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Liability Insurance Casualty & Financial Lines: Dipten Roychowdhury
Liability Insurance Casualty & Financial Lines: Dipten Roychowdhury
Dipten Roychowdhury
Overview of Liability Insurance
It covers UNIDENTIFIED and UNEXPECTED RISKS which can give rise to significant
losses. Blind spot is SURROGATE liability.
.
Legal Cost
Liability
policy covers
Payout/Damage
Liability arises from
Legal framework
COMMON LAW
Law that is derived from custom and judicial precedent- Codified in India. Indian Penal Code 1860; the Code of
Criminal Procedure 1973 and the Code of Civil Procedure 1908, Indian Contract Act 1872
This quintessentially universal and acted as the derivative of human conduct, used to maintain order where
there was none. It refers to the unwritten, judge made law as opposed to written law (statutory
law)...Accused can maintain silence. Prosecution has to substantiate the claim. Its known as CASE LAW
STATUTORY LAW
Factories Act 1948, WC Act 1923 (Employees Compensation Act 2010), PL Act 1991, Mines Act 1952
Food Safety and Standards Act, 2006 …………
NEGLIGENCE
•A legal duty to exercise "ordinary care and skill".
•The breach of [the] duty caused by the omission to do something which 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.
•Resulting in injury to the plaintiff's person or property.
NUISANCE
A private nuisance is a civil wrong; it is the unreasonable, unwarranted, or unlawful
Public nuisance covers a wide variety of minor crimes that threaten the health, morals, safety, comfort,
convenience, or welfare of a community. Violators may be punished by a criminal sentence, a fine, or both
Liability Jargon demystified
AOA
• Any One Accident
• Any One Event
1:1 1:2
• Any One Year
AOY (in ratio with AOA) • Annual Aggregate 1:3 1:4
Retro
Date
Policy
Period
Period Of
Insurance
Covers bodily injury, property damage (BI/PD) incurred by third parties and originating
from risk sources at the premises of any enterprise. The risk sources may be either
static or dynamic and effect may be within the premises or in its vicinity
Target Market
•Cover is so basic – Everybody needs it !
•Liability arises from Occupiers’ Liability Common Law Principle , so it is myth that Non-Industrial Risks do not
need Public Liability !
•Banks , Hotels , High Rise buildings and their occupants thereof.
•IT Companies - What are their risk exposures ?
•Manufacturing Industries – All of them who have hazardous storages, operations , processes , it is a must !
Important extensions in PL
AOG peril liability (only legal liability)
72 hrs Sudden and Accidental Pollution liability
Discharge of treated effluents thru pipeline
Industrial Risks
Public Liability Act
Public Liability Insurance Act 1991: Came into force on 1st April, 1991
“accident” means an accident involving a fortuitous or sudden or unintended occurrence while handling any
hazardous substance resulting in continuous or intermittent or repeated exposure to death of, or injury to, any
person or damage to any property but does not include an accident by reason only of war or radio-activity;
“handling”, in relation to any hazardous substance, means the manufacture, processing, treatment, package,
storage, transportation by vehicle, use, collection, destruction, conversion, offering for sale, transfer or the like of
such hazardous substance [vehicle is any road transport other than Railways]
“hazardous substance” means any substance or preparation which is defined as hazardous substance under the
Environment (Protection) Act, 1986 (29 of 1986), and exceeding such quantity* as may be specified, by
notification, by the Central Government- substance or preparation which, by reason of its chemical or
physico-chemical properties or handling, is liable to cause harm to human beings, other than living creatures,
plants, micro-organism, property or the environment
Public Liability Insurance Rules 1991
“Relief Fund” means the Environmental Relief Fund established under section 7A. Collector has power of a civil court
Compensation under PL-Act
Sec-3(1) of the Act
Applicatiuon for compensation [u/s 6(1)]: No application for relief shall be entertained unless it is made
within five years of the occurrence of the accident
Award by Collector: The Collector shall arrange to deliver copies of the award to the parties concerned
expeditiously and in any case within a period of fifteen days from the date of the award
Duty of the Owner: claim for relief in respect of death of, or injury to, any person or damage to
any property shall be disposed e within three months of the receipt of the application for relief
Duty of Insurer: the insurer, who is required to pay any amount in terms of such award within a period of
thirty days of the date of announcement of the award, deposit that amount in such manner as the
Collector may direct
Other compensation claimed by the victim/ legal representative - The right to claim relief under sub-section
(1) of section 3 in respect of death of, or injury to, any person or damage to any property shall be in addition to
any other right to claim compensation in respect thereof under any other law for the time being in force. The
amount of such compensation shall be reduced by the amount of relief paid under this Act
Extensions
SEC-C
1)TURNOVER
Domestic
USA/ Canada
OECD
Non OECD
2) AOA and AOY with any sub limits for Sec-B &C
3) List of Premises
4) Process, RM &FG, Safety, Quality
5) List of products
6) Advertisement responsibility and methods
Professional Indemnity
Extensions
IPR Infringement
Los of documents
Unauthorized access to data
Unintentional breach of confidentiality
Defamation liability
Court attendance cost
Empoloyee dishonesty
Outstanding fees
D&O
Who is Director and Who is Officer
Directors :
As defined under sections 2(34), Section 149(3), section 161(1) & Section 197(13) of Indian Co’s Act 2013
and also Non-Executive Directors/Independent Directors as per Sec 149(6) of Companies Act 2013
Director
a) Any natural person who is, was or becomes a director or officer of the Company during the Period of
Insurance or holds any equivalent position in any jurisdiction;
b) Any natural person who is, was or becomes an Employee of the Company during the Period of Insurance:
i) acting at the specific prior written request of the Company in the capacity of Outside Director; or
ii) acting in managerial or supervisory capacity; or
iii) named as co-defendant with any director or officer; or
c) any director or officer’s lawful spouse or civil partner
d) the estate, heirs, legal representative
e) Trustee in case of Bankruptcy
Officers
Any employee of the Policyholder in executive /managerial role as Officer who may beappointed or elected
to some position of responsibility or authority in the organization outside the said sections without any
Caveat.
Is D&O mandatory? What we pay
Sec 197 (13): Companies Act of 2013 recognizes the right of companies to purchase D&O
insurance.
Where any insurance is taken by a company on behalf of its managing director, whole-time director, manager,
Chief Executive Officer, Chief Financial Officer or Company Secretary for indemnifying any of them against any
liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust for which they may
be guilty in relation to the company, the premium paid on such insurance shall not be treated as part of the
remuneration payable to any such personnel:
Provided that if such person is proved to be guilty, the premium paid on such insurance shall be treated as part
of the remuneration.
Indemnity is paid
•Only for Civil Procedures grounds
•Legal cost is anyway payble till admission of the Insured or final adjudication
Limit Of Liability
Combined for Side-A&B in the ratio 1:1 throghout the policy period
Trigger –Claims Made
D&O Insurance
D & O Insurance policies offer liability coverage for company managers to protect them from claims
which may arise from the decisions and actions taken within their scope of regular duties. Policyholder is
Company and its subsidiaries.