Insurance Article, The Insurance Times 2022, The Insurance Times May 2022

Overview of Public Liability Insurance Act, 1991

The advent of the industrial revolution has brought about the social impact of accidents in manufacturing plants. With the evolution of sophisticated manufacturing product lines and use of hazardous chemicals, the risk for humans is high. According to the recent report published by the National Disaster Management Authority (NDMA), 130 major chemical accidents have been reported in the last decade, resulting in 259 deaths and 563 injuries.

Majority of the people affected due to such industrial accidents are found to be from the economically weaker sections and suffer huge financial hardships as they get delayed relief and compensations. However, workers of industrial units are protected under Workmen Compensation Act,1923, but there is no such protection for the affected public.

We are aware that worst industrial disaster in the world happened on a cold winter night in the early hours of 3rd December, 1984 in Bhopal. Nearly 25,000 people died in that incident and lakhs of people were injured.

A need to enact one Statute law was felt by Government of India after that event. The Public Liability Insurance Act (PLIAct), 1991 has been enacted and effected from 01st April, 1991. The object of this Act is to provide through INSURANCE immediate relief by Owners to persons affected due to accidents while handling hazardous substances on NO FAULT LIABILITY basisi.e., claimant need not be required to establish that the death, injury or damage in respect of which the claim has been made was due to any wrongful act, neglect or default of any person.

The definition of Owner includes any Firm or its partners,Association or its members, Company or its Directors and all other persons associated and responsible to that Company in the conduct of their business and also covers any person who owns or has control over any hazardous substance at the time of accident.

According to Section 4(2A) of the PLI Act, Insurance Policy is to be purchased by the owner for an amount up to the paid-up capital of the Undertaking but not exceeding Rs.50 Crores. But as per Rule 10 framed under the Act provides that the maximum aggregate liability of the Insurer to pay relief under an award to the several claimants arising out of an accident shall not exceed Rs.5crores (AOA) and in case of more than one accident during the currency of the policy shall not exceed Rs.15 crores(AOY) in the aggregate.

In case of claims exceeding this statutorylimits, it is to be met by Environmental Relief Fund (ERF) set up under Sec. 7A of the Act and managed by the Authority appointed by the Central Government. The liability beyond the total insurance and the Relief/Fund is to be borne by the OWNER.

Environmental Relief Fund (ERF) is created by contribution of equal amount of premium charged and collected from the Owner by the Insurance Company.

Schedule of Compensation.

Section 3 (1) of PLIAct, 1991 provides Relief in the following scale:

Sl.No. Impact of accident Quantum of Relief per person Additional: Actual Medical Expenses incurred  per person
1 Death Rs.25,000/- Rs.12,500/-
2 Permanent Total Disability Rs.25,000/- Rs.12,500/-
3 Permanent Partial Disability Amount of Relief on the basis of %age of disablement as  certified by Registered medical practitioner Rs.12,500/-
4 Temporary partial disablement which reduces the earning capacity of the victim Fixed monthly Relief not exceeding Rs.1,000/- per month up to a maximum of 3 months, provided the victim has been hospitalized for a period exceeding 3 days and is above 16 years of age. Rs.12,500/-
5 Actual Damage to property Up to Rs.6,000/- Not applicable

How to get relief under this act:

Under Section 6 of the PLI Act, 1991, an application for claim for relief to be made in prescribed form to the Collector of the District within 5 years of the occurrence of the accident by the person or legal representative of the deceased or by the owner of the property damaged by accident.

On receipt of application, the Collector would hold an inquiry in to the claim and make an award determining the amount of relief and specifying the person to whom such amount of relief to be paid.

Thereafter, the collector arranges to deliver copies within 15 days from the date of award and Insurer deposits the amount within a period of 30 days from the date of announcement of award.

The Collector would arrange to pay from the Relief Fund, in terms of such award and in accordance with the Scheme made under the Act to the claimants.

Introduction of ERF Scheme:

In 2008, the Central Government has notified and established “The Environment Relief Fund Scheme” known as ERF Scheme and United India Insurance Co. Ltd. was appointed as its Fund Manager. The funds existing in the custody of various Insurance Companies at the time of notifying the Scheme was transferred to ERF Scheme and subsequently the same Insurance Company remains Fund Manager. The contribution collected from the owner at the time of collection of premium by the Insurance Companies are transferred in the ERF Scheme. The Fund Manager is obliged to submit the annual statement of accounts on the management of funds to the Central Government. The quantum of this fund as on March,2019 was over Rs. 800 Crores.

Introspection:

When the Public Liability Insurance Bill was introduced in parliament, and when subsequent amendment bills came up for discussion, a key suggestion was “to increase the amount of relief”. As a matter of fact, this relief amount is negligible when compared with the present day expenses as well as the quantum of relief provided in other types of accidents.

Let us examine the provisions of Statutory law pertaining to liability under The Motor Vehicles Act (M.V.Act),1988, Workmen Compensation Act (W.C.Act), 1923, The benefits/relief are also on NO FAULT LIABILITY  basis.

M.V. Act, 1988 have been revised in 2019. Nomenclature of Workmen Compensation Act, 1923 has been changed to Employees’ Compensation Act, 2009 with increased benefits and benefits have again been revised upwards in 2020. Let us discuss provision of quantum of liability say, only for Death and Permanent Total Disablementunder these two acts:

  1. Under No fault Liability of Motor Vehicles Act,1988, Death benefit was Rs.50,000/ and Permanent Total Disablement was Rs. 25,000/-; In 2019,it has been increased to 5,00,000/- for Death and Rs.2,50,000/- due to Permanent Total Disablement, i.e. quantum of compensation has been increased by 10 times.
  2. Scale of Compensation under W.C. Act, 1923 varies with age, last drawn wages before the accident and”Relevant factor”( one multiplier varies with age provided under the act; compensation is derived multiplying that factor with the last drawn wages by the employee before the accident). Under W.C Act, 1923 maximum wages considered to calculate the Compensation for Death was Rs.4,000/-; it has been enhanced to Rs.8,000/- in 2009 and again revised to Rs.15,000/- in 2020. With the increase of wages, Compensation amount is also increased. Accordingly, at present, the compensation for Death, Permanent Total Disablement and other benefits have been increased nearly by four times.

Way Forward:

  • To increase the quantum of Relief: Taking a cue from the above introspection, it is of utmost importance to enhance the Relief under different contingencies of PLIAct at least AT PAR with the No Fault compensation provided under Motor Vehicles Act, 2019.
  • Upward Revision of Indemnity Limit: Once the quantum of Relief per person is increased, Insurance coverage is requiredto be increased suitably for AOA limit and AOY limit.
  • Widening the Scope of the Act: The selective use of “Transportation by Vehicle” excludes transportation of hazardous substances by other modes like air, railways and ships. The act should include transportation by all such modes.
  • Ensuring Compliance: The Public Liability Insurance Act administered by the Ministry of Environment, Forest and Climate Change(MoEFCC) would monitor and ensure that Industries handling hazardous substances purchase this insurance.Creating digital awareness campaign help increase the level of compliance. In addition to that, information on status of PLIAct-insurance should be available in the website of the respective organizations handling hazardous substances.

It has to be kept in mind that PLI Act is a piece of welfare legislation and its purpose is to provide prompt and adequate relief to the persons suffering from such accidents. Modifications of Public Liability Insurance Act,1991 is the need of the hour.

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