Five Things you Should Know about Piblic Liability Insurance
Public liability Insurance is a cover offered by insurers to business organisations for any third-party liability arising due to business operations and premises. The Liability might be related to physical injury, death or damage to the property of the third-party, other than the workmen or employees of the organisation. This policy is mandatory to be availed by the owners, users or transporters of hazardous substances as defined under the Environmental Protection Act, 1986 if these substances are in excess of the limit specified under the Public Liability Insurance Act, 1991.
Public Liability & Insurance
Imagine a situation in which some third-party (like a study group) visits a cement plant with required permissions to research on the operations of the factory. Due to some mismanagement, a huge bulk of lime falls off from a height leading to severe head injury to a person/s from the study group. What will the business unit do in such a case in the absence of an insurance policy? The owner will have to bear the medical and legal expenses personally, apart from risking the curbed operations of the plant for a considerable time period. A Public Liability Insurance Policy will enable him to bear the medical and legal costs of such unexpected mishaps.
It is thus important for all business organisations ranging from schools and educational institutions, factories, warehouses to IT companies, BPOs and restaurants to avail this policy. However, before availing it, there are a few important things that one should be clear about the insurance cover.
Important Characteristics of Public Liability Insurance Policy
A. Meaning and Significance
As mentioned above, this policy is important for the business organisations to cover the cost of third-party injury, disablement, or damage to third-party property.It is significant for all manufacturing and non-manufacturing business units because no organisation can guarantee a 100% security in its operations.Manufacturing units including factories and warehouses are naturally dangerous due to complex machines and operations. As for the non-manufacturing units like hotels or cinema halls, there are other kinds of accidental risks to visitors apparently due to bad maintenance or poor housekeeping.
There are certain extra benefits that can be availed by the insured by paying an extra premium. These include the accidental risks that come with the nature of the business. For example, a transporter of goods can avail this policy to cover the cost of any third-party damages caused by the vehicle(s) in his/her fleet.
In certain organisations like a power company, the level of pollution cannot be checked properly. Subject to the NOC from the Pollution Control Board, such risks of excessive pollution are also covered under the Public Liability Insurance.
Covers for accidents occurring due to natural disasters is also available as an add-on benefit.
C. Toxic Emissions Cover
A chemical plant handling hazardous chemicals and substances is always at the risk of emitting these substances into the atmosphere that might harm people unrelated to the business.The infamous 1984 Bhopal Gas tragedy is the example of the same. The emission of the dangerous Methyl Isocyanate gas led to the death of countless people around the plant. Such tragedies, however uncommon, can be catastrophic, not only for the affected people but also for the organisation.
Public liability insurance can help businesses cope with such accidents and help affected people in continuing their lives without further financial distress.
D. Deciding the Limit of Indemnity
Generally, the sum assured in this case can be availed as a ratio between per accident and per policy period, i.e. Any One Accident (AOA) to Any One Year (AOY).The ratio can vary according to that chosen by the insured. It is recommended that the AOA limit should be fixed considering the maximum risk and the maximum damage that can occur in the premises of the insured.
Generally, under the Public Liability Insurance Act, the AOY limit should be 3 times of the AOA limit.
E. Key exclusions
The key exclusions include any kind of contractual liability that may arise in relation to related parties like employees, vendors, carriers etc. For a transport company, the liability arising due to injury or death of contractual third-party carriers will not be covered under this policy.
Other exclusions include the payment of any cost due to libel or slander committed affecting the reputation of the third-party. Payment of penalties, fees, or cost of mental injury to the third-party is also excluded from this policy.
So, it is feasible to pay attention to the features of the Public Liability Insurance policy to safeguard the business in case of public accidents.
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