Liability Insurance
Public Liability Insurance Act
The Public Liability Insurance Act, 1991, was enacted in India to provide immediate relief to individuals and communities affected by hazardous activities of industries and businesses. This Act mandates that companies handling hazardous substances must have Public Liability Insurance to compensate victims in case of accidental harm, injury, or damage to property.
The Act ensures that businesses take responsibility for any unforeseen incidents, reducing the financial burden on victims and promoting safer industrial practices.
Why is the Public Liability Insurance Act Essential?
- Mandatory for Hazardous Industries – Businesses dealing with hazardous substances must have Public Liability Insurance under the Act.
- Provides Immediate Compensation – Ensures quick financial relief to victims of industrial accidents.
- Reduces Legal & Financial Burden on Businesses – Helps businesses handle liability claims efficiently.
- Ensures Environmental & Public Safety – Encourages businesses to maintain safety measures and prevent accidents.
- Covers Third-Party Injuries & Property Damage – Protects against liabilities arising from public claims.
Important Things You Should Note
- Applicable Only to Hazardous Industries – The Act is specifically for businesses handling hazardous substances.
- Insurance is Mandatory Under the Act – Companies must obtain Public Liability Insurance to operate legally.
- Compensation is Predefined – The Act specifies compensation amounts for death, injury, or property damage.
- A Special Environment Relief Fund is Maintained – A portion of insurance premiums contributes to this fund for compensating victims.
- Public Liability Insurance Act is Different from General Public Liability Insurance – The Act mandates insurance only for hazardous industries, whereas general Public Liability Insurance covers broader risks.
What is Covered & What is Not Covered?
What is Covered?
- Third-Party Bodily Injury/Death – Compensation to individuals affected by an industrial accident.
- Third-Party Property Damage – Covers damage to surrounding properties due to hazardous activities.
- Legal Expenses – Covers legal defense costs arising from liability claims.
- Immediate Relief to Victims – Compensation is provided as per the prescribed limits of the Act.
- Contribution to Environmental Relief Fund – Insurers pay a portion of premiums to this fund for additional relief.
What is Not Covered (Exclusions)?
- Employee Injuries – Covered under Workmen’s Compensation Insurance, not Public Liability Insurance.
- Intentional Violations – Claims due to deliberate negligence or illegal activities are not covered.
- Contractual Liabilities – Liabilities arising from breach of contracts are excluded.
- Gradual Pollution Damage – Only sudden and accidental incidents are covered; long-term pollution effects are excluded.
- Fines & Penalties – Regulatory fines imposed on businesses are not covered.
Frequently Asked Questions (FAQs)
Who is required to take Public Liability Insurance under the Act?
All businesses handling hazardous substances as per the Environmental Protection Act must obtain Public Liability Insurance.
Is Public Liability Insurance mandatory for all businesses?
No, it is mandatory only for businesses dealing with hazardous substances. Other businesses can opt for general Public Liability Insurance based on their risk exposure.
How is compensation determined under the Public Liability Insurance Act?
The Act specifies predefined compensation amounts for death, injury, and property damage. Additional compensation may be provided from the Environmental Relief Fund.
Can businesses get penalized for not having Public Liability Insurance?
Yes, non-compliance can result in penalties, fines, and legal actions, including suspension of business operations.
How is Public Liability Insurance different from General Liability Insurance?
Public Liability Insurance (General) provides coverage for third-party injury and property damage for all businesses, while the Public Liability Insurance Act is a legal requirement only for businesses handling hazardous substances.
Difference Between Public Liability Insurance & Public Liability Insurance Act
| Feature | Public Liability Insurance Act (1991) | Public Liability Insurance (General) |
|---|---|---|
|
Applicability |
Mandatory for businesses handling hazardous substances |
Available for all businesses but not mandatory |
|
Legal Requirement |
Yes, mandated under the 1991 Act |
No, but highly recommended |
|
Compensation Structure |
Predefined by law |
Based on policy terms & coverage limits |
|
Coverage Scope |
Only covers third-party risks from hazardous materials |
Covers third-party injury, property damage, and legal liabilities for various risks |
|
Government Involvement |
Contributions to the Environmental Relief Fund |
No government-mandated fund involvement |
