Liability Insurance

LIABILITY INSURANCE BY R.R.JOSHI HISTORICAL BACKGROUND     PUBLIC LIABILITY INSURANCE ORIGINATED IN THE U.K.WHEN THE FIRST POLICY WAS ISSUED IN 1875TO COVER T.P. LIABILITY ARISING OUT OF THE USE OF HORSE DRIVEN CARRIAGES EMPLOYER’S LIABILITY INSURANCE WAS A RESULT OF THE EMPLOYERS’ LIABILITY ACT,1880 AND W.C.ACT’1897 PRODUCT LIABILITY AND PRFESSIONAL INDEMNITY ORIGINATED IN THE EARLY 20th CENTURY IN INDIA, W.C.ACT AND M.V.ACT PAVED THE WAY FOR LIABILITY INSURANCE BASIC PRINCIPLES       POLICY WILL INDEMNIFY THE INSURED TO THE EXTENT OF THE AWARD AMOUNT PLUS CLAIMENT’S COST PLUS DEFENCE COSTS SUBJECT TO THE LIMIT OF LIABILITY UNDER THE POLICY LIMITS OF INDEMNITYAOA=ANY ONE ACCIDENT AOY=ANY ONE YEAR PRINCIPLE OF UGF- A POLICY CONDITION INSURABLE INTEREST / INDEMNITY SUBROGATION/CONTRIBUTION APPLY LEGAL BACKGROUND      TORT—MEANS A CIVIL WRONG ARISING OUT OF A BREACH OF DUTY SEQUENCE----INSURED OWES DUTY OF CARETHERE IS A BREACH OF THIS DUTY RESULTING IN INJURY TO T/P AND/OR T/P PROPERTY DAMAGE=>CLAIM FOR DAMAGES PUBLIC LIABILITY IS CONCERNED WITH TWO MAJOR TORTS— NEGLIGENCE=ABSENCE OF CARE NUISANCE(PRIVATE)= CONDUCT WHICH CAUSES TPPI/D AND TPPD NEGLIGENCE  DEFINED IN ENGLISH CASE—BLYTH V/S BIRMINGHAM WATERWORKS COMPANY(1856) THE BREACH OF A DUTY CAUSED BY THE OMISSION TO DO SOMETHINGWHICH A REASONABLE MAN ,GUIDED BY THOSE CONSIDERATIONS WHICH ORDINARILY REGULATE THE CONDUCT OF HUMAN AFFAIRS,WOULD DO OR DOING SOMETHING WHICH A PRUDENT AND REASONABLE MAN WOULD NOT DO LORD ATKIN’S NEIGHBOUR PRINCIPLE---A GENERAL DUTY OF CARE WAS OWED TO ALL LEGAL NEIGHBOURS i.e. THOSE SO CLOSELY AND DIRECTLY AFFECTED THAT THEY OUGHT TO BE IN CONTEMPLATION AT THE TIME THE TORT IS COMMITTED   NEGLIGENCE….contd      THE DEGREE OF CARE MAY VARY ACCORDING TO PARTICULAR CIRCUMSTANCES PERSONS WHO USE DANGEROUS THINGS e.g. EXPLOSIVES,FIREWORKS etc.ARE BOUND TO EXERCISE MORE THAN ORDINARY CARE/CONTROL OVER SUCH PROPERTY DUTY OF CARE TOWARDS CHILDREN IS REQUIRED TO BE OF A HIGHER DEGREE THE PLAINTIFF MUST PROVE THE CAUSAL CONNECTION BETWEEN THE BREACH OF DUTY OF CARE AND THE INJURY/DAMAGE SUSTAINED BY HIM TEST OF REASONABLE FORESEEABILITY INSTEAD NEGLIGENCE…contd     ONUS OF PROOF—BURDEN OF PROVING NEGLIGENCE IS ON THE PLAINTIFF UNLESS IT IS A CASE OF RES IPSA LOQUITOR DOCTRINE OF RESPONDENT SUPERIOR-AN EMPLOYER IS LIABLE FOR THE NEGLIGENCE OF HIS EMPLOYEE FOR ACTS COMMITED IN THE COURSE OF AND WITHIN THE SCOPE OF EMPLOYMENT.THIS IS ALSO KNOWN AS VICARIOUS LIABILITY PRINCIPAL’S LIABILITY FOR NEGLIGENCE OF CONTRACTOR-MAY ARISE AS UNDER: WHERE HE RETAINS SOME CONTROL OVER THE CONTRACTOR OR PROVIDES LABOUR AND/OR MACHINERY OR THE WORK INVOLVES E/H ACTS NEGLIGENCE….contd    FATAL ACCIDENTS ACT,1855—PROVIDES THAT IF DEATH OF A PERSON IS CAUSED BY WRONGFUL ACT, NEGLECT OR DEFAULT,AN ACTION FOR DAMAGES IS MAINTAINABLE BY THE LEGAL HEIRS OF THE DECEASED AGAINST THE PARTY CAUSING THE INJURY DAMAGES ARE AWARDED IN PROPORTION TO THE FINANCIAL LOSS TO THE SURVIVORS/LEGAL HEIRS DAMAGES FOR PERSONAL INJURY FALL INTO TWO CATEGORIES: SPECIAL DAMAGES-eg LOSS OF EARNINGS, MEDICAL EXPENSES ,FUNERAL EXPENSES GENERAL DAMAGES---eg PAIN AND SUFFERING,LOSS OF EXPECTATION OF LIFE   IMPORTANT LIABILITY INSURANCE POLICIES        PUBLIC LIABILITY—INDUSTRIAL RISKS PRODUCT LIABILITY WORKMEN’S COMPENSATION LIABILITY LIFT THIRD PARTY LIABILITY DIRECTORS AND OFFICERS LIABILITY PUBLIC LIABILITY—NON INDUSTRIAL RISKS PUBLIC LIABILITY INSURANCE ACT PUBLIC LIABILITY-INDUSTRIAL RISKS   SCOPE: INDUSTRIAL PUBLIC LIABILITY POLICY APPLIES TO INDUSTRIAL AND MANUFACTURING RISKS OF ALL TYPES POLICY COVERS LIABILITY TO THE PUBLIC ARISING OUT OF ACCIDENTS DUE TO THE NEGLIGENCE OF THE INSURED/SERVANTS POLICY OPERATES ON CLAIMS MADE BASIS AND PROVIDES FOR CERTAIN SPECIALIZED FEATURES LIKE RETROACTIVE DATE, NOTIFICATION EXTENSION etc. S/I MUST BE EXPRESSED IN RATIOS 1:1,1:2,1:3 &1:4 OF AOA TO AOY LIMITS    PUBLIC LIABILITY-INDUSTRIAL RISKS..contd   1. 2. 3. IMPORTANT FEATURES PREMIUM RATE-WILL DEPEND UPON RISK GROUP RATIO OF AOA/AOY LIMITS ANNUAL TURNOVER  1. EXTENSIONS MULTIPLE UNITS CAN BE COVERED UNDER SINGLE INDEM NITY LIMIT ACCIDENTAL POLLUTION LIABILITY COVERAGE OF DISCHARGE OF TREATED EFFLUENTS THROUGH PIPELINES COVERAGE OF GODOWNS/WAREHOUSES LOCATED OUTSIDE THE FACTORY PREMISES COVERAGE FOR AOG PERILS TRANSPORTATION COVER 2. 3. 4. 5. 6. PRODUCT LIABILITY   SCOPE POLICY COVERS LIABILITY ARISING OUT OF THIRD PARTY ACCIDENTAL DEATH/BODILY INJURY OR DISEASE OR PROPERTY DAMAGE DUE TO ANY DEFECT IN THE PRODUCTS MANUFACTURED AND COVERED UNDER THE POLICY AFTER SUCH PRODUCTS HAVE LEFT THE INSURED’S PREMISES BY PAYMENT OF ADDITIONAL PREMIUM, COVERAGE MAY BE OBTAINED FOR COST OF REMOVING/REPLACING/REPAIRING/RECALLI -NG THE DEFECTIVE PRODUCT  PRODUCT LIABILITY…contd.   1. POLICY IS SUBJECT TO RETROACTIVE DATE,NOTIFICATION EXTENSION,CLAIMS SERIES CLAUSE etc. SALIENT FEATURESPREMIUM RATES ARE BASED UPON RISK GROUP CLASSIFICATION,ANNUAL GROSS TURNOVER,AOY LIMIT ETC. MIDTERM INCREASE/DECREASE IN THE LIMITS OF INDEMNITY CAN BE CONSIDERED SUBJECT TO CORRESPONDING REVISION IN THE RETROACTIVE DATE. POLICY MAY BE EXTENDED TO COVER VENDOR’S LIABILITY/SUB-CONTRACTORS LIABILITY/EXPORTS 2. 3. WORKMEN’S COMPENSATION   SCOPE W.C. POLICY INDEMNIFIES THE INSURED EMPLOYER AGAINST LEGAL LIABILITY TOWARDS HIS EMPLOYEES FOR DEATH/DISABLEMENT DUE TO ACCIDENTAL INJURIES ARISING OUT OF AND IN THE COURSE OF EMPLOYMENT i.e. EMPLOYMENT RELATED INJURIES. POLICY CAN BE EXTENDED BY PAYMENT OF ADDITIONAL PREMIUM TO COVER LIMITED MEDICAL EXPENSES, EMPLOMENT RELATED DISEASES LIKE ASBESTOSIS etc. POLICY IS ISSUED ON UNNAMED BASIS AND IT IS MANDATORY TO COVER ALL EMPLOYEES ON THE BASIS OF ESTIMATED GROSS WAGES FOR THE POLICY PERIOD.PREMIUM IS ADJUSTABLE ON ACTUAL WAGE BASIS AT POLICY EXPIRY.   WORKMEN’S COMPENSATION..contd.    PREMIUM RATES ARE RELATED TO THE NATURE OF THE MAIN ACTIVITY OF THE INSURED AND THE BUSINESS HAS BEEN DE-TARIFFED W.E.F.01/01/07 IT IS PERMISSIBLE TO ISSUE A POLICY FOR LESS THAN ONE YEAR DEPENDING UPON THE WORK CONTRACT INSURANCE SCHEME PROVIDES FOR TWO TERMS OF INSURANCE VIZ.TABLE A POLICY-WHICH PROVIDES INDEMNITY AGAINST LEGAL LIABILITY FOR EMPLOYMENT INJURIES TO ALL EMPLOYEES(WHETHER WORKMEN OR NOT) UNDER W.C.ACT,FATAL ACCIDENTS ACT,COMMON LAW 1. WORKMEN’S COMPENSATION..contd. 1.  1. TABLE B POLICY- WHICH PROVIDES INDEMNITY AGAINST LEGAL LIABILITY FOR EMPLOYMENT INJURIES UNDER FATAL ACCIDENTS ACT AND COMMON LAW TO EMPLOYEES WHO FALL UNDER NON-WORKMEN CATEGORY.TO OBTAIN COMPENSATION, NEGLIGENCE ON THE PART OF THE EMPLOYER MUST BE PROVED. LIMITS OF COMPENSATIONDEATH- 50% OF AVERAGE MONTHLY WAGES X RELEVANT FACTOR PTD-60% OF AVERAGE MONTHLY WAGES X RELEVANT FACTOR PPD-%age OF PTD AS PER SCHEDULE TEMPORARY DISABLEMENT-COMPENSATION PAYABLE ON THE BASIS OF HALF-MONTHLY WAGES FOR EACH MONTH OF DISABLEMENT.TIME EXCESS OF 3 DAYS FOR DISABLEMENT UPTO 28 DAYS.COMPENSATION PAID ON ACTUAL WAGE BASIS 2. 3. 4. LIFT(THIRD PARTY LIABILITY) INSURANCE   THIS INSURANCE POLICY IS DESIGNED FOR OWNERS OF PASSANGER LIFTS INSTALLED IN BUILDINGS TO TAKE CARE OF THEIR LIABILITIES ARISING OUT OF THE USE AND OPERATION OF THE LIFT POLICY PROVIDES INDEMNITY AGAINST LEGAL LIABILITY FOR PAYMENT OF COMPENSATION TO THIRD PARTIES FOR DEATH/DISABLEMENT/PROPERTY DAMAGE IN CONNECTION WITH THE USE OF THE LIFT DIRECTOR’S AND OFFICER’S LIABILITY INSURANCE   SCOPE: DIRECTORS ARE NOW PERCEIVED AS PROFESSIONAL MANAGERS WHO SHOULD BE ACCOUNTABLE FOR THEIR ACTIONS. A DIRECTOR/OFFICER OWES A DUTY TOWARDS THE SHAREHOLDERS/EMPLOYEES/ CREDITORS/CUSTOMERS/COMPETITORS/PUB LIC/GOVT.AND OTHER REGULATORY BODIES HE IS LIABLE TO FACE CIVIL AND/OR CRIMINAL SUITS FROM THESE QUARTERS FOR BREACH OF DUTY DUE TO WRONGFUL ACTS RESULTING FROM VARIOUS REASONS.   DIRECTOR’S AND OFFICER’S LIABILITY INSURANCE….contd.  1. 2. 3. EXAMPLES OF WRONFUL ACTSFAILURE OF SUPERVISION/MISMANAGEMENT OF FUNDS ACTUAL OR ALLEGED BREACH OF DUTY/BREACH OF TRUST MISSTATEMENT IN PROSPECTUS/MISLEADING STATEMENT FILED WITH STOCK EXCHANGE WRONGFUL DISMISSAL/SEXUAL HARASSMENT OF EMPLOYEE 4.  1. POLICY COVERAGEPOLICY PROVIDES INDEMNITY IN RESPECT OF CLAIMS MADE AGAINST THE INSURED DURING THE POLICY PERIOD ARISING OUT OF THE WRONGFUL ACT OF DIRECTOR/OFFICER POLICY COMPRISES TWO SECTIONS-INDIVIDUAL D&O SECTION AND THE COMPANY REIMBURSEMENT SECTION 2.