Public Liability Insurance Act

Background and evolution

The Bhopal gas disaster of December 1984, when methyl isocyanate leaked from a Union Carbide pesticide plant and killed thousands, exposed the weakness of India's legal system in dealing with industrial accidents. Victims had to prove negligence in long court cases, and interim relief came slowly. The Supreme Court, in the Oleum gas leak case (M. C. Mehta, 1987), developed the principle of absolute liability: an enterprise engaged in hazardous activity is fully liable for harm, without exceptions.

Parliament followed with the Public Liability Insurance Act 1991, which made it compulsory for owners handling hazardous substances to insure against liability, and provided for immediate relief to victims regardless of fault. The aim was to ensure quick help, not full compensation, which victims could still pursue in courts or tribunals.

Key features and provisions

• Coverage: owners who handle hazardous substances above specified quantities, as notified under environmental law.
• No-fault liability: relief must be paid whether or not the owner was negligent.
• Insurance: owners must take insurance policies before starting operations, with the sum insured not less than the paid-up capital and within a maximum limit.
• Relief amounts: fixed in a schedule, for example reimbursement of medical expenses, and fixed sums for death, injury and property damage.
• Environment Relief Fund: owners contribute an amount equal to the premium, and the fund is used to pay relief when insurance is insufficient.
• Procedure: the District Collector receives claims, verifies them and awards relief.
• Penalties: failure to insure is punishable with imprisonment and fines.