Page 420 - IC38 GENERAL INSURANCE

K. Liability Policies

Accidents cannot be avoided altogether, however careful a person is. This could

result in injury to oneself and damage to one‟s property and also may
simultaneously cause injury to third parties and damage to their property. The
persons thus affected would claim compensation for such loss.

A liability could also arise from a defect in a product manufactured and sold,

say chocolates or medicines, causing harm to the consumer. Similarly, liability
could arise from wrong diagnosis / treatment of a patient or from a case

improperly handled by a lawyer for his client.

In all such cases, where a third party, consumer or the patient would demand

compensation for the alleged wrong doing, it would raise a need for payment of
compensation or meeting expenses involved in defending the suits filed by the

claimants. In other words there is a financial loss arising from a liability to pay.
The existence of such a liability and the amount of compensation to be paid

would be decided by a civil court which would go into the aspect of alleged
negligence / fraud. Liability insurance policies provide coverage of such

liabilities.

Let us look at some of the liability policies.

Statutory liability

There are certain laws or statutes which provide for the payment of
compensation. The laws are:

 Public Liability Insurance Act, 1991 and
 Employees Compensation Act 1923 amended in 2010

Insurance policies are available for protection in respect of such liabilities. Let
us look at some of them.

1. Compulsory Public Liability Policy

The Public Liability Insurance Act, 1991 imposes liability on no fault basis on
those who handle hazardous substances if a third party is injured or his property

is damaged during the course of such handling. The names of hazardous
substances and the quantity of each, is listed in the 'Act'

The amount of compensation payable per person is fixed as shown below.

Compensation payable

Fatal Accident Rs. 25,000
Permanent Total Disability Rs. 25,000
Permanent Partial Disability % of Rs. 25,000 based on % of disability
Temporary Partial Disablement Rs. 1000 per month, maximum 3 months
Actual Medical Expenses Upto a maximum of Rs. 12,500
Actual damage to property up to Rs. 6,000

414