PUBLIC LIABILITY POLICIES

PUBLIC LIABILITY POLICIES

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

Contd..
Public Liability Insurance Act 1991 This is a mandatory policy to be taken by owners ,users or transporters of hazardous substance as defined under Environment (Protection) Act 1986 in excess of the minimum quantity specified under the Public Liability Insurance Act 1991.

ADD ON COVERS

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 Control Board Transportation Risk

Industrial Special Risks (Property)

Covers the Insured for:
physical loss destruction or damage to the insured property in some cases the costs incurred due to the interruption of your business activities arising from the loss of or damage to the insured property

Some examples are:

Fire Storm Theft / Loss Water Leakage Accidental Damage

Property Risks

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

SUM INSURED

In Public Liability Policy, the sum insured is referred to as Limit of Indemnity. This limit is fixed per accident and per policy period which is called Any One Accident (AOA) limit and Any One Year (AOY) limit respectively.

 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

Contd..
The AOA limit which is the maximum amount payable for each accident should be fixed taking into account the nature of activity of the insured and the maximum number of people who could be affected and maximum property damage that could occur, in the worst possible accident in the insured's premises. In the case of Public Liability Insurance Act 1991, the AOA limit should represent the paid up capital of the company subject to maximum of Rs.5 crores. The AOY limit is fixed at 3 times the AOA limit (Max.Rs.15 Crores).

Premium Calculation

Premium chargeable depends on : Risk Group Limits of Indemnity selected Ratio of limits No. Of locations Annual Turnover

Standard Exclusion

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

CLAIM

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 in accident to visitors on the premises Accidental leakage of toxic substance which pollutes the atmosphere and injures or kills people

Contd..

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 of that breach. In case of any event likely to give rise to a liability claim as described above, insurance company should be informed immediately. In case any legal notice or summons is received, it should be sent to the insurance company. The company has the option of arranging the defence of the case.

 The event giving rise to the claim should have occured during the period of insurance or retroactive period and the claim first made in writing against the insured during the policy period. The maximum amount payable including defence cost will be the AOA limit selected. The any one year limit will get reduced by the amount of claim or indemnity paid for any one accident

Contd..
Any number of such claims made during the policy period will be covered subject to the total indemnity not exceeding the Any One Year limit. In case of Public Liability Insurance Act 1991 Policy, any award which exceeds the AOA limit will be paid by the government through Environment Relief Fund to which the insured has to contribute an amount equivalent to the premium paid under the Public Liability Insurance Act Policy.

 The policy will not pay for claims arising out of contractual liability, intentional non-compliance of any statutory provision, loss of goodwill,slander ,fines ,penalties , libel , false arrest , defamation , mental injury etc.

Worldwide Disasters Insurance Contribution

Year No of No of Total Insured losses Catastrophe fatalities losses (USD bn) s (USD bn) 397 97,000 230 83 349 335 311 288 31,000 21,500 246,000 15,000 48 70 269 62 16 28 52 26 % Insured losses 36% 33% 40% 19% 42%

2005 2006 2007 2008 2009

Source : Swiss Re Sigma

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

Disasters in India Insurance Contribution

Catastrophe Year Estimated Estimated % Insured losses economic insurance loss ($ mn) loss ($ mn) 900 2,000 2,500 200 150 650 22% 8% 26%

Gujarat Cyclone Gujarat Earthquake Mumbai floods

Source : Market information

1999 2001 2005

Low insurance penetration impacting Public finances

Risk Management Process

ESTABLISH THE CONTEXT C O M M U N I C A T E & C O N S U L T

IDENTIFY RISKS

ANALYSE RISKS

M O N I T O R & R E V I E W
No

EVALUATE RISKS Compare against criteria Set priorities

Treat Risk s Yes

TREAT RISKS Source: AS/NZS 4360:2004

PHASES OF RISK MGT. PLANNING

1. 2. 3. 4.

Analyzing risks and determining approaches to control Obtaining statements of policy from the policymaking entity Planning desirable operational practices Implementing the plan

Risk Management Assessment

1.

3 STEPS: Identify risks

Categories include: property exposures; public liability, non-negligence; and public liability, negligence

2. 3.

Estimate frequency & severity of each risk Determine alternative approaches to controlling the risks

Control Approaches
1. 2. 3. 4 Basic Approaches: Avoidance choose not to offer or discontinue an activity/service
Should be used when appropriate leadership, facilities, & equipment cannot be provided E.g., insurance, contract

Transference liability is shifted to another Retention accepting risk w/i the budget of the organization Reduction using operational management to reduce risks

4.