Public Liability Insurance**

Purpose of the Act

The Public Liability Insurance Act, 1991 (PLIA, 1991), is a crucial piece of environmental legislation in India enacted in the wake of the Bhopal Gas Tragedy of 1984. This disaster highlighted the devastating consequences of accidents involving hazardous substances and the difficulties faced by victims in getting timely compensation. The Act was specifically designed to address this gap by creating a mechanism for providing immediate financial relief to victims.

To provide for public liability insurance for providing immediate relief to victims of accidents arising from handling of hazardous substances

The core purpose and objective of the Public Liability Insurance Act, 1991, as articulated in its preamble, is precisely this: "to provide for public liability insurance for the purpose of providing immediate relief to the persons affected by accident occurring while handling any hazardous substance and for matters connected therewith or incidental thereto."

This objective can be broken down into key components:

Public Liability Insurance: The Act makes it mandatory for anyone handling hazardous substances (defined later) to take out an insurance policy that covers their liability towards the public in case of an accident. This insurance provides a guaranteed source of funds for compensation.
Immediate Relief: The Act prioritises providing quick financial assistance to victims of accidents involving hazardous substances. This 'immediate relief' is intended to help victims cover initial medical expenses, loss of wages, or other urgent needs without waiting for a lengthy legal process to determine fault or the full extent of damages.
Victims of Accidents: The Act applies to persons who suffer death or injury (or damage to property) as a result of an accident occurring while handling hazardous substances. The focus is on the public who are exposed to the risks posed by such activities.
Handling of Hazardous Substances: The Act's applicability is triggered by accidents that occur during the 'handling' of substances defined as hazardous under the Act. 'Handling' is defined broadly to include manufacturing, processing, treatment, packaging, storing, collecting, transporting, using, offering for sale, distribution, import, and export of hazardous substances.

In essence, the PLIA, 1991, establishes a statutory "no-fault liability" regime (discussed in detail later) backed by mandatory insurance, ensuring that a certain level of financial compensation is immediately available to victims of accidents involving dangerous chemicals and materials, irrespective of the cause of the accident or the negligence of the owner.

Definition of Hazardous Substance (Section 2(d))

The applicability of the Public Liability Insurance Act, 1991, hinges on whether an accident involves a substance defined as "hazardous" by the Act. The Act provides a specific definition for this term.

Section 2(d) of the Public Liability Insurance Act, 1991, defines "hazardous substance" as follows:

"'hazardous substance' means any substance or preparation which is defined as hazardous substance in the Environment (Protection) Act, 1986, and where the quantity of such substance or preparation is in excess of such quantity as may be specified by the Central Government by notification."

This definition links the PLIA, 1991, directly to the broader definition of hazardous substances under the Environment (Protection) Act, 1986 (EPA, 1986). Section 2(e) of the EPA, 1986, defines "hazardous substance" as:

"any substance or preparation which, by reason of its chemical or physical properties or handling, is liable to cause harm to human beings, other living creatures, plant, micro-organism, property or the environment."

The Central Government has the power to notify specific substances as hazardous under the EPA, 1986. Various rules framed under the EPA, such as the Manufacture, Storage and Import of Hazardous Chemicals Rules, 1989 (and subsequent versions), list numerous hazardous chemicals and define threshold quantities. The PLIA, 1991, adopts this list.

However, the PLIA definition adds a crucial rider: the quantity of the hazardous substance must be in excess of such quantity as may be specified by the Central Government by notification. This means that not just any amount of a hazardous substance triggers the Act's provisions, but only quantities exceeding certain thresholds. These threshold quantities are specified in the Public Liability Insurance Rules, 1991 (and amendments). For example, the Rules specify minimum quantities for various hazardous substances (e.g., 5 tonnes for chlorine, 10 tonnes for ammonia) above which the owner is required to take the mandatory insurance.

Therefore, for the purpose of the PLIA, 1991, a substance is "hazardous" if it is notified as hazardous under the EPA, 1986, AND it is handled in quantities exceeding the thresholds specified in the Public Liability Insurance Rules.

Mandatory Insurance

A key mechanism introduced by the Public Liability Insurance Act, 1991, to ensure the availability of funds for immediate relief is the requirement of compulsory insurance. This shifts the financial burden for initial compensation from the owner's immediate cash flow to an insurance provider.

No owner shall handle any hazardous substance without the insurance

Section 4(1) of the Public Liability Insurance Act, 1991, imposes this mandatory requirement:

"Every owner shall take out, before he starts handling any hazardous substance, one or more insurance policies providing for contracts of insurance whereby he is insured against liability to give relief under sub-section (1) of section 3:..."

This provision makes it legally binding for any 'owner' (defined as a person who owns, has control over, or is in possession of a hazardous substance) who intends to handle a hazardous substance in quantities exceeding the thresholds specified in the Rules, to first obtain a valid Public Liability Insurance policy. The phrase "before he starts handling" implies that the insurance must be in place even before commencing activities involving the hazardous substance.

The insurance policy must cover the owner's liability to provide 'immediate relief' to victims as stipulated by the Act (Section 3(1) deals with the owner's liability). The Act also provides that the Central Government may, by notification, require owners to pay a specified sum to the Environment Relief Fund established under the National Green Tribunal Act, 2010, which can be used for providing relief in certain cases (Section 7A of PLIA, 1991, as amended, linking to NGT Act).

The amount of mandatory insurance cover is prescribed in the Public Liability Insurance Rules, 1991, and is based on the paid-up capital of the undertaking handling the hazardous substance, subject to minimum and maximum limits per accident and per site. As per the Public Liability Insurance Rules, 1991 (as amended), the minimum sum for which an insurance policy is to be taken is ₹10 crore, and the maximum is ₹50 crore. The capacity per accident is capped at ₹10 crore. If the liability exceeds the insurance cover, the owner remains personally liable. The rules also require a compulsory contribution to the Environment Relief Fund based on the amount of insurance premium.

Failure to take out the mandatory insurance is an offence punishable under the Act (Section 14), which can lead to imprisonment or fines. This mandatory insurance requirement is a critical safety net designed to ensure that funds are readily available to provide immediate assistance to victims of chemical accidents.

No Fault Liability

One of the most significant features of the Public Liability Insurance Act, 1991, is the principle of No-Fault Liability, also known as Strict Liability. This principle simplifies the process for victims to receive immediate relief by removing the requirement to prove negligence on the part of the owner.

Owner is liable to pay relief without proving fault of the owner

Section 3(1) of the Public Liability Insurance Act, 1991, establishes the principle of no-fault liability:

"Where death or injury to any person (other than a workman) or damage to any property has resulted from an accident, the owner shall be liable to give such relief as is specified in the Schedule, for such death, injury or damage."

The crucial aspect here is that the liability to provide relief is triggered simply by the occurrence of an accident involving the handling of a hazardous substance which results in death, injury, or property damage. There is no requirement for the victim to prove that the accident occurred due to the fault, negligence, or wrongful act or omission of the owner or any other person.

This is a departure from the traditional law of torts, where a claimant seeking compensation for harm typically needs to prove negligence. The principle of strict liability holds the owner responsible simply because they are engaged in an activity that is inherently dangerous (handling hazardous substances), and an accident causing harm has occurred. The focus shifts from the 'blame' to the 'risk' associated with the activity.

This principle was significantly influenced by the Oleum Gas Leak case (M.C. Mehta vs. Union of India, 1986), which followed the Bhopal tragedy and where the Supreme Court of India evolved the principle of 'absolute liability' for enterprises engaged in hazardous activities, stating that such enterprises must be strictly and absolutely liable to compensate all those affected by any accident, regardless of whether they took reasonable care.

Under the PLIA, 1991, a victim only needs to demonstrate that:

An accident occurred.
The accident involved the handling of a hazardous substance (as defined by the Act and Rules).
They suffered death or injury (or property damage) as a result of that accident.

Once these facts are established, the owner is legally obligated to provide immediate relief as per the Schedule of the Act, without being able to raise defences like "it was an unavoidable accident," "act of God," or "act of a third party," which might be available under traditional negligence law.

This no-fault liability system, backed by mandatory insurance, ensures that victims receive at least basic financial support quickly, alleviating their immediate hardship without getting entangled in protracted legal battles over proving negligence.

Relief Amount

The Public Liability Insurance Act, 1991, and the Public Liability Insurance Rules, 1991 (as amended), specify the fixed amounts of immediate relief that must be paid to victims of accidents involving hazardous substances. These amounts are listed in the Schedule to the Act and the Rules.

Amount payable for death and injury

The Schedule appended to the Public Liability Insurance Act, 1991, lists the types of damage and the fixed amounts payable as 'immediate relief' for each category. These amounts are minimum mandatory payments under the no-fault liability principle and are paid out from the mandatory insurance policy taken by the owner.

The typical amounts specified in the Schedule (these amounts are subject to revision by the Central Government through amendments to the Rules) for death and injury are:

For Death: A fixed sum is payable to the legal representatives of the deceased. For example, as per updates to the Rules over time, this amount for immediate relief in case of death has been revised to around ₹25,000 per person (this was initially ₹25,000 and may have been revised subsequently by further amendments to the Rules). Note that this is immediate relief, not the final compensation. An additional amount, such as ₹12,500, may be reimbursed for medical expenses, and ₹1,000 for funeral expenses, as per Rule 7 of the Public Liability Insurance Rules, 1991 (as amended).
For Permanent Total Disablement: A fixed sum is payable. This amount is typically equivalent to the sum payable for death (e.g., ₹25,000).
For Permanent Partial Disablement: A fixed sum is payable, usually half of the amount payable for death (e.g., ₹12,500).
For Temporary Partial Disablement: Weekly payments are made for the period of disablement, usually up to a maximum number of weeks, or a lump sum payment. The Rules specify a fixed weekly rate (e.g., ₹125 per week) for a maximum number of weeks (e.g., 24 weeks), along with medical expenses reimbursement up to a certain limit (e.g., ₹12,500).
For Medical Expenses: Reimbursement of actual medical expenses incurred for treating injuries, up to a specified maximum limit (e.g., ₹12,500).

These amounts represent the minimum immediate relief payable to the victims. The Act clarifies (Section 3(2)) that the payment of this immediate relief does not prevent the victim from claiming further compensation for the damage through a separate legal process, such as filing a case before the National Green Tribunal (NGT) or a civil court, where the full extent of the damage and liability can be assessed, and higher compensation might be awarded based on the principle of absolute liability.

The purpose of these specified amounts is to provide quick and standardised financial aid in the immediate aftermath of an accident, without requiring detailed assessment of individual losses or lengthy legal proceedings for the initial payment.