III Exam|IC 74, Liability Insurance|One Liners|Chapter 4


III Exam|IC 74, Liability Insurance|One Liners|Chapter 4

The Liability Insurance (IC – 74) is a paper in III exam  for Non Life Insurance. The Liability Insurance (IC 74) is a optional paper and it comprises of 30 Points. This is the most important paper in III Examination, and most people prefer this paper.
This paper comprises of 100 Multiple Choice Questions. Aspirants need to score 60% in this paper to qualify for Licentiate.

We are providing Chapter 4: Statutory Liability one-liners of this paper practice of Non Life Insurance (IC – 74) which will be very important from exam point of view. This one-liners is very easy to understand.

Chapter 4: Statutory Liability

  • Public Liability Insurance Act-1991
  • Statutory Liability Has Certain Characteristics–
  1. Liability Arirses By A Specific Legislation I.E. Public Liability, Workmen Comp. Etc
  2. The Compensation Payable Is Fixed By Amt Or By A Structured Formula, Can Be Quantified.
  3. The Claims For Compensation Is On An ‘ Occurrence Basis’. The Cause For Claim And The Liability Limit Arises On The Date Of Event Causing Loss.
  4. The Authority For Hearing Such Case And The Procedures For Claiming Are Specified In Legislation, Can Be Termed As Fast Track Courts, Result In Speedier Settlement.
  • Preamble: An Act To Provide For Public Liability Insurance For The Purpose Of Providing Immediate Relief To The Persons Affected By Accident Occurring While Handling Any Hazardous Substance And For Matters Connected Therewith Or Incidental Thereof.
  • The Statement Of Objects And Reasons Say: The Growth Of Hazardous Industries, Process And Operations In India Has Been Accompanied By The Growing Risk From Accidents…To The Innocent Victims. As Per Principle Of ‘No Fault Liability’
  • The Purpose Of This Law Is To Providing Immediate Relief To Persons Affected By Use Of Hazardous Materials. It Does Not Apply To Employees Of The Organisation Handling Hazardous Material.
  • No Fault Liability: Section 3 Provides That Where Death Or Injury To Any Person Or Damage To Any Property Has Resulted From An Accident, The Owner Shall Be Liable To Give Such Relief As Is Specified In The Schedule Of The Act.
  • In Any Claim For Relief The Claimant Shall Not Be Required To Establish That The Death, Injury Or Damage Was Due To Any Wrongful Act, Neglect Or Default Of Any Person(This Is Known As No Fault Liability)
  • Injuries Includes Permanent Total Or Permanent Partial Disability Or Sickness Resulting Out Of Accident.
  • Amount Of Relief Payable As Per Sec 3 : Fatal Accident, Permanent Total Disability-25000, Permanent Partial-% Of Disablement As Decided By Authorised Physician
  • Temporary Partial Disablement-Fixed Monthly Relief Not Exceeding Rs.1000 Pm Upto A Maximum Of 3 Months—Victim Hospitalised For Period Exceeding 3 Days and Of Above 16yrs Age.
  1. Actual Medical Expenses 12500 For Fatal Accident & Tpd
  2. Actual Damage To Property Rs. 6000
  3. 8 Provides Claim Under Sec.3 Shall Be In Addition To Any Other Rights To Claim Compensation
  • Compulsory Insurance:4 The Liability Has To Be Compulsory Insured Under A Contract Of Insurance.
  • The Insurance Policy Has To Be Taken For Amount Not Less Than The Paid Up Capital Of The Undertaking Handling Any Hazardous Substance And Owned Or Controlled By The Owner.
  • If The Owner Is Not Co. Paid Up Capital Means Market Value Of All Assets And Stocks Of The Undertaking On The Date Of Contract Of Insurance.
  • The Liability Of The Insurer Shall Not Exceed The Limit Of Indemnity Specified In The Policy.
  • Rule 10 Under The Act -The Maximum Aggregate Liability Of The Insurer To Pay Relief Under An Award To Several Claimants Arising Out Of An Accident Shall Not Exceed Rs.5 Cr. and In Case Of More Than One Accidents During The Currency Of Policy Or 1 Year ,Whichever Is Less, Shall Not Exceed Rupees 15 Cr. In Aggregate
  • Environment Relief Fund-In Addition To Premium Owner Has To Pay To Insurer an Equivalent Amount To Be Credited To Erf Establish Under The Act.
  1. Aoa-Any One Accident – 5 Crore
  2. Aoy-Any One Year-15 Crore
  • The Central Govt. State Govt., Corporation Owned By Central Govt. Or State Govt. Any Local Authority-An Amount Of Rs.5 Cr. Or Equal To Paid Up Capital Of Undertaking, Whichever Is Less In Any Nationalised Bank For Meeting Liability Under The Act.
  • An Application For Claim For Relief May Be Made In Prescribed For-Within 5 yrs Of The Occurrence Of The Accident-By The Person Who Sustained Injury Or By The Legal Representatives Of The Deceased, In Event Of Death
  • The Collector Shall Verify The Occurrence Of Any Accident In His Jurisdiction Who Has The Power Of A Civil Court.
  • The Collector Shall Arrange To Deliver Copies Of The Award To The Parties Concerned In Any Case Within Period Of 15 Days From The Date Of Award.
  • The Insurer Has To Deposit Within 30 Days Of The Announcement Of Award To The Collector.
  • Compulsory Public Liability Insurance Policy: Covers All Location Within India Under The Control Of The Insured Where Hazardous Materials Are Handled.
  • The Turnover Is One Of The Factors Of Premium Rating
  • Time Barred Liability -There Shall Be No Liability Under The Policy For A Claim Made After 5 Years From The Date Of Accident.
  • The Policy May Be Cancelled On 30 Days notice Both Insured And Insurer
  • The Premium Is Based On Limit Of Indemnity Any One Accident (Aoa) And The Turnover.
  • The National Environment Tribunal Act 1995 -Imposes No Fault Liability In Respect Of Hazardous Substances
  • Compensation Can Be Claimed Under 14 Heads As Against 6 Under Pli Act.

Workmen’s Compensation Act, 1923  

  • An Employer Is Liable Under Law Towards The Employees To Pay Compensation In Respect Of Injury Or Disease Arising Out Of And In Course Of Employment
  1. Personal Negligence Of The Employer
  2. The Employers’ Negligence In Failure To Use Reasonable Care And Skill In The Provision And Maintenance Of Suitable, Safe Plant, Safe Place To Work And Safe System Of Work.
  3. Breach Of Statutory Regulations In Regard To Safety Of Employees
  4. Personal Negligence Of Fellow Employee
  5. Negligence Of Employees In The Performance Of Their Employment Duties
  • Section 3(5) Act Provides If Workman Chooses To File A Suit For Compensation For Injury In A Civil Court, His Remedy Under The W.C.Act Is Lost To Him. He Cannot File A Suit In A Civil Court.
  • Death Compensation: The Amount Of Compensation Payable For Death Is 50% Of Monthly Wages Multiplied By Relevant Factor(Minimum Rs.80000) Revised To Rs.1,20,000
  • Permanent Total Disablement: Compensation Payable is 60% Of Monthly Wages Multiplied By The Relevant Factor(Minimum Rs.9000) Revised 1,40,000/-Wef 18.1.2010
  • The Limit Of Monthly Wages For The Purpose Of Calculation Of Compensation Has Been Revised To Rs.8000 W,E,F, 31.5.2010
  • For Temporary Disablement Whether Total Or Partial, The Amount Of Compensation Is A Half Monthly Payment Equal To 25% Of Monthly Wages Of The Workman. This Is Payable On 16th Day
  1. From The Date Of Disablement Where Such Disablement Lasts For A Period Of 28 Days Or More Or
  2. After The Expiry Of A Waiting Period Of 3 Days From The Date Of Disablement Where Such Disablement Lasts For A Period Of Less Than 28 Days, Thereafter Half Monthly During The Disablement Or During Period Of 5 Years, Whichever Period Is Shorter.
  • Payment Of Compensation For Death Has To Be Deposited By The Employer With The Commissioner Whose Receipt Shall Be A Sufficient Discharge(Sect.8)
  • Section 4 A – Compensation Shall Be Paid As Soon As It Fall Due.
  • If Payment Is Not Made Within One Month The Employer Would Be Liable To Pay Interest And In Case The Delay Is Unjustified, He Has To Pay Further Amount By Way Of Penalty Subject To Maximum Of 50% Of Amount Payable As Ordered By Commissioner.
  • Section 17- The Workman Has Right To Recover Compensation From The Contractor Instead Of The Principal.
  • Section 5 Method Of Calculating Wages For The Purpose Of The Act
  • Section 10 Notice Of Accident To The Commissioner Within 2 Years Of Occurrence Of Accident
  • Section 13 Commissioner Has Power Of A Civil Court
  • Employee’s Compensation Act, 1923(Amendment Act 2009-45 Of 2009) The Workmen’s Compensation Act Nomenclature Has Changed To The Above With Effect From 18th January, 2010.
  1. Clerical Workers Under Preview Of The Act
  2. Death Compensation- 1,20,000
  3. Permanent Total Disablement Compensation: The Minimum Compensation For Ptd
  4. Is Enhanced To Rs.140000
  5. Funeral Expenses: Is Enhanced From Rs.2500 To Rs.5000
  6. Maximum Monthly Wages : Rs.8000 For Calculation Of Compensation W.E.F.31.5.2010
  7. The Amended Act Provides For Reimbursement Of Medical Expenses.
  • Employers’ Liability Insurance Policy:
  1. Preamble: Reference To The Proposal And Declaration Which Is Made Basis Of The Contract And Is Deemed To Be Incorporated In The Policy. Insurance Is Restricted To Business Specified In The Schedule Of Policy.
  2. Exceptions: The Insured’s Liability To Employees Of Contractors To The Insured.
  3. Exception E : Excludes Liability Under The Policy For Certain Diseases Brought Within Scope Of Workmen; S Compensation Act Ny Amendment In 1959. These Disease Are Silicosis, Coal, Miner’s Pneumoconiosis, Asbestosis, Bagassosis. This Liability Can Be Covered At Extra Premium.
  4. Premium For This Class Of Insurance Are Calculated On The Amount Of Total Earning Of The Employees.
  5. The State Of Actual Earnings Of The Employees Is Required To Be Submitted By The Insured Within One Month From The Expiry Date Of The Policy.
  • The Fatal Accident Act, 1855
  1. The Premium Rates Are In Rupees Per Mille And Are To Be Calculated On The Total Earning Of The Employees.
  2. The Rate Of Premium Depends On The Nature Of Work Carried On By The Insured.
  3. The Cover Under Table B Is On The Basis Of ‘Negligence’ Under Common Law
  4. Table A Policy The Cover Is In Respect Of Liability Under Common Law(I.E. Negligence) As Well As Under The W.C. Act(I.E. Irrespective Of Negligence)
  5. Compensation For Occupational Diseases May Be Covered At An Additional Premium Of 50% Of The Standard Rate.
  6. Medical Expenses For A Limited Extend Ranging From Rs.80/- To Rs.2400/- Per Case Was Being Provided By The Insurer As An Extension Under W.C. Policies.
  7. Under Workmen’s Compensation Amendment Act,2009, The Employee Shall Be Reimbursed The Actual Expenditure Incurred By Him For Treatment Of Injuries

During Course Of Treatment.

  1. In All Classes Of Accident Insurance Proposal Form Is Compulsorily Used And Is Made The Basis Of The Contract.
  2. The Workmen’s Act Required The Employer To Deposit Compensation For Death Within A Month Of The Event, Delays Invite Interest And Penalties.
  • Esis: Employees State Insurance Scheme: Is A Social Legislation For All Industrial Workers.
  1. It Is A Contributory Scheme And Deductions Towards Membership Are Compulsorily Deducted From Enrolled Employee Wages. The Scheme Overrides The Workmen, S Compensation Act. In Effect Persons Covered Under Esis Are Not Eligible For Workmen’s Compensation Act.
  2. The Scheme Applies To : All Factories Using Power & Having 10 Or More Employees On Roll
  3. Non Powered Factories Employing 20 Or More Employees and
  4. Shops, Hotel, Restaurants, Cinemas And Theatres, Road Motor Transport Undertaking And Newspaper Establishments Having 20 Or More Employees On Rolls
  5. As Per Amendments W.E.F. 2010 All The Factories Employing 10 Or More Employees Are Eligible For This Scheme Irrespect Of Whether It Is Using Power Or Not. The Wage Limit For Eligibility Is Rs.15000/-
  6. The Scheme Provides For All Hospitalisation Treatment Of The Members And Dependents. In Addition To Allowance For Disease And Long Term Ailments Are Also Provided To The Members.  The Scheme Extends To Provide Compensation For Employment Related Accidents And Occupational Diseases
  7. Esis Provides Wider Benefits Than The Wc Act For The Members Covered. However The Monthly Wage Eligibility Limits The Beneficiaries. Persons Over The Wage Limit
  8. Would Be Eligible To Workmen’s Compensation Benefits.
  • Carriers Legal Liability Insurance Policy: Is Offered To Road Transport Companies Carrying On The Business Of Common Carriers. In Terms Of The Carriers Legal Liability Act, Road Transporters Were Absolutely Liable For Losses To Cargo In Their Custody Whilst In Transit.

There Are Two Types Of Covers Available:

  1. Basic: It Provides For Liability On The Carrier Arising Out Of Fire, Explosion Or Accident Caused By Negligence By The Insured Or Their Employees Or Representatives Whilst In Transport Vehicles.
  2. Wider: Perils Of Fire, Explosion Or Accident Due To Negligence As Covered Under Basic Policy
  • In Addition Liability Resulting In Loss Or Damage Due To The Perils Of Fire, Riot And Strike, Malicious Damage, Burglary Whilst Goods Are In Carriers Custody.

Shortage Due To Theft Or Pilferage

  1. Flood/Water Damage, Damage By Other Cargo, Breakage, Leakage, Damage Due To Importer Handling.
  2. The Cover Is During Transit, Incidental Storage, Transhipment And Up to 7 Days After Reaching Final Place.
  3. The Policy Follows The Coverage Under Road Transit Marine Insurance
  • Multimodal Transport Operator (Mto) Liability Insurance Policy: The Multimodal Transportation Of Goods Act 1993 Provides For Legal Liability For Loss Or Damage To Cargo. It Provides For The Creation Of A licenced Operator Called The Mto Who Could Be Held Responsible For The Loss Or Damage To The Cargo Entrusted To Them For Transportation.
  • Multimodal Transport Operators Face A Wide Range Of Liability Exposures
  1. Act For Their Principal In Arranging Shipping And Transport Services Or
  2. Contract With The Cargo Owner To Transport Goods Or
  3. Provide Expert Advice, Assistance And Opinions.
  • Mto Act Came Into Effect In 1993, Indian Insurer Were Not Providing Cover Till 2001. Currently Few Insurer Are Offering This Cover In Market. In Light Of This The
  • Ministry Of Finance Had Given Special Dispensation Allowing Insurers To Directly Underwrite This Business.

Multi model Transport Operator Liability Policy Provides Indemnity

  1. A Customer Or Third Party For Loss Or Damage To Cargo In The Insured Care, Custody Or Control
  2. A Third Party For Death, Bodily Injury Or Damage To Property
  3. A Customer Or Third Party Errors And Omission Or Professional Negligence
  4. An Authority For Fines And Duty

Cargo Liability:- Indemnity Is Provided To The Insured For Its Legal Liability And Claims Expenses In Respect Of Claims Which Arise From:

  1. Physical Loss Of Or Physical Damage To Cargo Provided Such Legal Liability Arises From
  2. An International Transport Convention Or
  3. A National Transport Law Which Is Compulsorily Applicable To The Insured Or
  4. Any Standard Trading Conditions Approved By A National Freight Forwarding ,Road Haulage Or Warehousing Association Of Which Insured Is Member

Fiata Or Combicon Bill Of Lading Or

  • The Indian Multimodal Transport Act,1993 Any Statutory Amendments
  1. For Consequential Loss Directly Arising From The Above
  2. The Cargos Contribution To General Average And Salvage Which The Insured Is Unable To Recover From A Customer, Agent Or Sub-Contractor.
  3. Extra Cost Incurred By The Insured Due To The Failure Of Consignee To Collect Or Remove Cargo From The Place Of Delivery
  4. Extra Cost Incurred By The Insured For Sending Mis-Directed Cargo To The Correct Destination
  5. Cost Incurred By Insured For Quarantine, Fumigation Or Disinfection Arising Other Than In The Normal Course Of Business
  6. Cost Relating To Removal Of Debris Following An Accident For Which Insured Is Liable.
  • Professional Indemnity: This Is An Extension Under The Policy ,Indemnity Provided Is For Legal Liability For A Claim And Claims Expenses Arising From:
  1. The Negligent Performance Of A Professional Duty
  2. Fraud By An Employee Other Than Partner, Executive Officer, Senior Official
  3. Libel, Slander Or Infringement Of Personal Rights not Arisen From Publication In An Independent Journal, Magazine, Newspaper, Website Or Electronic Publication Or In Any Pre-Arranged Radio Or T.V. Interview
  4. An Unintentional Breach Breach Of Warranty Of Authority Where Insured Is Contracted.

Fines And Duties: Is An Extension Under The Policy

  1. Rating: A. Gross Fright Receipt(Gfr)
  2. Number Of containers Handled (In Terms Of 20 Teu)

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