The Public Liability Insurance Act 1991

In one line

The Act makes the owner of a hazardous substance pay immediate relief for an accident without any proof of fault, and compels him to insure so that the money is there.

In the wording a student can write in an exam: the Public Liability Insurance Act 1991 provides for public liability insurance for the purpose of giving immediate relief to persons affected by an accident occurring while handling any hazardous substance; section 3 imposes liability on the owner on the principle of no fault, section 4 obliges him to take out insurance before he begins handling the substance, section 7A establishes the Environmental Relief Fund, and the relief is awarded by the Collector under section 7 on an application made under section 6.

Why the Act exists

The Bhopal disaster showed two gaps. A victim who must prove fault gets nothing for years, and a defendant may have no money when judgment is finally given. The Act answers both: liability without fault, and compulsory insurance to back it.

The Act gives immediate relief, not full compensation. Section 8 preserves every other right, and chapter [Absolute Liability] supplies the larger claim.

The Act, section by section

Sections 1 and 2: title, commencement and definitions. The Act came into force on 1 April 1991. Section 2 defines "handling", "hazardous substance", "owner" and the other working words, and expressions defined in the Transfer of Property Act 1882 and the Environment (Protection) Act 1986 carry their meanings from those Acts.

Section 3: liability on the principle of no fault. Where death or injury to any person, other than a workman, or damage to any property has resulted from an accident, the owner is liable to reimburse such amount or provide such other relief as may be prescribed, for death due to a fatal accident, medical expenses for total or partial disability, loss of wages due to partial disability, other injury or sickness, damage to private property, and such other loss as may be prescribed. Sub-section (2) is the heart of the Act: in a claim for relief the claimant is not required to plead and establish that the death, injury or damage was due to any wrongful act, neglect or default of any person. The Explanation adopts the meaning of "workman" from the Workmen's Compensation Act 1923 and provides that "injury" includes permanent total or partial disability or sickness resulting from an accident.

Section 4: duty to insure. Every owner must take out one or more insurance policies before he starts handling any hazardous substance, insuring him against the liability under section 3, and must renew them so that cover continues throughout. Sub-section (2A) requires the policy to be for not less than the paid-up capital of the undertaking, and it may extend to such amount as may be prescribed but not exceeding five hundred crore rupees; for an owner who is not a company, paid-up capital means the market value of all assets and stocks. Sub-section (2C) requires the owner to pay, along with the premium, a further amount not exceeding the premium for credit to the Relief Fund, and sub-section (2D) requires the insurer to remit it, failing which it is recoverable as arrears of land revenue. Sub-section (3) allows the Central Government to exempt the Central Government, a State Government, a Government corporation or a local authority, but only where that owner maintains a fund of its own for meeting the liability.