Public Liability Act (1991) Policy

What is a Public Liability Act policy?

A Public Liability Act policy is the compulsory insurance that owners of units handling hazardous substances must buy under the Public Liability Insurance Act, 1991. It provides immediate relief to members of the public who are injured, fall ill, die or suffer property damage because of an accident involving those substances, whether or not the owner was at fault.

The Act was passed after the Bhopal gas disaster, when victims waited years for any payment. Its purpose is simple: fast, fixed interim relief to the public, while any larger claim for full compensation is pursued separately. It is one of the few statutory liability covers in India, and is part of the wider range of liability insurance that industrial businesses need.

Who must buy it

The duty falls on the owner, meaning the person or company that has control over handling a hazardous substance at the time of an accident. “Handling” is defined widely and includes manufacture, processing, treatment, packaging, storage, transport by vehicle, use, collection, destruction, conversion, sale and transfer. A substance is hazardous if it is notified under the Act with a quantity above which the rules apply.

Units that commonly need the policy include:

• Chemical, petrochemical, pesticide and fertiliser plants.
• Pharmaceutical and dye manufacturers using notified solvents and intermediates.
• LPG bottling plants, fuel depots and gas storage terminals.
• Warehouses and tank farms storing notified chemicals for others.
• Paint, adhesive and plastics units handling flammable or toxic materials.

Certain government bodies are exempt. If you are unsure whether your substances and quantities cross the threshold, check the notified schedule with your safety officer before the next renewal.

What the policy covers

The policy pays relief to third parties affected by an accident that involves the hazardous substances you handle. The relief covers death or permanent disability, temporary injury or illness, medical expenses, loss of wages and damage to private property. The relief amounts and the maximum payable per person are fixed by the Act and its Rules, not by the insurer.

The policy limit must be at least equal to the owner’s paid-up capital, subject to the maximum limits prescribed. An aggregate limit for the year is also set within the statutory cap.

What is not covered

• Your own employees; they are protected under the Employees’ Compensation Act, 1923, and your employees’ compensation policy.
• Damage to your own property, which belongs under fire or industrial all risk insurance.
• Compensation beyond the fixed relief amounts. Claims for full damages from the public are a common law liability and need a separate public liability insurance policy.
• Accidents involving substances or sites not declared in the proposal.
• Fines and penalties for non-compliance.

The Environment Relief Fund

Along with the premium, the owner pays a contribution to the Environment Relief Fund set up under the Act. The insurer collects this amount together with the premium and passes it to the Fund. If a relief claim exceeds the insurance available, the Fund can step in. The contribution is a statutory requirement, not an insurer charge, so it is not negotiable.

How a claim works

1. After an accident, the affected person applies to the Collector of the district for relief.
2. The Collector gives notice to the owner and the insurer, holds an inquiry and decides the relief amount.
3. The insurer pays the awarded relief within the time set, from the policy; any shortfall may be met from the Fund.
4. The owner should notify the insurer immediately, preserve records of the accident and cooperate with the inquiry.

How MILES helps

• We help you confirm whether the Act applies, based on the substances and quantities you actually hold.
• We calculate the minimum limit linked to your paid-up capital and advise whether to buy more headroom within the statutory cap.
• We compare insurers, place the policy and make sure the Fund contribution is processed with it.
• We pair the statutory policy with a proper public liability or CGL cover so larger claims are not left uninsured.
• We track renewal dates, since operating without a valid policy is an offence, and support you through any claim or inquiry.

Cover, exclusions and premiums depend on the insurer’s policy wording and underwriting. MILES Insurance Brokers Pvt. Ltd. is an IRDAI-licensed direct broker (Life & General, Reg. No. 954); the insurance is issued by the insurer. Insurance is the subject matter of solicitation.