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Public Liability Insurance

t he growth of the hazardous industries, processes and operations in India has been accompanied by the growing risks of accidents, not only to the workmen employed in such undertakings, but also to the innocent members of the public who may be in the vicinity. Such accidents lead to death and injury to human beings and other living beings and damage private and public properties. Very often, the majority of the people affected is from economically weaker sections and suffer great hardships because of delayed relief and compensation. While workers and employees of hazardous installations are protected under separate laws, members of the public are not assured of any relief except through long legal processes. Industrial units seldom have the willingness to readily compensate the victims of accidents. It is, therefore, essential to provide for mandatory public liability for installations and handling of hazardous substances to provide minimum relief to the victims. Such insurance, apart from safeguarding the interests of the victims of accidents, would also provide cover and enable the industry to discharge its liability to settle large claims arising out of major accidents. If the objectives of providing minimum relief are to be achieved, the mandatory public liability insurance should be based on the principle of ‘no-fault’ liability (absolute liability) as it is limited to grant of relief on a limited scale. However, the availability of immediate relief should not prevent the victims to go to courts for claiming larger compensation.

The Public Liability Insurance Act 1991, has been enacted with the object of providing immediate relief to the victims of accidents that might occur while handling of hazardous substances. The owner who has control over handling of hazardous substances is required under the Act to pay specified amounts to the victims as interim relief based on ‘no-fault’ liability. The Act stipulates the maximum compensation for injury or death at Rs. 25,000 and limits compensation in respect of damage to private property to Rs. 6000. The right of a victim to claim additional relief under any other law is expressly reserved. The Act makes it mandatory for every owner handling hazardous substances to take out insurance policies covering potential liability from an accident. An ‘accident’ is defined to cover a sudden unintended occurrence while ‘handling’ any hazardous substance resulting in continuous, intermittent or repeated exposure leading to death or injury to any person, or damage to property or the environment. Accidents by reason of war or radio-activity are excluded from the scope of the Act.