Over a year ago, we, at Moneylife Foundation, began to explore public liability insurance (PLI) and why it is not available for those who are injured in public places such as banks, restaurants, cinema houses, theatres, malls, hospitals, hotels, airports, or while accessing bridges and ropeways.
When involved in accidents, Indians react in three ways: we look to the government to announce an ex-gratia payment (think of the recent Morbi disaster and all major accidents and disasters); well-off Indians pay out of their pockets or through their insurance policies; others blame it on their karma. Only in case of motor accidents are people paid a fair compensation, if properly pursued.
Our discovery mission started when the ombudsman with State Bank of India (SBI) and the Reserve Bank of India (RBI) rejected a reimbursement claim by DS Ranga Rao who was badly injured while trying to access his SBI locker. Mr Rao was eventually reimbursed, after the matter was escalated to the highest levels in RBI. In the process, we were shocked to find that SBI had adequate liability cover but the organisation does not know that it can be used. Startlingly, this is true of the entire banking system and even RBI. They simply do not know that they have paid for liability cover and can ensure that a customer who is hurt or affected in their premises can be treated at the bank’s cost which would be reimbursed by the insurer!
If this is the level of ignorance when liability cover exists, imagine how much worse it is in smaller establishments that do not even have an insurance cover? To understand the situation better and what could be done about it, we reached out to insurance experts for information and guidance. Several industry leaders directed us to one person—Uttara Vaid, a bright and articulate liability insurance expert and founder of the Uttara Vaid Advisory (UVA). She generously agreed to put together a comprehensive report on public liability insurance in India and why it has ‘remained stunted’ or failed to reach the people it is supposed to benefit.
A detailed and eye-opening report by UVA, which spells out the evolution, shortcomings, lacuna in implementation and suggested remedies, will be released in a few weeks; but here are some interesting facts in the report that provide food for thought and may get drowned in the larger findings and recommendations.
Most companies, especially those who do business with American, European or Australian companies or have foreign customers, are required to purchase a comprehensive cover called ‘commercial general liability policy’ (CGLP) as part of their contracts. So, most large companies, in particular, airlines, hotels and restaurant chains, not only have comprehensive liability cover, but have regularly settled claims.
The report says that foreign tourists make the maximum public liability claims and, in many cases, demand compensation with fake claims as a way of recovering the money spent on their Indian holiday. Such claims are apparently rampant in Goa where, hotel and resort owners are often ‘stuck between a rock and a hard place’. If they contest or contradict a claim, especially a false one, it could affect their future business with charter companies that fly in planeloads of tourists to specific hotels every season. The report cites the following examples of public liability insurance cases:
A lady visiting a cinema theatre twisted her right foot due to a broken surface that was hidden under the carpet at the exit gate. The theatre management paid her Rs3.5 lakh in compensation under a PLI policy.
The maintenance team of a reputed hotel was repairing and oiling the main gate, which accidently rolled away when it was being tested and fell on bystander, who happened to be a taxi-driver. The hotel team rushed him to hospital but he succumbed to his injuries. His legal heirs sought compensation and, based on his income, the claim settlement was Rs20 lakh.
In a bizarre accident involving the valet parking attendants at a posh hotel, a Mercedes Benz car was being driven up from the basement parking area. The Mercedes ended up hitting a Toyota Innova which, in turn, rammed into a Tata Tigor, which then hit a fourth vehicle—a Swift Dzire. The resultant damage to the four cars led to a claim of Rs14.5 lakh which was settled by the insurer.
Nine customers using a lift at a garment store were severely injured when the lift cables snapped and it crashed from the third floor to the ground floor. They were rushed to hospital and the PLI policy paid Rs4.07 lakh for their treatment.
Foreigners are able to pursue claims more effectively through their lawyers because the contingency fee system in their countries allows them to pay the lawyer only if the claim is successful. Others, who make successful claims, are either informed people or the organisation pursues the claim when the damage is significant.
In contrast, in India, when there is valid insurance available, the tendency is to hide the fact because it will invite legitimate claims. For instance, petroleum companies and dealers have comprehensive liability cover of Rs40 lakh to indemnify LPG cylinders bursts leading to bodily injury and property damage. But they go out of their way to hide the fact from consumers, with the result that claims are rare, despite the many incidents of cylinder blasts! Another reason this happens is the slow, expensive legal system which disallows the payment of contingency fees and makes the claims process itself a second punishment.
In sharp and telling contrast, Uttara Vaid cites the famous 1992 case of Stella Liebeck, who suffered third-degree burns on her legs and her groin when she accidentally spilled a cup of scalding hot coffee on herself. What people do not know is that she had to spend $18,000 on lost income and medical bills. She sued McDonald’s for $20,000 and was offered a humiliating $800 in settlement. She fought and won a compensation of $160,000 as compensation and $480,000 in punitive damages.
We, in India, don't necessarily want to get to this level of compensation; but we have a long way to go, just to create basic awareness of our right to fair treatment, compensation and a workable claims process. We hope to pursue that systematically, when we release our findings on liability insurance in a few weeks. Watch this space; meanwhile, you may want to read more on our efforts so far:
My sister, aged 69, met with an accident in a large and famous Shopping Mall in Bangalore two months ago. She slipped and fell down from a moving escalator while trying to go to the first floor from the ground floor. She suffered intense pain in her back and had difficulty in getting up and walking. She was provided some physical assistance by the mall staff / security personnel. She however managed to go home in an autorickshaw, with the help of her younger sister, aged 63, who was accompanying her.
As the pain increased greatly she was taken to a hospital by me and tests revealed that she had fractured a bone in her spinal chord. Immediate surgery had to be done and metal implants were fixed on the fractured bone and she had to remain in hospital for two weeks, most of the time in ICU. soon after her surgery she complained of severe chest pain and an angiogram revealed a major blockage in her artery. So a single stent angioplasty was done. Just the hospital bill came to Rs 12.00 lacs and other expenses like daily physiotherapy is continuing. Another Rs 2.00 to Rs 3.00 lacs is being spent by me. My sister is a spinster and she has not been employed anywhere during her life time. She is partly dependent on me and partly on another sister. I have incurred all the expenditure so far by myself. She had insurance only for Rs 5.00 lacs which has been adjusted against the hospital bill. I too am 71 years old and am a pensioner.
My sister wrote a letter to the Manager of the Mall and requested for compensation, but there is no response. Is there any avenue for my sister to claim damages / expense reimbursement from the mall ?
Can you guide me on what can be done ?
Beautiful
Indian judicial system the insurer will be very happy if someone one there behalf popularise this concept to enable them to get creamy business atleast for retail policies
Academic it look very attractive. But in a country where more than 5 cr. Cases are pending. Insurers refuse to respect insurance ombudsman awards. The people shiver going to police station for FIR. club with the performance of Indian judicial system the insurer will be very happy if someone one there behalf popularise this concept to enable them to get creamy business atleast for retail policies
Well Sanjeev ji if Motor insurance works I dont see why this cannot be MADE to work. Hopefully others at IRDA will not be as pessimistic as you. We activists believe in pushing for the right thing to happen, even when all others are negative. It gets results. May not be 100% but better than folding our hands and doing nothing. 70+ years after independence and innumerable public accidents - we ought to have had something in place. Even after Bhopal we have an unworkable process. I personally think all of you ought to have pushed in while working INSIDE IRDAI!
It is fascinating to bring up that in Stella Liebeck Versus McDonell case, it was Stella who had bought the espresso through a drive-through café and 'coincidentally' spilled it on her lap. However court expected McDonald to take responsibility and granted her pay!
Well, I used to have the same impression until I read the details. First, it was an accident. It occurred in the outlet. There is some responsibility. And it was NOT a minor matter of her spilling coffee - it was so scalding hot that she not only needed hospitalization but multiple skin grafting. Why are we missing those details? And why should insurance not pay the costs? McDonald's could easily have paid her bill - it is BECAUSE they rejected her claim that they got slapped with this exemplary fine. I would strongly urge you to change your mindset. We are pushing this through Moneylife in the public interest. Most Indians only want a restaurant or a mall or any outlet to call an ambulance and ensure initial treatment - not wait for large calamities that need us to pressure sarkar for ex-gratia!
It is interesting to point out that in Stella Liebeck Vs McDonell case, it was Stella who had purchased the coffee through a drive thru restaurant and 'accidentally' spilled it on her lap. Yet court held McDonald liable and awarded her compensation!
That is the point about public liability insurance! It was an accident, it occurred in the outlet. There is some responsibility. And the coffee was so scalding hot that she needed hospitalization and multiple skin grafting. McDonald's could easily have paid her bill - it is BECAUSE they rejected her claim that they got slapped with this exemplary fine. I would strongly urge you to change your mindset. We are pushing this through Moneylife in the public interest.
Thank you Sucheta and Moneylife team for raising this issue and commissioning the report on the subject. Your article mentions Morbi bridge disaster and the ex-gratia announced by the government. What people fail to realise is that the ex-gratia (or the dole) comes from public funds which is essentially taxpayers' money. It is time the victims started suing Municipal or other bodies responsible for maintenance, for punitive damages who will hopefully then recover it from the contractors. Another important measure is to make public liability insurance mandatory when any private contractor is awarded a maintenance contract.
Money from municipality is also a public money only. In case of public institutions, the officers responsible for lapse should be held personally accountable.
Yes, it is a very neglected issue . Frankly, even I did not know the details , even though I had known the public liability policy taken out by the designers
This should be followed up and we should get a proper system to get compensation from insurance and not depend on * doles* from Government
Why we Indians always treat an institution or organization as the "government" and therefore do not take initiative to fight for our rights and to make legitimate claims.
One of my friend was working in Noida in 1984. While on duty he meet with an accident and fill a case for compansation under WC act. After that the company went to high court lucknow. For about 20-22 year every quarter he was going for hearing in Lucknow. Spending handsome amount. After that the court has given a order of one lakh compensation with 7% interest. He was happy and went to Noida police for execution of order. But by the time the company shifted from Noida to Delhi. The authorities asked him to again go to court and get new order for delhi.
Apart from above we have section 45 which says that if a life insurance policy run for 3 years . No questions will be asked and the claim will be payable. The awareness of this provision can boost the real Penetration. Unfortunately the regulator is only interested to give more room for distribution and that is only poaching each other business. Upto the time a common man will not get assurance that he/ she don't have to spend energy in fighting the cases in judicial form they will not be interested in improving penetration. Libality insurance we have seen ansal / upphar cinema cases fought for 30 years. The message goes it's not easy to get claim why to pay premium
Very informative. IRDA keeps talking about insurance penetration. What have they done in terms of spreading insurance awareness? It is yeomen service of 4th estate like Moneylife that is contributing to this!
Thanks for this enlightening article. Since organisations are required to obtain liability insurance, they pay the premium just to meet the compliance/regulatory requirements. Even those responsible for payment of the insurance premium may not be aware of their rights vis-a-vis the insurance companies giving such policies and duties to their injured customers in the event of any mishap. Good for the insurance companies! The best thing to know is the loss ratio under this type of policies. They must be making huge underwriting profits in these lines of business where awareness levels are not high. Why IRDA - a toothless tiger - is silent on such matters. Should they not come up with educational videos or public awareness campaign that such policies are existing and public can lodge claims with the organisations where they sustained injuries?
This column in the past has perhaps mentioned about the incumbent IRDA chief as very forthcoming in reforming the industry. Probably he shall be able to sit up and take notice of petitioned properly.
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Articles outside the subscription period can be bought separately for a small price per article.
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A detailed and eye-opening report by UVA, which spells out the evolution, shortcomings, lacuna in implementation and suggested remedies, will be released in a few weeks; but here are some interesting facts in the report that provide food for thought and may get drowned in the larger findings and recommendations.
As the pain increased greatly she was taken to a hospital by me and tests revealed that she had fractured a bone in her spinal chord. Immediate surgery had to be done and metal implants were fixed on the fractured bone and she had to remain in hospital for two weeks, most of the time in ICU. soon after her surgery she complained of severe chest pain and an angiogram revealed a major blockage in her artery. So a single stent angioplasty was done. Just the hospital bill came to Rs 12.00 lacs and other expenses like daily physiotherapy is continuing. Another Rs 2.00 to Rs 3.00 lacs is being spent by me. My sister is a spinster and she has not been employed anywhere during her life time. She is partly dependent on me and partly on another sister. I have incurred all the expenditure so far by myself. She had insurance only for Rs 5.00 lacs which has been adjusted against the hospital bill. I too am 71 years old and am a pensioner.
My sister wrote a letter to the Manager of the Mall and requested for compensation, but there is no response. Is there any avenue for my sister to claim damages / expense reimbursement from the mall ?
Can you guide me on what can be done ?
Indian judicial system the insurer will be very happy if someone one there behalf popularise this concept to enable them to get creamy business atleast for retail policies
This should be followed up and we should get a proper system to get compensation from insurance and not depend on * doles* from Government