types of public liability policies

7/28/2019 Types of Public Liability Policies

1/22

PUBLIC LIABILITYPOLICIES


2/22

There are two types of Public Liability Policies.

Public Liability Non Industrial Risk - For offices,hotels,cinema houses,hospitals, schools etc.

Public Liability Industrial Risk - For godowns ,warehouses and factories

PUBLIC LIABILITY POLICIES


3/22

Public Liability Insurance Act 1991

This is a mandatory policy to be taken byowners ,users or transporters of hazardoussubstance as defined under Environment

(Protection) Act 1986 in excess of the minimumquantity specified under the Public LiabilityInsurance Act 1991.

Contd..


4/22

The Public Liability Policy can be extended to cover the

following risks on payment of an additional premium.

Natural calamities like flood, earthquake etc.

Pollution Risk subject to NOC from Pollution ControlBoard

Transportation Risk

ADD ON COVERS


5/22

Covers the Insured for: physical loss destruction or damage to the insured property

in some cases the costs incurred due to the interruption of yourbusiness activities arising from the loss of or damage to the insuredproperty

Some examples are: Fire

Storm

Theft / Loss

Water Leakage

Accidental Damage

Industrial Special Risks (Property)


6/22

Industrial Risks

Loss or damage to Fixed Assets like Buildings, Plant &Machinery, Furniture & Fixture, etc

Loss or damage to stock in godowns, in transit and at

manufacturing sites, etc Consequential losses

Non-Industrial Risks

Loss or damage to Household property, Motor Vehicles,

Shops, Offices, Hotels, Educational Institutes, etc

Property Risks


7/22

In Public Liability Policy, the sum insured is referred to

as Limit of Indemnity.

This limit is fixed per accident and per policy periodwhich is called Any One Accident (AOA) limit and AnyOne Year (AOY) limit respectively.

SUM INSURED


8/22

The ratio of AOA limit to AOY limit can be chosen

from the following : a.1:1

b.1:2

c.1:3

d.1:4


9/22

The AOA limit which is the maximum amount payable for

each accident should be fixed taking into account thenature of activity of the insured and the maximum numberof people who could be affected and maximum propertydamage that could occur, in the worst possible accident inthe insured's premises.

In the case of Public Liability Insurance Act 1991, the AOAlimit should represent the paid up capital of the companysubject to maximum of Rs.5 crores. The AOY limit is fixedat 3 times the AOA limit (Max.Rs.15 Crores).

Contd..


10/22

Premium chargeable depends on :

Risk Group

Limits of Indemnity selected

Ratio of limits

No. Of locations Annual Turnover

Premium Calculation


11/22

This policy do not cover liability arising out of or in

connection with: Pollution

Any product

Any professional deficiency

Personal injuries such as libel, slander, fines, penalties

Transportation of materials

Standard Exclusion


12/22

Legal liability under the Law of Tort ,can arise under

several circumstances in insured's premises such as Collapse of building structure

Accidental falling of fixtures

Bad maintenance or poor housekeeping resulting inaccident to visitors on the premises

Accidental leakage of toxic substance which pollutesthe atmosphere and injures or kills people

CLAIM


13/22

Negligence will be proved only when following conditions are

satisfied: Existence of duty of care

Breach of this duty

Injury suffered by a person or property damaged as a result ofthat breach.

In case of any event likely to give rise to a liability claim asdescribed above, insurance company should be informedimmediately. In case any legal notice or summons is received, itshould be sent to the insurance company. The company has theoption of arranging the defence of the case.

Contd..


14/22

The event giving rise to the claim should have

occured during the period of insurance or retroactiveperiod and the claim first made in writing against theinsured during the policy period.

The maximum amount payable including defence cost

will be the AOA limit selected. The any one year limitwill get reduced by the amount of claim or indemnitypaid for any one accident


15/22

Any number of such claims made during the policy

period will be covered subject to the total indemnitynot exceeding the Any One Year limit.

In case of Public Liability Insurance Act 1991 Policy,any award which exceeds the AOA limit will be paidby the government through Environment Relief Fundto which the insured has to contribute an amountequivalent to the premium paid under the PublicLiability Insurance Act Policy.

Contd..


16/22

The policy will not pay for claims arising out of

contractual liability, intentional non-compliance ofany statutory provision, loss of goodwill,slander ,fines,penalties , libel , false arrest , defamation , mentalinjury etc.


17/22

Worldwide Disasters Insurance Contribution

Year No ofCatastrophe

s

No offatalities

Totallosses

(USD bn)

Insured losses(USD bn)

% Insuredlosses

2005 397 97,000 230 83 36%

2006 349 31,000 48 16 33%

2007 335 21,500 70 28 40%

2008 311 246,000 269 52 19%

2009 288 15,000 62 26 42%

Source : Swiss Re Sigma

The proportion of insured losses in underdeveloped anddeveloping Economies tends to be even lower


18/22

Disasters in India Insurance Contribution

Catastrophe Year Estimated

economic

loss ($ mn)

Estimated

insurance

loss ($ mn)

% Insuredlosses

Gujarat Cyclone 1999 900 200 22%

GujaratEarthquake

2001 2,000 150 8%

Mumbai floods 2005 2,500 650 26%

Low insurance penetration impacting Public finances

Source : Market information


19/22

ESTABLISH THE CONTEXT

C

O

M

M

U

N

I

C

A

T

E

&

C

O

N

S

U

L

T

ANALYSE RISKS

M

O

N

I

T

O

R

&

R

E

V

I

E

W

EVALUATE RISKS

No

TREAT RISKS

Source: AS/NZS 4360:2004

IDENTIFY RISKS

Compare against criteria

Set priorities

TreatRisk

Yes

Risk Management Process


20/22

1. Analyzing risks and determining approaches to

control2. Obtaining statements of policy from the policy-

making entity

3. Planning desirable operational practices

4. Implementing the plan

PHASES OF RISK MGT. PLANNING


21/22

3 STEPS:

1. Identify risks

Categories include: property exposures; public liability,

non-negligence; and public liability, negligence2. Estimate frequency & severity of each risk

3. Determine alternative approaches to controlling therisks

Risk Management Assessment


22/22

4 Basic Approaches:

1. Avoidance

choose not to offer or discontinuean activity/service Should be used when appropriate leadership, facilities,

& equipment cannot be provided

2. Transference liability is shifted to another E.g., insurance, contract

3. Retention

accepting risk w/i the budget ofthe organization

4. Reduction using operational management toreduce risks

Control Approaches

types of public liability policies

Documents