Compulsory third party liability (CTPL) insurance

Since the compulsory third party liability (CTPL) insurance was the issue in the news "Non-life insurance firms raise howl over DOTC order", I think we better discuss it.

First, let’s dissect the phrase.  Three (3) elements are involved:

Compulsory means mandatory or required.

Third party.  In insurance, the first party is the "insurer"; and the second party is the "insured".  Do you remember them?  Click here.  Therefore, the third party is any party other than the insurer or insured.

Liability.  It’s a pecuniary obligation for death or bodily injury or harm done to a third party.

In short, it is a mandatory insurance for a possible liability to a third party. 

Who or what requires it?

The LAW (Chapter VI of the Insurance Code of the Philippines - ICP) requires a vehicle owner to secure a third party liability (TPL) insurance as a prerequisite to the registration of a motor vehicle with the Land Transportation Office (LTO)

Who really is a third party?

It was earlier discussed that any person other than the insurer and insured is a "third party".  But wait!  The motor car insurance policy qualifies other parties that do not fall within the ambit of a third party.

Pursuant to Section 373 (c), Chapter VI of the ICP, the motor car policy defined third party;

THIRD PARTY shall refer to any person other than a PASSENGER as defined in the law and shall also exclude a member of the household, or a member of the family within the second degree of consanguinity or affinity of the vehicle owner, or his employee in respect of death, bodily injury, or damage to property arising out of and in the course of employment. 

Are your friends or other persons, who are not your relatives, riding in your car considered third parties or passengers?

Answer:  They are considered third parties and not passengers.   In the definition of a third party, it didn't mention where the third party should be.  Whether they are inside or outside your car, they are third parties.

Passenger, on the other hand, is defined in (Section 373 (c) Chapter VI of ICP):

"Passenger" is any fare paying person being transported and conveyed in and by a motor vehicle for transportation of passengers for compensation, including persons expressly authorized by law or by the vehicle's operator or his agents to ride without fare.

In the definition, a person to be considered as passenger, it must be:

• Paying a fare, and
• On board a public utility vehicle.

Here, it mentioned where the passenger should be - on board the PUV.  Once the passenger arrived in its destination and got off the PUV, it became a third party.

Person on board a private vehicle is not a passenger.

What liability is covered?

It covers the liability of the insured in respect of the bodily injury and/or death of any THIRD PARTY in an accident caused or arising out of the use of the insured vehicle.  As such, the insurer will pay, subject to the limits of liability, all sums necessary to discharge the insured from liability.  Liability for loss or damage to property is not covered.

It is primarily intended to provide compensation for the death or bodily injury suffered by an innocent third party as a result of the operation and use of motor vehicle.  It assures the victim and or his/her dependent/s of immediate financial assistance, regardless of the financial capacity of the motor vehicle owner.

How much is the insurance coverage? 

The current CTPL coverage is P100,000.00.  Previously, the coverage was for P50,000.00 only and the increase took effect last year.  Despite the 100% increase in coverage, the premium rates remain the same in view of the good loss experience of the industry.

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Should you need further clarifications, have question/s, find an error, disagreed with the views and opinions, and/or wish to give a suggestion, kindly don't hesitate to leave comments or email at insurance@i.ph or insurance.i.ph@gmail.com