The Bhopal Gas Leak disaster and Shriram Gas Leak tragedy provided an impetus for the passing of the Public Liability Insurance Act, 1991. The Act provides for ‘mandatory insurance’ for the purpose of providing an immediate relief to persons affected by accident occurring while handling nay hazardous substance. The Act covers every industry, public or private, which handles hazardous substances.
A ‘hazardous substance’ is one which, by reason of its chemical or physio-chemical properties or handling, is liable to cause harm to human beings, other living creatures, property or the environment. ‘Handling’ in relation to any hazardous substance, means the manufacture, processing, treatment, package, storage, transportation, use, collections, destruction, conversion, etc. of such hazardous substance.
The Act incorporate the ‘no-fault’ liability standard. Thus, a defendant is liable for accidental harms caused without any intention and negligence on his part. Section 3 of the Act lays down an absolute duty on the owner to compensate all deaths, injuries and damages to property which result from the accident. The entire burden of paying compensation is not to exceed the paying capacity of the owner.
Section 4 of the Act ordains every owner to take out, before he starts handling any hazardous substance, one or more insurance policies providing for contracts of insurance whereby he is insured against liability to give relief in case of death or injury to a person, or damages to any property, arising from an accident occurring while handling ay hazardous substance. In respect of already established units, insurance policy or policies be taken as soon as possible, but within a maximum period of 1 year from the commencement of the Act.
The Act provides for stiff penalties to the defaulting owners Rs. 1 lakh fine and up to 7 year imprisonment Section 14. These penalties are similar to that provided under the Environment Act, 1986, and the Water Act, 1974, an the Air Act, 1981. By 1992 amendment to Act, the liability of insurer has been limited to the amount premium (proportionate to the paid-up capital of the unity); in adding a similar amount (as of premium) has to be given by the owner to an Environment Relief Fund.