Public Liability Insurance Act, 1991
A hazardous-substance owner pays relief without proof of fault, and must insure to back it.
The Public Liability Insurance Act, 1991 makes sure that people hurt by an accident at a factory, godown or tanker handling hazardous chemicals get some money quickly, without first winning a court case. It does two things: it makes the owner liable to pay fixed relief on a no-fault basis, and it makes the owner buy insurance to back that liability.
For IC-11, this is the one liability cover in India that is compulsory by statute for industry, much like third-party motor cover is for vehicle owners. Expect questions on who must insure, what no-fault means, and why an ordinary public liability policy does not satisfy the Act.
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The Key Terms, as the Act Policy Defines Them
- Hazardous substance
- Any substance or preparation defined as hazardous under the Environment (Protection) Act, 1986 and exceeding the quantity the Central Government notifies. Below the notified quantity, the Act does not apply.
- Handling
- Manufacture, processing, treatment, packing, storage, transport by vehicle, use, collection, destruction, conversion, offering for sale or transfer of the substance. A transporter or a warehouse can be an owner, not only a factory.
- Owner
- The person who owns or controls the handling at the time of the accident. For a company this includes directors and officers directly in charge of the business; for a firm, any partner.
- Accident
- A fortuitous, sudden or unintentional occurrence while handling a hazardous substance that causes death, injury or property damage, including through continuous or repeated exposure. War and radioactivity are outside it.
What No-Fault Relief Means
Under ordinary law, a person injured by a gas leak must prove the factory was negligent. Under the Act, the claimant does not have to plead or prove any wrongful act, neglect or default by the owner. If death, injury or property damage resulted from an accident while handling a hazardous substance, relief is payable. Workmen are outside section 3: an employee's injury falls under employees' compensation law instead. The claim goes to the District Collector, who sends notice of the application to the owner (the Act policy requires the insured to pass those notices to the insurer at once).
The relief is a limited amount, meant as immediate help. Since the Jan Vishwas amendments took effect on 1 April 2024, section 3 says the amounts are prescribed by the Central Government; courseware may still quote the older Schedule. It is not full compensation. Under section 8 the right to relief is in addition to any other claim, but compensation payable under another law is reduced by the relief already paid. The Act policy covers only the liability the Act itself creates.
Act Policy vs Ordinary Public Liability Policy
A chemical unit in Ankleshwar usually needs both. Each policy excludes what the other covers.
Basis of liability
PLI Act (Act only) policy
Statutory, no-fault relief under the 1991 Act
Public liability (industrial) policy
Legal liability in negligence (fault must be proved)
Who buys
PLI Act (Act only) policy
Every owner handling hazardous substances above notified quantities
Public liability (industrial) policy
Any business wanting third-party cover; voluntary
What it pays
PLI Act (Act only) policy
Relief amounts prescribed under the Act
Public liability (industrial) policy
Damages awarded or settled, plus claimant's costs
Rating base
PLI Act (Act only) policy
Turnover: gross sales for a manufacturer, rental receipts for a godown, freight receipts for a transporter
Public liability (industrial) policy
Usually the limit of indemnity, the activity and turnover
Extra payment
PLI Act (Act only) policy
Premium plus a statutory contribution to the Environment Relief Fund
Public liability (industrial) policy
Premium only
Overlap
PLI Act (Act only) policy
Excludes liability under any other law, except as section 8 provides
Public liability (industrial) policy
Excludes liability under the PLI Act or any no-fault law
| Point | PLI Act (Act only) policy | Public liability (industrial) policy |
|---|---|---|
| Basis of liability | Statutory, no-fault relief under the 1991 Act | Legal liability in negligence (fault must be proved) |
| Who buys | Every owner handling hazardous substances above notified quantities | Any business wanting third-party cover; voluntary |
| What it pays | Relief amounts prescribed under the Act | Damages awarded or settled, plus claimant's costs |
| Rating base | Turnover: gross sales for a manufacturer, rental receipts for a godown, freight receipts for a transporter | Usually the limit of indemnity, the activity and turnover |
| Extra payment | Premium plus a statutory contribution to the Environment Relief Fund | Premium only |
| Overlap | Excludes liability under any other law, except as section 8 provides | Excludes liability under the PLI Act or any no-fault law |
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How the Act Policy Is Written
- check_circleLimit of indemnity is stated per accident, with an aggregate for the year not exceeding three times the per-accident limit (as in a typical public sector wording).
- check_circleThe policy pays the insurer's share of relief, while the owner also pays a contribution to the Environment Relief Fund along with the premium.
- check_circleRelief claimed more than five years after the accident is not payable under the policy.
- check_circleExclusions include wilful non-compliance with statutory provisions, fines and punitive damages, damage to the insured's own property or property in its custody, war, and nuclear risks.
- check_circleThe insured must declare turnover at renewal and keep records the insurer can inspect, because turnover drives the premium.
How IC-11 Tests This
The classic MCQ asks what no-fault liability means: the claimant need not prove a wrongful act, neglect or default. Other angles: the Environment Relief Fund contribution paid alongside premium, and which policy covers a no-fault claim. The trap is assuming the ordinary public liability policy pays Act relief. It does not; it excludes no-fault liability by name.
FAQs
Who has to take insurance under the Public Liability Insurance Act 1991?expand_more
Every owner who handles a hazardous substance above the quantity notified by the Central Government. Handling covers manufacture, storage, transport, use and sale, so godown owners and transporters can be covered too.
What is no-fault liability under the PLI Act?expand_more
The injured person gets relief without having to prove that the owner was negligent or at fault. Proof that the death, injury or damage came from an accident while handling a hazardous substance is enough.
What is the Environment Relief Fund?expand_more
A fund set up under the Act. Owners pay a statutory contribution to it along with the insurance premium (section 4(2C) caps it at an amount equal to the premium); the Act policy schedule shows the premium and the contribution as separate amounts.
Does a public liability policy cover claims under the PLI Act?expand_more
No. Standard public liability (industrial and non-industrial) wordings exclude liability under the PLI Act or any law based on no-fault liability. A hazardous unit needs the separate Act policy.
Next steps
- Liability Coversarrow_forward
- Employee's Compensationarrow_forward
- Motor Third Partyarrow_forward
- IC-01: Proximate causearrow_forward
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