NAGINDAS COLLEGE OF COMMERCE, ARTS AND MANAGEMENT STUDIES BHADRAN NAGAR, ROAD NO.1, OFF. S.V.ROAD, MALAD (WEST), MUMBAI ~ 400064, PROJECT REPORT ON LIABILITY INSURANCE, “A Re-liable Solution” SUBMITTED BY ABHIZAR BOOTWALA ‘T.Y.B.Com. (BANKING & INSURANCE) UNIVERSITY OF MUMBAI ACADEMIC YEAR: 2006 ~ 07ACKNOWLEGEMENTS When I selected Liability Insurance as my project I knew it was a tough mut to erack but the support of the people around me made this project an interesting affair | am inspired by my peers whose strong influence helped me all the way in completing this challenging project 1 am thankful to Nisha Mehta whose valuable expertise and knowledge gave ime the push that I needed to begin this project. am also thankful to my special friend R. M. Patel who was my philosopher and guide during this project. [would be failing in my duty if I do not thank my colleagues who have helped me at various stages in the completion of this project. ‘The last but not the least my thanks are due to the academicians at various institutions and insurance companies who provided me various contents and valuable suggestions,PREFACE, Insurance is not a new area of academic study or profession. With the increasing dynamism of risk and growth of professional risk management, the insurance device has become more and more popular these days. The liberalization of the economy has resulted into the availability of large number of alternative products/financial services. This has paved way for the potential and unconventional entrants to penetrate the market through innovative higher product profile. So we come to the point-liability Insuran though the concept is old is has gained lot of importance in the past few years. This project goes into the depths of Liability Insurance and covers all the major aspects of the subject along with company related ‘examples to bring this project to life. It starts with the explanation of the topic along with types then covers the working of the insurance and it ends with a local survey which acts as the primary data of this project.CONTENTS + Introduction to Liability Insurance Overview of Liability Insurance + Working of Liability Insurance + Types of Liabilities + Employee Liability Insurance + Industrial Risks Liability Insurance + Non Industrial Risks Liability Insurance + Professional Liability Insurance + Product Liability Insurance “+ Directors and Officers Liability Insurance % Liability Insurance in ICICI Lombard + Primary Data + Conclusion Bibliography WibliographyINTRODUCTION TO LIABILITY INSURANCE, ployee ela aiid we it rue yourbuine promis. semen, omy ve Bebe at ines ut scare ps he es ep nr ou bac ppt an bese ad Hace oe de iy een sec fe cf onal ash abe saline oa any ak athe an basic coverage. Before talking to an insurance agent or broker about liability insurance, consult industry organizations and other small business owners to find out what types of liability coverage’s they recommend. What are the liability risks for your industry? What is it most important for you to insure ‘against, and what is the risk ofa liability suit being brought against you, For Example: ‘You own a catering company. While on a delivery, one of your employees strikes another car and causes injury to the other driver and her property. You are liable to pay for injuries and property damages caused by i{sh yen hh se ne oie eur egoe with "op ie niga ih Real hones em carn linterna boty seni our last bert shale eb 0 dete wh Liability insurance is a part of the general insurance system of risk transference. Originally, individuals or companies that faced a common peril formed a group and created a selfhelp fund out of which to pay compensation should any member incur loss. The modem system relies on dedicated carriers to offer protection against specified perils in consideration of a premium. Liability insurance is designed to offer specific protection ‘against third party claims, payment is not typically made to the insured, but rather t© someone suffering loss who is not @ party to the insurance contract. In general, damage caused intentionally and contractual liabilities are not covered under liability insurance policies. When a claim is made, the insurance carrier has the right to defend the insured. The legal costs of a defense are not affected by any policy limits, which is useful because they can be significant where long trials are held to determine either fault or the amount of damages.OVERVIEW OF LIABILITY INSURANCE In many countries, liability insurance is a compulsory form of insurance for those at risk of being sued by thind parties for negligence. The most usual classes of mandatory policy cover the drivers of vehicles, those who offer professional services to the public, those who manufacture products that ‘may be harmful, and those who offer employment. The reason for such laws is that the classes of insured are deliberately engaging in activities that put others at risk of injury or loss. Public policy therefore requires that such individuals should carry insurance so tha, if their activities do cause loss or damage 10 another, money will be available to pay compensation, In addition, there are a further range of perils that prudent people insure against and, consequently, the number and range of liability policies has increased in fine with the rise of contingency fee litigation offered by lawyers. Public Liability Insurance Act of 1991 defines the scope of liability insurance in India, Mostly these relate to work situations and handling of hazardous substances. However, in the light of today’s movement towardsWORKING OF LIABILITY INSURANCE ‘The cost of insurance known as the premium - is typically worked out using a book rating. A book rating is calculated using a base rate, which ineludes the insurer's costs and refl 1s their appetite for your particular type of business - if they want your type of business the rate will be less than if they dont. ‘The premium is also calculated on the insurer's estimate of the level of risk attached to a particular business or industry area ‘The premium will be affected by factors such as your claims history, the size of the perceived risk and your approach to risk management, Use our interactive Health & safety performance indicator tool to find out how well you're managing your health and safety. ‘The safer your working environment and the fewer claims you have made, the cheaper premium should be.‘TYPES OF LIABILITIES Insurance is available across several types of liabilities, these are also known as Indemnity Policies: 1, Employee Liabilities: Chief among these are those related to working conditions, and are covered under Workmen’s Compensation Insurance policies. Liability in this area chiefly covers the Industrial Risks. 2. Industrial risks: As per the Public Liability Policy covering the industrial ris , there exists a No-Fault Liability ie. irrespective of any negligence, wrongdoing or default on part of any employer or owner in the event of death or injury to any person or damage to property out of an accident handling hazardous material. This is known as compulsory liability. The claimant is not required to prove that death, injury or damage occurred due to any neglect, 3. Non-industri risks: These relate to non-industrial but_mainly commercial enterprises such as Cinemas, Restaurants, Offices,5. Product liabilities: These are liabilities that could arise from the sale Of products to customers and resulting damage to any customer due to 4 fault product. Edible products, equipment and machinery, clocks & watches, air-conditioners units, chemical products, motor vehicle tyres, fireworks and explosives, elevators & escalators ete, are covered under such policies. 6. Public liabilit insurance (Aet): This is a compulsory poliey with limit scope, as the act only provides for basic relief. If the liability risks are high this policy can be supplemented with another public liability policy that is tailored to suit particular requirements 7. Directors and Officer’s liability: The D&O poliey offers coverage for the liability faced by directors and officers of the company. It is notable that the D&O policy covers their personal liability and not that of the company.EMPLOYERS LIABILITY INSURANCI If you are employer, you are legally required to take out adequate employer's liability insuranes ensures that, should an employee (current or former) be injured at work or become ill as a result of their work and decides to sue you for compensation; there is at least a minimum level of insurance to cover the claim, Failure to take out an insurance policy which complies with the law an resut in you belng Snes CONDITIONS As with any insurance policy there wil be a number of conditions attached to which wil be lalored to your bushess, Certain conditions, however, cannot be imposed. Your insurer cannot rafuse to pay compensation: Puraly because you have not provided reasonable prctecton ‘against jury oF disease. You cannot provide certain infomation to the insurer You have done something they told you not to da You have not done something thy told you oo You have not ‘mot ary togal requirement connected with potcton of your employees However, if you havent complod win youre the health and safely measures tho law requires - ek assossments,Your instr wil give you a cetifcale of employers’ Eabiy insurance. This must clearly state the minimum level of cover provided and the companies it covers. copy of his cerficate must be Aisplayed where employees can easly read covER "You must be insured frat least Sr but once youve assessed your risks and abies you may decide you need more than tis, Most insurers offer cover of al tnast 10Cz You ean spilt the cover between diferent insurance companies as long asthe tolls at least SCr. Bearin mind that the ‘minmim level of cover ncudes costs so you may want to buy adatonal insurance to cover this. EXCEMPTIONS Most pubic organizations such as Goverment departments and loca authorises, health sevice bios and publ financed organizations such as passonger transport executves ae exemet ‘Tho main exomoton most tkely to aply 0 sll businesses, hewever, ie the ono relating © family businesses. If your employees ore close relations (epouse, paren, randbarent, stepparent, chil, grandchild, stepchild, sibing or hal sibling) you do not have to tke out te insurance unless yous family business has been incorporated asa linited company. FoR WHOM You nood to lake out insurance for all your employees. This is usually straightfonvard but f you have sall-employed people working for you on a reguar basis they may be covered io. Their taxofthe folowing statements apply You wil no need emsovers bit insurance it some o al of the falowing statements apply You deduct National Insurance and tax fam the many you pay them You do nat deduct ax or National Insurance (though his lone is na consi pro) You have the right to contol where, when and how they work They do not work exchsively for you supply most materials and equpment They supply most ofthe equipment and materials they need 0 do for hej You have ight tothe profits and sue the losses your wocker makes They are clear n business for personel benefit You hire that person to do the ob and he canna send «substi in thr place They can employ a substitute when they are unable to do the work thomsoWves They are teated as other employaos, e., they exjoy the same toms and conditions ‘You normaly don't need to insure volunteers but you wil ned cover fr students working unpaid participants taking part in @ youth or adult tresng programme ora school student on a work experience programme. this apps o you, inform your insurance company and consider aking ‘ut insurance as they may be classed as employees. You oly need 1 insure domestc ep such 5 gardeners and cleaners Hf they work exclusively for you It have more than one cent you are probably exert PERIOD You must copy conificates of insurance for AD years after ther expiry date. This is because aims can be made for diseases many years after the disease is caused. You must these favalable to healt and safely inspectors on request. This requirement only apples to poles in cat 91 Cie: SONNE BALANCE imal sap Nien nay acpiINDUSTRIAL RISKS LIABILITY INSURANCELegal costs and expenses ineurred with the prior consent of the Insurer and within the limit of indemnity. Main Extensions These include: industrial Seepage, pollution and contamination extension, carriage of effluents (outside the premises) extension, transportation extension, technical collaborators extension, act of god, perils extension. Sum Insured Depending on exposure, the Proposer has to fix two limits of indemnity as Under (for both premises and transportation): Any One Accident (AOA) and Any One Year (AOY). AOA and AOY ean be in ratio of II, 1:2, 1:3 oF 1:4 It is not permissible to issue the policy with unlimited liability Pre m Premium chargeable depends on the: Risk group Limits of indemnity selected Ratio of limits ‘Number of locations Annual turnover. ExcessThis Policy does not cover liability arising out of or in connection with: pollution any product personal injuries such as, libel, slander, fines, penalties Punitive or exemplary damages, transportation of materials, ‘What ean be insured All industrial risks (other than risks rateable under Petrochemical Tarif) having overall Sum Insured of Rs. 100 Crores and above in one or more locations in India are eligible. This is a package policy with the following Fire and Special Perils including Flood, Storm, Tempest, Earthquake, Fine & Shock, Consequential Li 3s (Fire), Machinery Breakdown, Boiler Explosion, Electronic Equipment, Machinery Breakdown — Optional Basis of Insurance Buildings, Machinery, Fur re, Fixtures and Fittings & Electrical Installations shall be on reinstatement value basis only. Stocks shall be covered on market value basis. Facilities of declarations for stocks are not available under this policy. Underinsurance on each to the extent of 15% will be ignored. Compulsory Deductibles Material Damage. 5% of the claim amount subject to minimum of Rs. 5 Lakhs and maximum of Rs. 50 Lakhs Business Interruption Fire Three days Gross Profit subject toAs prescribed under IAR Tariff Extensions Following clauses may be attached to the policy by adjusting or providing additional Sum Insured where applicable Agreed Bank Clause Architects, Surveyors and Consulting Engineers! Fees Clause, Designation of Property Clause, Escalation Clause Omission to Insure Additions, Alterations or Extensions Clause, Temporary Removal of Stocks Clause. Exclusi Destruction/damage by own fermentation natural heating or spontaneous combustion, undergoing any heating or drying proc , burning of property insured by order of any public authority, explosion/implosion damage to boilers, damage caused by centrifugal forces, forest fire, war and nuclear group of perils, unspecified precious stones (upto Rs. 10,000), cheques, curreney ete. electrical files, consequential losses, theft during/after operation of peril, mis-description, mis-representation, non-disclosure of ‘material facts, expenses relating to claim documentation, fraud. NON-INDUSTRIAL RISKS LIABILITY INSURANCE1, Hotels, motels, restaurants, club-houses, boarding & lodging houses, Aight kitchens & other establishments in the hospitality businesses. 2, Cinema halls, auditoriums, theatres, public halls, pandals, open air theatres & other concert venues. 3. Residential premises owned & used for private purposes. 4, Offices, administrative premises, medical premises, airports, research institutes & laboratori Schools, educational institutions, public libraries. Exhibitions, fairs, fetes, melas, stadium & publie grounds. Permanent amusement parks. Depots, warchouses, godowns, shops, tank farms & other similar ‘non-industrial risks. 9, Film studios-indoor & outdoor, circus, zoological parks. Limits of Indemnity 1. Minimum as described in the compulsory liability policy. 2, The insured has to select limits of indemnity based on Any One Accident (AOA) & Any One Year (AOY) ba: 1:2, 13 or 1:4 basis. For eg., for AOA the limit may be Rs. 10 Lakhs, with AOY going up to 10 Lakhs, 20 Lakhs, 30 Lakhs or 40 Lakhs, in a ratio of 1:1 3. The insured has to bear a compulsory excess of 0.5% in case of5. The policy can cover the insured only against legal liabilities & other than that, which is covered under the Public Liability Insurance Act, 6, Indemnity is also provided only for accidents occurring in India & those covered in Indian Law and in respect of accidents caused only to third parties. 7. The important exclusions of are: a) Product liability b) Pollution liability ©) Transportation of hazardous goods liability 4) Injuries to employees — covered under ESIC/Workmen Compensation Premium rates Premium rates for indemnity insurances are based on the following factors: 1. Risk group 2. Limits of indemnity AOA 3. The ratio of AOA to AOY 4, Tumover of the insured Risk categories are divide into four broad groups: Jamin. 1 ies Tanna Serene ates alee camel Comics beet oeGroup III: Distilleries, man-made yarn factories, fiber manufactures, paper and eard board mills etc Group IV: Celluloid goods manufucturing, fertilizer fhetories, match factories, synthetic rubber factories ete ‘The rates are the lowest on Group I risks and move up along the scale rising towards the Group IV risks. TURNOVER Tumover is defined for most risk groups for the purpose of indemnity policies: For manufacturing unit it is entire gross sales turnover, including all levies of the manufacturing unit and the taxes for handling hazardous goods, if any For godowns and warehouses, the tumover would mean the total annual rentals receipts of the premises building or store house. For transport operators the term turnover would mean the total annual freight receipts. For all other types of business the turnover would mean the total annual gross receipts. While the rate for insurance ranges between 0.70 rupees per mille to 0.80 rupees per mille, the turnover loading is added to such a rate as follows’ © For tumover up to Rs.1 Cr, 0.12 per mille subject to a minimum of* For turnover between SCr to 10 Cr, Rs. 4560 plus 0.072 per mille on Rs.5 Cr, Over and above the premium rate and amount equivalent to the premium is paid by the insured towards an Environment Relief Fund of the government, This fund pays relief when it execeds the amount payable under this policy.This protects them against financial losses from lawsuits filed against them by their cients Professionals are expected to have extensive technical knowledge or training in their particular area of expertise, They are also expected to perform the services for which they were hired, according to the standards of conduct in their profession. If they fail to use the degree of skill expected of them, they can be held responsible in a court of law for any harm they cause to another person or business. When liability is limited to acts of negligence, professional liability insurance may be called "errors and omissions” liability Professional liability insurance is specialty coverage. Professional liability coverage is not provided under homeowner's endorsements, in-home business policies or business owners policies (BOPS). Professional indem If you are in the business of selling your knowledge or skills, you may want to consider taking out professional indemnity insurance. The professional liabilities of an organization, can often be as significant or even greater than the general liabilities, particularly where there is the potential for substantial ‘economic loss.generally insurable under a specialist professional indemnity insurance policy. Many organizations have exposures where they may be sued by third parties for causing a financial loss as a result of their business activities. Whilst not initially apparent, this may include such things as: + design work; + provision of advice or technical information; or + management of a project on behalf of other joint venturers, ‘The Trade Practices Aci 0 creates an exposure for false and misleading conduct in the promotion and sale of goods and services. All of the potential exposures need to be carefully reviewed to determine how serious a risk they represent to the organization, and/or what (if any) protection ean be provided under contracts with third parties. Where there is still a significant risk exposure, professional indemnity insurance cover should be sought. ‘The professional indemnity policy indemnifies the insured for amounts which they become legally liable to pay as a result of any actual or alleged negligent act, error or omission in the conduct of their business or profession. Costs and expenses incurred to investigate, defend or settle any claim are also ineluded, in some circumstances in addition to the policy limit otherwise inclusive of the limitMost professionals carry professional indemnity cover. If you are a lawyer, accountant or Financial adviser, then you must have professional indemnity insurance, Professionals such as architects, consultants and designers often opt for such coveras well, One important aspect to bear in mind when considering professional indemnity insurance is that, because there can often be a long delay between an event and a subsequent claim; you need to be covered both at the time of the event and when the claim is made This means that if you plan to eaneel your policy when you close your business or retire you may need to arrange “run off" cover for a period of time afterwards. Also, if you plan to change insurers, you will either need to arrange run off cover or get agreement from your new insurer to accept new claims for prior incidents Keep everything well documented One way to minimize such claims is to make sure projects are well documented. Ensure that you set out specific responsibilities in your contracts with elients beforehand and deal with complaints promptly. As this is a specialist area of insurance you should take advice from a suitably experienced insurance broker.If you manufacture or supply goods, there’s always the possibility that your product could cause damage to a third party — that could be property or another person, A small defect could open you up to massive claims, so this cover is vitally important for produet manufacturers. Look for a policy that guards you against safety claims, manufacturing quality, spoilage and indemnity costs (medical bills and so on). And remember Product Liability is designed to cover you against unforeseen circumstances, if you simply make an inferior product or supply bad services then you're not going to be able to make a claim, You can reduce your premiums by taking quality control measures beforehand, and you should make sure your insurer knows of any measures you've taken ~ it could affect your premiums. [In product liability insurance, a product is defined as any physical item that is sold or given away. Products must be "fit for purpose”, and under the Consumer Protection Act 1987 you are legally responsible for any damage or injury that a product you supply may caus Your responsibilities If you supply a product and something goes wrong with it, claimants are Jikely to try to claim from vou first. even if vou did not manufacture the‘The nature of risk, ie. the viability of a elaim and the premium, is affected by who the produet is sold to, how and where it is used and any warnings or labels that are provided. What the insurance covers ‘The product liability insurance that you buy covers you against any compensation awarded as a result of damage or injury caused by your product. Product liability covers you against unforeseen circumstances. If you simply make an inferior product, then you may not be able fo make a claim. Bad workmanship is not covered either. How much cover should you take out? Most businesses have cover of between Rs.0.5 million and Rs.5 million, but the nom is Rs.2 million, In order to reduce your premiums you should put in place quality control measures, This not only ensures lower premiums, but also reduces the risk of compensation claims and the loss of your reputation in the marketplace, Evaluation of produet liabili If you are involved in producing a product then you should consider having insurance to cover any serious defects that might emerge. We live in a veryThis isa fainly specialist area of the insurance market, and like all specialists is therefore expensive, but the costs of defending your company in court will almost certainly be greater. And should a case go against you the damages could run into millions. In most industries product liability insurance is not compulsory however certain government and specific contracts may insist A good policy should guard you against © Claims made regarding safety ‘© Claims made regarding manufacturing quality or quality of service © Spoilage ‘© Indemnity costs - medical bills ete Product liability, like most insurance, is designed to cover you against something untoward. Ifyou simply make an inferior product or supply bad services then you are not going to be able to claim. Itis also crucial to realize that simply having product liability insurance does not relieve you from the responsibility of taking statutory due care in your fnusiness operations, It is not a license to take your eye off the ball, Your insurer will also require you to observe certain standards (use of trained staff, proper equipment etc). Precisely how much you should cover your company for is up to you. \doporalle wmuy actll he lacsbime ab Jarome qumme ams it ie umlilelo teat wom aallPUBLIC LIABILITY INSURANCE (ACT) POLICY Public Liability insurance covers you against any claims made against your business ~ for example if you were held legally liable for personal injury, or for damage done to property, The insurance will also cover you for any legal costs associated with defending claims against your business. Even if you work from home it may be that you need Public Liability insurance. If elients often visit you at your home office then this policy will cover you if they injure themselves while they're on your premises (it could be something, as daft as tripping over the carpet!). And don’t forget if you regularly work off-site your policy should apply to off-site as well as on-site Jobs. ‘The premiums will depend on the type of business, your turnover and the number of employees. The problem is working out what level of protection you think you need. The key is not to underestimate — Rs.1 erore may sound like a lot of cover, but if you find yourself facing a series of claims from a group of people the legal fees will be large. It's also vi 1 10 keep your Public Liability policy up-to-date to reflect any changing circumstances in your business. As your business expands you're esEvaluation of Public Liability Insurance Owning your own business has its responsibilities as well as its rewards, One of these is to ensure that the public doesn't suffer from your activities In an imperfect world however things do go wrong so it makes sense to protect your interests from expensive legal claims from members of the public that could seriously damage your eash flow. This type of financial protection is called public liability insurance Depending on the type of business you are operating, public lability insurance can be compulsory. It can often be included in other insurance packages. Properly drawn up Public Liability Insurance covers you for your legal responsibility for Injury, caused by the operations of your business Ilness or disease to any member of the public loss and damage to a member of the public's property - pollution claims ete. Public Liabil yy Insurance (Act) 1991: Object of act ‘To provide for public liability insurance for the purpose of providing immediate relief to persons affected by aecident occurring while handlingHandling Manufacture, processing, treatment, packaging, storage, transportation, Use, Collection, Destruction, Conversion, Offering for sale, ‘Transfer or like. Hazan tan Substance defined in EPA 1986 exceeding threshold quantity, ‘Compensations payable + Medical Expenses: Rs 12,500/- + Death: Rs 25,000/- + Property: Rs 6000/- + PTD,PPD: % of disability X Rs 25,000/- + TPD: Rs 1000/- pm, Max: 3 montbs. + Indemnifying the Insured against the statutory liability arising out of eeKey points: Finding providers is no great problem as there are literally hundreds. Naturally you should look to use a company that has experience in your particular fine of business and who will appreciate the challenges and risk your business faces. However the fact that you have public liability insurance does not relieve you from the responsibility of taking due care in your business operations. You are still obliged to live up to your legal responsibilities. ‘The key challenge of this type of insurance is gauging how much you think you will need. Obviously you will have to judge on the basis of what you think your risk is, but do not underestimate. One million pounds might seem like a lot of cover, but if you find yourself facing a series of claims from a group of people then the legal fees alone could cost you a fortuneDIRECTORS AND OFFICERS «= only those (directors) who have been involved in litigation are aware of the significant cost which can arise regardless of the directors ultimate liability or guitt and the fact that civil damages awarded may be enormous. Francis Zudlueta in the Independent Director- Handbook and guide 10 corporate governance, Directors and officers of companies and other organizations have various duties, responsibilities and powers in connection with their position. In most cases these are set out in a job description or terms of reference. As a result they ean be held responsible for a range of issues including: + health and safety + data protection + maintaining satisfactory aecounts + fraud + negligence If your company's directors or officers are found to have inadvertently acted outside their terms of reference and this gives rise to a claim, then any compensation and legal fees will be covered by directors’ and officers’ liability insurance. If the act was deliberate, then it may not be covered by the policy.officers are bound by duty towards the company itself, shareholders, employees, creditors, customers, competitors, members of the public, government and other regulatory bodies. Any breach or non-performanee in the duties can result in claims against the companies and/or its directors of the company by reason of any wrongful act in their respective capacity. The Directors’ and Officers! Liability Insurance policy has been designed specifically to meet any financial liabilities imposed upon them. Suitable for This policy is necessary for directors and officers of every company if they ‘wish to avoid potential litigation owing to + Failure of supervision. + Inaccuracy in statements of financial accounts. + Lack of judgments and good faith + Mismanagement of funds, ‘+ Mis-statements in prospectuses, + Allotment of shares. + Unauthorized loans or investments. + Failure to obtain competitive bids. + Impradent expansion resulting in a loss.+ Wrongfill dismissal of an employee. Risks covered. This policy covers all claims made in event of + Mergers, takeovers and divestment + Liquidation + Changes in control of shareholding + Share issues. + Shareholder claims. + Misdeeds of eo-directors + Trustee accountability and responsibility. + Customs and excise allegations, + Administrative liabilities. + Termination of employment + Disposal of old firm entry of new owners. Compensation Offered ‘The extent of indemnity being severely restricted by the Companies’ Act will reimburse the extent of legal costs expended only if the Director/ Officer successfully defend the act taken against him. Also, coverage is available on a ‘claims made' basis and applies only to+ Liabilities arising from any claim made against Directors and/ or Officers of the company by reason of any wrongful act in their respective capacity. + Liabilities against the company where it is required to indemnify the Directors’ Officers pursuant to common or statutory law provisions or Memorandum and Articles of Association. + The company and its subsidiaries that are under the common control of the Directors! Officers. Exclusions + The policy will not pay for the losses arising from any claim. + Prior and pending litigation and claims submitted under previous policies. + Bodily injury, sickness, disease, emotional distress, death, damage or destruction of tangible property including loss. + Insured v/s Insured. viz. Directors suing each other: + Illegal personal profit and remuneration, + Deliberate, dishonest or fraudulent aets. ‘© Pollution and/ or contamination + Insider trading,LIABILITY INSURANCE IN ICICI LOMBARD, 9M Foro TR) lity- Industrial risksloss or damage to property. * legal costs and expenses incurred with the prior consent of the Insurer and ithin the limit of indemnity. ‘Sum Insured ~ any One Accident (AOA) ~ any One Year (AOY) AON and AOY ca ein ao of E112, Sar is at permit nue te ply within abi. Premium Fisk group limits of indemnity selected ratio of limits number of locations eo* pollution © any product personal injuries such as: * libel * slander * fines * penalties punitive or exemplary damages, © transportation of materials Excess Reto. tigher crop on shay cuaes fr adacant ne retiu Kel ‘Main Extension * Industrial Seepage, pollution and contamination extension Carriage of effluents (outside the premises) extension * Transportation extension ‘Technical collaborators extension * Act OF god Perils extension,Non industrial risks This Ply nol cover Leg ily fe lose ond dames oth th pry nih pt accidental death bodily injury or disease * loss or damage to property "Tak group © limits of indemnity selected ratio of limits number of locations * annual turnoverSignificant Exclusions 7 * any product any professional services deficiency personal injuries such as libel, slander, ines, penalties © punitive or exemplary damages * fines © transportation of materials Excess ~ Maximum of Rs 1,00,000/- © Minimum of Rs 1000/- Main Extension* twansportation Extension * act OF God * perils Extension Safty nd relly prod aan prt concn consume sll & mares Fay oat en Sagas epg owatonna aes Psu ili insurance poses the congnis apse 1 ovens by Hevea isiPremium Risk group (products to be covered) ‘Turnover of products (for proposed period of insurance) * Sales temitories * Limits of indemnity selected © Ratio of limits Quality control system & R&D strength of the insured Claims experience Significant Exclusions * Product efficacy * Product recall Product guarantee Pure financial loss * Terrorism, war & SRCC * Any professional services deficiencyExcess Main Extension Limited named vendor's liability North American jurisdiction clause (covering exports to American countries) * Technical collaborator's clause This Poy hea coer the Onna’ tn ably oa then rp re elasng conn eng * death of or injury to any person damage to propertyPremium Pram tarp dans on tos * limit of indemnity selected * annual turnover (Gross Sales of all goods including all levies and taxes) ‘Significant Exclusions ‘Thi asus Ply dos not ver ably ari on of wife non complino stay room, nih eect ns and peti. Workmen's Compensation ‘Scope of cover “aie Indenity agains! egal ait al employees (heer of rt coming wn the dfn ofthe tam Woman) unser ge W.C-Ac 1923 ord subsecuortemenamertto he sald Acta toe dle of Fes ofthe poy, the Pata Accidents Ac 135 and at Common Ln. “aie =ndamnty aginst galabty under he Fatal Accents Act, 1855 and Common Law. Table patie ay note sued ovaramcloyes who fl win ne defnten of Wormer under ne Workmen's Compensaton Act 823 as amended) (ce: Msc 10)Main Extension Medical Expenses ‘Occupational Diseases Directors & Officers Liability Introduction Direc a offer fa tak oon oft reponse onad te soma, he rc the © Mis-statement in prospectus Inaccurate statement of financial conditions * Errors in annual accounts * Conflict of interest * Lack of judgment, diligence, good faith Mismanagement of funds * Unfair allotment of shares * Using insider information © Unwarranted dividend, salary, compensation payments Unfair dismissal of an employeeSalient Features Former, present, future directors are all covered. (All wrongfl acts committed or alleged to have been committed) Parent company and existing subsidiary companies covered Defence costs payable (even in alleged criminal cases, if directors and officers are finally acquitted) Cover on claims: wrongful act committed or alleged to have been ‘committed and all liability reported during the period covered * Legal liability towards claims made against the Insured Person (s) to the extent not indemnified by the Insured Organisation * Reimbursement to the Insured Organization on account of indemnification to each Insured Person. The policy additionally covers heirs, estates & legal representatives and spousal liabilities.Limits of indemnity * Industry of the proposer * Management perception to various stakeholders. Capital structure of company: Source of Shareholder funds - Foreign vis Domestic exposure, Debt structure * Credit rating of the company to honour future financial commitments, Clientele of the proposer ‘Annual turnover * Auditors of the company * Information gathered about the company from public sources Significant Exclusions * Liability for criminal wrongs Fines and penalties for civil wrongs Prior or pending litigation * Suits orarising from person who is a major shareholder © Bodily injury/ property damage « Infringement of intellectual propertyCrisis Communication Cover * Risk Management Extension * Pollution Defence Costs Extension * Extended reporting Period * Auto inelusion of new subsidiaries Prof. Indemnity for Doctors Protection for the experts. by the experts ‘ucts nis Unfrumely. huts chorcnseltelmmucd snd aecorne coed ocean ‘pata posing thao nr hs Our expense adving you how tec yr pots nr Claims arising out of bodily injury or death caused by error, omission, negligence * Legal liability including * Defence costs (costs, fees, expenses) incurred while investigation, cost of representation, compensation ete. ‘Scope of cover * Bodily injury and / or death of any patient caused by or alleged to have been caused by error, omission or negligence in professional service rendered or which should have been rendered by the insured doctor‘Sum Insured * Any One Accident (AOA) * Any One - Year (AOY) AOA and AOY can be in ratio of 1:1 or 1:2 Premium Premium chargeable depends on the: Risk group of doctor © Limits of indemnity selected © Ratio of limits ‘Significant Exelusions * Criminal acts * Acts committed under Influence of intoxicants / narcoties Weight reduetion Plastic surgery ur asa* Blood Banks Scope and jurisdiction 0.25 % of AOA in India only PRIMARY DATA ‘The Liability Insurance Market Liability insurance is not a new concept. It has been there for quite a while but has been virtually non-existent. However with the emergence of ‘multinationals and Indian companies going abroad liability is slowly but surely picking up speed in the ever widening insurance market, “Thrust on corporate governance to push demand for liability insurance”. me min ssiryaera of ecole igh, nd edi becoming mere nme pate wh he al esc wil etn uh denn orth pd. My research revealed around 100-odd companies have availed Directors & Officers Liability cover and almost all of these companies had some overseas exposure. Either these companies had a strong international presence or they had a GDR or ADR listing, We did not come across any domestic companies having taken a D&O cover. If one considers a percentage inerease in the ‘number of companies having taken a D&O cover, itis over 100 per cent to 200 companies. But, if one juxtapose this to international practices, this is minuscule. For instance, in the US and other matured markets over 90 per cent of the companies listed on the bourses have a D&O cover. Compare this to over 6,000-7,000 listed companies on the BSE / NSE; the number 200 looks microscopic. In India almost all general insurance companies provide liability insurance services as they have realized the importance and scope of this product Liability insurance constitutes of just about 10% to 119% oftheir overall business but the companies are confident that this figure will rise inthe fature as people are beginning to realize the importance of lability insurance in their day to day lives,Survey Report The following survey was carried out to analyze the views of the common people about Liability Insurance, fo find out their awareness about the product as well as their recommendations. Research methodology Number of people: 50 ‘Area covered: Malad, Kandiwali & Boriwali Occupation: Mostly businessmen and the rest were professionals Note: none of these people have taken liability insurance,mm ener 2. looking at our present legal system do you think there is scope for lability insurance in India? a a 3. Do you think Liability Insurance will be beneficial oris it just a gimmick? \ Z f Xlane Final Analysis Itis evident from this survey report that majority of the people are not aware about Liability insurance and the people who are aware of it are hesitant when it comes to buying Liability insurance because of the legal system and various other factors that are present in India which work against Liability insurance. However they are into agreement that Liability insurance will be beneficial if taken up. Such mixed reactions only make one suggestion that the insurance companies market such products more efficiently and simplify Liability insurance so that it is easier for the layman to understand LiabilityCONCLUSION Conventionally, Liability insuran concerned itself with the workplace and issues arising out of working conditions, death or accident at work and Unforescen incidents while in employment. More recently, however, third party Liability in damages for suits filed against manufacturers by their customers, as well as similar liability of professionals towards the users of their services has become a matter of insurable interest. Consumer courts fare a new reality that insurers are finding opportunities in, the latest manifestations of this liability issue is shareholder activism that is causing Directors and Officers of companies to cover themselves against legal suits in ease of negligence of duties.BIBLIOGRAPHY 4 Insurance Products and Services (Indian institute of banking and finance) 4 Fundamentals of insurance (P. K. Gupta) + Corporate Insurance ( V. Kumaraswamy) WIBLIOGRAPHY“& www liabilitiesinsurance.com 4 wow.corporateworld.com wwwadii.com