provisions of sub-article(1) of this article shall be determined by the Government on the basis of studies conducted by the Board.[article 23]
The treatment of Foreign Registered Vehicles is provided under article 33 of the proclamation as follows:
1.The driver of any foreign registered vehicle permitted to be driven on the roads of Ethiopia shall possess a valid certificate of insurance and insurance sticker or, where the insurance policy is not issued by a local insurance company, he shall produce a yellow card or an equivalent proof of insurance coverage.
2.The insurance coverage against third party risks with respect to an accident caused by any foreign registered vehicle while driven on the Ethiopian road shall not be less than the amount of compensation specified under Article 16 of this proclamation.
For your information, ―Yellow Card‖ means a certificate issued for the payment of compensation as per the protocol signed in relation to vehicle insurance against third party risks by member states of the Common Market For Eastern and Southern Africa.
In relation to Emergency Treatment, article 34 stipulates that:
- Any person who has sustained injury caused by a vehicle accident shall be entitled to emergency medical treatment costing up to Birr 1,000 whether he is a third party or not as defined under this proclamation.
- Any medical institution shall have the duty to provide emergency medical treatment to a victim of a vehicle accident when approached by such victim.
- The medical institution shall be entitled to claim its fees for the medical treatment directly from the insurer or from the fund as provided under article 24 of this Proclamation.
Finally, on the basis of article 37 of the proclamation, unless otherwise a maximum penalty is incorporated in the Penal Code, any person who violates the provisions of this Proclamation or Regulations issued pursuant to this proclamation shall be fined from Birr 3,000 (three thousand) up to Birr 5,000 (five thousand) or with imprisonment from one year up to two years.