1. PREAMBLE
1.1 Liability insurance is of comparatively modern origin. The need arises on account of increased awareness of legal rights following death, injuries, loss or damage, wither tangible or intangible and also the availability of free legal aid in many cases as well as setting up of statutory bodies like Consumer Forums, etc. This is added by the greater complexity of modern living and development of residential complexes around Industrial belts in particular, thus increasing the impact of accidents.
1.2 Liability Insurance comprises covers issued under:
a) Public Liability Insurance Act, 1991 –
b) Market Agreement for :
— Public liability Insurance for Industrial Risks
— Public Liability Insurance for non-industrial risks
— Product Liability Insurance
— Professional Indemnity Insurance for Doctors, Medical Establishments, Architects, Solicitors, Chartered Accountants. Consulting Engineers, Financial Consultants, etc.
1.3 In addition other Liability Policies like Carriers’ Liability, Specific Liabilities as part of package Policies like Householders’ Comprehensive. Shopkeepers, LPG (Traders’ Combined), Couriers Liability, Libel, Freight Consolidators Liability. Stevedores’ Liability, Inland Vessels Act Liability are also issued.
This list is not exhaustive and policies covering other specific types of Liability may also be issued.
1.4 In claims under Liability Insurance policies there has first to be a claim on the insured by a third party, followed by a claim by the insured on the Insurance Company. It is essential that the insured is legally liable to the third party for a claim to be considered under the Insurance Policy. It is, however, not necessary that the policy will pay for all claims that the insured is liable to the third party. There are various provisions, exceptions and conditions under the policy, which may negate or reduce the Insurer’s liability as compared to the insured’s liability to the third party.
1.5 Liability to Third Party may arise out of:
— Tort or Common law
— Contract
— Statute
The remedy is payment of damages.
Tort involves breach of duty. Tort may be of various kinds like negligence, nuisance, trespass, slander, assault, etc. As regards Liability arising out of Contract, it is liability assumed by the insured by agreement and which would not have attached in the absence of such agreement. This is not covered in the normal course.
The Statutory Liability arises out of various legislations / acts like Public Liability Insurance Act 1991, Inland Vessel Act 1917 etc.
1.6 Market Agreement Liability Policies are issued on “Claims made” basis.
a) Claims-made policies represent a relatively new concept in Liability underwriting and contain certain special terms like “retroactive date”, “policy period”, “period of insurance” etc. and provision for “Claims Series”, “Extended Reporting” and “Notification extension” etc. It is therefore recommended that thorough familiarity with the claim made concept and relevant policy conditions be attained before attempting to handle claims there under.
b) However Policies which are issued outside the provisions of the Market Agreement may be on: losses occurring basis as also liability sections incorporated in Non/liability Policies such as Householders Comprehensive, etc.
Public Liability Insurance Act Policies are governed by a Tariff and issued on “occurrence” basis.
1.7 Liability Policies are policies of Indemnity and insure the legal liability of the insured to pay compensation in respect of
a) Injury, which means death, bodily injury, illness or disease of or to any person and
b) Damage, which means loss of possession or control of or actual destruction (whether full or partial) to tangible property and
c) Pecuniary Loss
1.8 The Policy pays claimant’s costs, fees and expenses incurred with insurer’s consent in defending any claim made against the insured. However, these are payable within the limit of liability, unless otherwise specified.
2. INTIMATION OF EVENT
2.1 Upon intimation of the happening of an event, which may give rise to a claim under the policy, the Claim Handling office has to check the following:
a) Whether Sec. 64-VB of the Insurance Act has been complied with by the insured affecting in particular the retroactive date.
b) Whether the accident has occurred during the period of insurance and the claim is made during the policy period or within 90 days from the date of expiry in the event of non-renewal or cancellation of the policy.
c) Limit of Indemnity applicable under the policy.
2.2 The Claim Handling Office should also immediately call for full details of the event (if not already provided) and depending upon the circumstances and extent of injuries/loss reported to have been caused may also appoint an independent/ in-house agency “without prejudice” to verify the facts and collect all evidences for defence in a discreet manner without alerting the affected parties or other agencies to lodge claim which otherwise may not have been lodged.
2.3 Simultaneously, the insured is also to be advised to pass on to the insurer any notice of claim that may be received without admitting liability.
2.4 The Investigator’s Report and the connected documents may be preserved at the Claim Handling Office till a regular claim is preferred by the claimant against the insured. Thereafter, the general procedure as described below may be followed in dealing with the claim.
3. CLAIMS PROCESSING
3.1 On receipt of claim intimation, the procedure as enumerated under 2.1 and 2.2 above may be followed.
3.2 In cases wherein notices or summons are received directly from the court whether or not any intimation has been made by the insured, a competent advocate should be engaged to defend the case effectively. Generally, defence is taken on lack of privity of contract between the claimants and the insurer, as the insurer is liable to indemnify the insured only subject to the terms and condition of policy of insurance.
3.3 It is also to be verified whether the claim is barred by limitation placed by statute or by policy conditions.
4. DOCUMENTS
4.1 Depending on individual circumstance, reliance may be placed on the following documents and information/appropriate.
a) Detailed version about the incident / alleged misfeasance.
b) Details of loss caused/injury/death/property damage including all available information on victims as well as estimated quantum of liability.
c) Steps taken by the insured to mitigate the loss.
d) Statements from witnesses, sketch plans, photographs, visual records of evidence/circumstance, video, etc.
e) Any other evidence in support of claim
f) Press reports
g) FIR/Investigation report of Police
h) Survey/Investigation Report; Survey Report on the damaged property of some other surveyor, if any
i) All notices/summons of the court
j) Weather (Meteorological) report.
k) Pollution Control Board Report
l) Post Mortem Report/Medical Certificate
m) Consumer Action Group/Society/Group representation/Report
n) Details of other Insurance
o) Legal opinion/ Expert’s opinion on admission of liability / appeal
p) Details of claims, if any, preferred by the affected party / insured for the same loss from any other source.
q) Evidence of legal liability of the insured.
4.2 If the legal opinion expresses the likelihood of liability being pinned on the insurer in terms of the policy all possibilities must be explored for out of court/compromised settlement. This will ensure expeditious settlement, avoidance of possibly large/huge liability and adverse publicity.
4.3 In the event of an Award being passed by the appropriate authority, a copy of the Award may be obtained immediately. A legal opinion may thereafter be obtained and the merits of the case examined as to whether it is worthwhile going in for appeal.
5. FACTORS TO BE CONSIDERED WHILE DETERMINING LIABILITY
5.1 Property Damages:
a) Nature and extent of loss/damage, valuation, depreciation
b) Contributory negligence
c) Loss of use, loss of profits, increased cost of working, etc. as claimed.
d) Recovery Rights
5.2 Bodily Injury / Death:
a) Age, Occupation, Status, Income, Dependency, Age of the dependents, etc.
b) Succession/Legal Heir Certificate as may be applicable
c) Percentage of disability supported by Medical Certificate
d) Nature and extent of injuries as certified by medical authorities.
e) Contributory negligence
5.3 Pecuniary Loss:
Though scrutiny and verification, if necessary, with assistance of independent experts of all the circumstances and factors claimed to be responsible for such pecuniary loss. It should be ensured that the experts appointed are fully conversant with technicalities, professional and trade practices related to the field of investigation.
6. SPECIAL FEATURES TO BE CONSIDERED FOR CERTAIN LIABILITY CLAIMS
6.1 Product Liability:
a) Whether the item is covered under the policy
b) Date of sale vis-à-vis the retroactive date
c) Whether quality control measures as prescribed had been fully complied with by the insured.
d) Whether manufacturing defect in product is established.
e) Whether specific instructions for use given by insured, if any, have been complied with or not.
f) Whether Vendors’ Liability covered and claim has arisen there under.
g) Specialists/Experts to be engaged to determine whether product is defective
h) Collaborators’ Liability
i) Whether compromised settlement is worthwhile.
j) Recovery Rights, if any.
k) Loss Minimization Measures – recall; stoppage of sale/destruction of the concerned product.
Where claims arise in a foreign county, it is usual to appoint claims settling agents overseas who are conversant with handling such claim in the country in which they have occurred and follow their advices.
6.2 Public Liability Act Policy:
6.2.1 ‘No fault’ Liability provisions as incorporated in the Public Liability Insurance Act, 1991 are in the nature of social welfare measure. The Act Liability claims have to be expeditiously settled and neither the insurer nor the advocates appointed need contest where it is established that the claim is payable as per the provisions of the Act.
6.2.2 The following documents have a bearing in the event of a claim
a) Letter from the insured narrating the circumstance leading to the claim scenario
b) F I R
c) Post Mortem Report or death Certificate, wherever applicable
d) Medical Certificate in case of permanent disability / injury
e) Details of Property damaged.
6.2.3 On receipt of notice from the Collector, representation should be made on behalf of the insured as well as the insurer before the Collector.
6.2.4 On receipt of the copy of the Award from the Collector, the same should be satisfied within the time stipulated by the Act.
6.2.5 Where the Collector has given the Award but the liability does not, however, strictly fall within the purview of the PLI Act Policy, a competent advocate should immediately be consulted for further course of action. However it must be borne in mind that Act allows a period of 30 days, calculated from the date of award for its satisfaction and speed in follow-up action is therefore of essence.
6.3 Legal Liability:
6.3.1 Scope of cover should be looked into i.e. whether wider or basic – verify whether the claim falls within the purview of the policy.
6.3.2 To verify admission of liability under Own Damage Section of Motor Policy
6.3.3 To verify the lorry receipt, Invoice and ascertain whether the consignment is the subject matter of the transit.
6.3.4 To appoint surveyor to assess the loss
6.3.5 To obtain F.I.R. copy
7. Following are some of the claims, which may arise under various Liability Policies. Apart from the guidelines enumerated above the aspects noted hereunder may also be looked into.
7.1 Claims on Food & Beverage, Drugs and Medicines:
7.1.1 Whether the sample of suspected product is given for analysis
7.1.2 Whether complaint reported to Public Authority
7.1.3 Date of manufacture/Sale of product/Date of expiry/Details of product life
7.1.4 Special instructions, if any, notified for consumption of the product – whether complied with or not.
7.1.5 Details of preparation of product, by whom, how packed transported and sold.
7.1.6 Whether foreigners involved, if so, details.