What is Public Liability?
The phrase Public liability indicates a potential liability to a member of public i.e. a person who is not in any way connected to you by way of a contractual arrangement. The distinction from your employees/ business associates is obvious. So, the eventuality of a visitor to your office/factory fracturing his/her ankle on the polished slippery floor, is a potential liability situation. This, obviously needs to be taken care of.
Does one need Liability insurance for this? Let us look at some of these & decide:
1. Do you run an industry handling hazardous substances?
No one in Bhopal can ever forget the cold light of 6th December 1984. The leakage of MIC from a rusted tank of Union Carbide- has been described as the “worst industrial disaster” globally. The liability for the effected people around the factory due to – was finally compromised at USD 470 million by Government of India in the Supreme Court. Incidentally this was just 15% of the original compensation sought.
A few years later, the Public Liability insurance act-1991 has made it mandatory for anyone handling hazardous substances to have a liability insurance policy as provided in this law.
2. Do you run a non- seasonal factory employing 10 or more workers- and ESIC has not been notified in your area?
Any injury/ fatality in the factory can be taken care from your own resources or by an Employee Compensation insurance policy. Interestingly, meeting the liability under this policy is mandatory but taking the policy is not.
3. Do you manufacture ready to use/ cook snacks? Has there been any inadvertent breach of norms of say FSSAI.
The Government of India’s 640 crore compensation case against manufacturers of the Two Minute noodles is not awarded against them as yet, but shows the high risk potential.
4. Are you the manufacturer/ component vendor for a vehicle which has just noticed a manufacturing issue and has been forced to recall a large number off vehicles already sold? What is the cost of this recall liability?
A recent study points out that in 2019 number of recalls reached the figure of 3,04,017 against 1,62,869 in previous year.
5. As an IT infrastructure owner/ running a BPO/ KPO did WannaCry make you cry in May 2017 by putting a sudden stop to all your operations and demanding millions in ransom in bitcoins!!
6. Can all the Ethical Hackers be a step ahead of the Hackers in the cat and mouse game?
7. As one running a medical establishment have you heard of the decision of the Supreme Court awarding Rs 12 crore compensation to the husband of the lady of who died due to medical negligence of the doctors attending on her.
8. Though the IPO infringement suit of Warner Brothers (of Harry Potter fame) against the Bollywood creation of "Hari Puttar: A comedy of Terrors" may not have succeeded; imagine a situation if the court had passed a judgement against Hari Puttar
9. Is the legal department in your Company keeping you informed about section 201 of Companies Act 2013 that permits you to offer additional liability protection to the directors and officers of your company
10. Have you been informed of S. 245 of the Companies Act which permits Class action by any group of affected customers/ members of public- by filing a common suit against you.
Thankfully the shareholders of Nestle were restrained during the downward slide of share value. But can we rely on that all the time?