If you're running any business involving hazardous substances, you need to know about the Public Liability Insurance Act 1991. Accidents can happen without warning and when they do, the law ensures that victims get quick compensation. This Act has an important role in protecting the public and making sure companies take responsibility for any harm caused by their activities.
In this blog, we'll break down what the public liability act 1991 is all about, what powers it grants, what penalties it imposes and why it's essential for businesses to follow its rules.
What is Public Liability Insurance Act 1991?
The Public Liability Insurance Act 1991 was passed by the Indian Parliament to provide immediate relief to individuals who suffer harm due to accidents involving hazardous substances. Before this Act, victims often had to go through lengthy legal battles to get any sort of compensation. With this law in place, the process became faster and more streamlined.
Here's what the Act covers:
- It mandates that all businesses handling hazardous substances must take out an insurance policy.
- The insurance must cover liability for death, injury or damage caused by accidents involving hazardous materials.
- It ensures that affected individuals receive compensation promptly without the need for extensive court proceedings.
The Public Liability Insurance Rules 1991 were introduced to guide the implementation of the Act. These rules outline how businesses should purchase insurance, what the coverage should include and how the Environmental Relief Fund (ERF) works.
Some important highlights:
- The ERF is a central fund that supplements compensation paid under the insurance policy.
- The owner of the hazardous material must contribute to the ERF annually.
- The insurer is required to pay a portion of the premium into this fund.
Powers under Public Liability Insurance Act, 1991
Let's look at the authority and enforcement mechanisms under the Public Liability Insurance Act 1991. The Act doesn't just suggest what businesses should do — it mandates it.
Key powers include:
- Compulsory insurance: All owners handling hazardous substances must get insurance coverage that complies with the Act.
- Environmental Relief Fund management: The central government has the authority to manage and utilise the ERF to support quick payouts to victims.
- Collector's role: The local District Collector plays a major role in assessing claims and distributing compensation. Victims or their representatives can apply directly to the Collector.
- Claim settlement: Once a claim is verified, the Collector can order the insurer and the ERF to disburse the required compensation.
- Inspection powers: Designated officers can inspect premises, request documents and ensure compliance with safety norms and insurance obligations.
In case you're wondering how this ties into liability insurance coverage, here's a quick overview:
- Liability insurance coverage covers businesses from the financial burden of paying compensation out-of-pocket.
- Under this Act, it's mandatory, not optional.
- It ensures that both the insured party and the affected person are safeguarded.
Who needs to comply?
The Act applies to any owner or operator of a facility handling hazardous substances in quantities exceeding the prescribed limits. This includes:
- Chemical manufacturing plants
- Pesticide producers
- Paint and solvent factories
- Oil and gas refineries
- Warehouses storing hazardous substances
Penalties under Public Liability Insurance Act, 1991
The Public Liability Act doesn't take violations lightly.
Here's a look at the penalties under the Act:
- Failure to take insurance: If a business doesn't buy the required insurance policy, the owner can face up to six years in prison or a fine of up to ₹1 lakh or both. Section 14 of the Act covers this in detail.
- Non-compliance with directions: Not following lawful orders from authorities (such as the Collector) can also lead to imprisonment of up to three years and/or a fine.
- Continuing offences: If violations continue over time, additional daily fines may apply — up to ₹5,000 per day.
- Corporate liability: If a company violates the Act, both the company and responsible individuals (like directors or managers) may be held liable.
- Shutting down operations: Authorities have the power to shut down units that repeatedly violate safety standards or insurance norms.
Why compliance benefits businesses
Beyond avoiding penalties, compliance with the Public Liability Insurance Act 1991 has real advantages for businesses:
- Reputation boost: Following safety norms and having the right insurance in place builds public trust.
- Financial security: Liability insurance covers large compensation claims, shielding your business from bankruptcy.
- Risk mitigation: Insurance companies often require safety audits, which help reduce the chance of accidents.
Conclusion
The Public Liability Insurance Act 1991 plays a key role in ensuring quick compensation for victims of accidents involving hazardous substances. It mandates liability insurance for businesses, enforces compliance through penalties and enables swift claim settlements via the District Collector and ERF. Following the Public Liability Insurance Rules 1991 helps businesses stay legally compliant and socially responsible. Simply put, having the right liability insurance coverage protects both the public and your business.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure / policy wordings carefully for detailed information about on risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.