Liability/casualty

insurance

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What is casualty/liability insurance
 Casualty insurance mainly protects a person
or business against legal liability for losses
caused by injury to other people or damage
to the property of others.

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Classification of legal liability
 Criminal liability which is enforced by State
 Civil liability where action is brought by one

party against another

 Payment of damages to the aggrieved party

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Types of Liability Insurance policies
 Policy under Public Liability Insurance Act ( hazardous
substances)
 Public Liability policy for Industrial and non-industrial

risks
 Product liability policy
 Professional indemnity for doctors, solicitors etc.
 Directors and officers Liability Policy
 All the above 5 policies are non-tariff policies

 Employers liability ( under Workmen compensation

Act). This is a Tariff policy
 Motor, aviation and marine hull policies also cover

third party liability

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Features of Liability Insurance
policies
 Claims are paid to persons other than the insured
i.e. member of the public or insured’s employees,
as the case may be, but on behalf of the insured.
 The insurance provides indemnity to the insured

in respect of his potential legal liability i.e.

liability arising under common law or statutory
law
 Claims are negotiated and settled by insurers but

on behalf of the insured who is required, by

policy conditions, to co-operate with the insurers
in this respect

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Features contd.
 Legal costs of the insured incurred with the
written consent of the insurers are reimbursed
under the policy
 Instead of a ‘sum insured’ a limit of indemnity

is stated in public liability policies. In

employer’s liability policies no limit of
indemnity is incorporated
 To arrive at the premium, the rate is related not

only to the limit of indemnity but also to other

factors such as turnover, seating capacity,
number of students etc.

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Public liability and law of torts
 Public liability insurance is concerned with
liabilities of the insured, which arise mainly
under the law of torts which forms part of the
Common Law

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Torts
 Tort means a civil wrong arising out of a
breach of some duty which leads to a civil
cause of action and for which damages or
compensation are recoverable
 The law of tort imposes a duty on each

person to regulate is actions and behavior as

not to cause injury to other persons or
damage to their property

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Difference between TORT and CRIME
 A TORT is a breach of private rights of an
individual which affects individuals

 Crime is a breach of public rights which affect

the entire society
 Breach of contract is also different from Tort

as contract requires privity between the

parties

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Types of Torts
 Liability Insurance is mainly concerned with
Two Torts:
 Negligence ( absence of care expected of a

prudent and reasonable person)

 Nuisance ( unlawful interference with another

person’s use or enjoyment of some right or

property): public nuisance and private
nuisance( smoking)

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“Res ipsa loquitur” in liability insurance

 In the common law of negligence, the

doctrine of res ipsa loquitur (Latin for "the
thing speaks for itself") states that the
elements of duty of care and breach can be
sometimes inferred from the very nature of
an accident or other outcome, even without
direct evidence of how any defendant
behaved.

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 the common law originally stated that the accident
must satisfy the following conditions:

 A "duty" exists for a person to act "reasonably"; and

 A "breach" of this duty occurs because a person [or
agency, etc.] acted outside this duty, or
"unreasonably"; and
 There was "causation in fact"...the result would not
have occurred "but for" the "breach" of this duty;
 There was actual legally recognizable harm suffered
by the plaintiff who did nothing wrong (i.e., no
contributory negligence).

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 Upon a proof of “res ipsa loquitur”
the plaintiff need only establish the remaining
two elements of negligence—namely, that the
plaintiff suffered harm, of which the incident
result was the legal cause.

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Volenti Non fit Injuria
 “ to him who is willing there can be no injury”
 This is a defense against negligence

 Examples:
 Spectators at football, cricket matches
 Presence at such events is an implied consent

to accept the risks involved.

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Other defenses against negligence
 Inevitable accidents – e.g. defects in machinery
which could not detected with reasonable care
 Act of God( Vis Major) – without human
interference – e.g. earthquake, lightining,
storms etc.
 Contributory negligence – damages are reduced
to the extent of negligence of the injured
 Disclaimer notices( contracting out) –
“passengers are carried at own risk and
responsibility”

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Statutes which have bearing on
public liability insurance
 Water(prevention and control of Pollution)
Act, 1974
 Air(prevention and control of pollution) Act,

1981
 The Environment protection Act, 1986
 The Factories Act, 1948
 Motor Vehicles Act, 1988
 Consumer Protection Act, 1986

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 The Public Liability Insurance Act, 1991
imposes ‘ no fault’ liability in respect of
handling of hazardous substances as
specified in the Act.

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