Public Liability

A tort is a civil wrong and gives rise to civil proceedings. It involves infringement of the right of a person and the person is compensated by the wrongdoer. Unlike, criminal proceedings which results in the guilty person being sent to jail, in civil proceedings the remedy is financial compensation to the victim.

To show that the occurrence of negligence, the plaintiff must prove that the defendant not only had a duty of care towards him but also that the same was breached through the rash act of the defendant i.e either his commission led to negligence or the omission to do the right thing resulted in negligence.

While the above is the legal position, it is important for the defendant to protect themselves with a proper insurance policy to offset the financial outgo that may arise as a result of their negligence to a third party.

Who is a Third Party?

Anybody who is neither the policy holder including its servants/employees or the insurance company becomes a third party. For example, a visitor to a hospital or a restaurant is a third party. A student in a college is a third party. Visitors to an office premises, residential premises, exhibition, airport, medical establishment, shops, auditorium are third party.

Scope of Cover

It covers legal liability to Third Party on account of accidental bodily injury/ death/ disease and/or loss/ damage to their property arising out of claim made for any incidence occurred during the policy period. This includes legal costs ( defence costs ) if the same is covered under the policy.

Extent of liability under the policy:

  • Maximum liability being limits of indemnity specified in the policy.
  • No insurance company will issue a policy with unlimited liability.
  • The policy holder must decide what should be the optimum limits of liability that they should avail to get the financial protection by way of an insurance policy.
  • The potential policy holder can take the help of an insurance broker to explain the business model and get the opinion as to what sum insured should be fixed towards limits of third-party liability.
  • The limits of liability depends upon the nature of business and the potential claims that may arise from the third parties.
  • Generally, an insurance company would set the limits of liability on two parameters.
  • Parameter 1 would the limit of indemnity for any one accident ( AOA )and Parameter 2 would the aggregate limit of liability for all accidents during the policy period otherwise called any one year ( AOY ).
  • The policy holder can decide whether the ratio of limits of liability should be on either 1:1, 1:2, 1:3, 1:4. For example if the limit of liability chosen is 1 : 1 and the quantum of sum insured is Rs.1 Crore, it means the liability of insurance company for any one claim ( AOA ) would be Rs. 1 Crore and the aggregate for the policy period ( AOY ) would be Rs.1 Crore. Should the policy holder exhaust the limits in a single accident the policy ceases and they may have to go for a fresh policy. On the other hand if they chose 1 : 2 or 1 : 4 the aggregate policy limit in the above case would be Rs. 2 Crores and Rs.4 Crores respectively and the policy holder continues to be protected with an insurance policy for future claims if any.
  • The premium computation therefore would depend upon the sum insured and the ratio on AOA:AOY basis taken together

How To Get Started

Proposer would be required to fill up standard proposal form at inception as well as subsequent renewals together with duly signed declaration that all statutory requirements relating to business activities are complied with. The proposal form is very exhaustive and captures all the details pertaining to the business activity of the firm/organisation/company etc

Basic Cover

  • Third party bodily Injury/Dismemberment / Death.
  • Third party Property Damage.

The policy pays if the policy holder is legally obliged to pay damages for bodily injury or property damage if the policy satisfies the following:

  • Bodily Injury/death or Property Damage should be caused by an occurrence that tales place within the geographical jurisdiction of the policy holders business activity as stated in the policy document.
  • It should happen during the policy period.
  • The limit of liability is as per the policy schedule.
  • It is a legal liability policy and negligence will have to be proved to claim damages.

Add-on Covers

  • Food & Beverages extension -applicable for hotels, restaurants , clubs, resorts etc.
  • Lift liability extension.
  • Sudden and Accidental pollution.
  • Act of God perils