Public Liability Insurance Act: Higher Compensation For Victims, Stricter Compliance For Industries

When industrial accidents happen, the immediate question is not just who is responsible, but who will pay for the damage inflicted upon people directly or indirectly affected by the event. For decades, the Public Liability Insurance (PLI) Act,1991 has been the answer.

It is a law that requires industries handling hazardous substances to carry insurance so victims don’t have to wait years for justice. Last year, the Act was amended, and the difference is most visible in the compensation victims can now expect.

A Law Born From Bhopal Gas Tragedy

The legislation was first passed in 1991, seven years after the Bhopal Gas Tragedy, when thousands died and many more suffered permanent disabilities after a leak of methyl isocyanate gas from the Union Carbide pesticide plant in Bhopal. The absence of a quick relief mechanism then meant long delays and inadequate payouts.

The PLI Act was designed to change that, making it mandatory for factories dealing with dangerous substances to insure against the risk of death, injury, or property damage to third parties. Crucially, the law works on a no-fault basis wherein compensation must be paid even if negligence isn’t proven.

Compensation gets higher

Until recently, the compensation amounts had barely moved in three decades. That has now changed. The 2024 amendments bring in much higher limits:

• Death: From Rs 25,000 to Rs 5 lakh, along with medical expenses up to Rs 1.5 lakh

• Permanent disability: From Rs 12,500 to Rs 5 lakh with additional medical cover

• Temporary disability: The older limit was Rs 6,250. Now, it is Rs 25,000 per month for up to three months

• Other injury/illness: Reimbursement up to Rs 25,000

• Property damage: From Rs 6,000 to as much as Rs 50 lakh

The overall insurance obligations for businesses have also increased, up to Rs 250 crore for a single accident and Rs 500 crore for multiple incidents in a year.

Such mechanisms are critical and useful for bystanders, like those people walking past a factory, vendors stationed near some industrial unit, or schools located near chemical plants, who might end up becoming casualty and suffer the worst consequences of accidents though they will have no part in the day-to-day operations of the plant.

Why Does It Matter?

The PLI Act has been invoked in many incidents since 1991. In 2021, a gas leak at a pesticide plant in Jharkhand caused severe respiratory issues in nearby villages. During this incident, claims under the PLI Act ensured that victims received due compensation and support quickly.

The no-fault principle remains the cornerstone of the Act: victims need not prove negligence; compensation is payable as long as hazardous substances are involved.

Compliance Getting Strict

In addition to the increase in payouts, regulatory bodies are also tightening their oversight on compliance and enforcement of the PLI Act. Recent crackdowns by the Central Pollution Control Board (CPCB) and state pollution boards have led to FIRs, license suspensions, hefty fines, and court-ordered closures for non-compliant factories.

Yet, according to a Policybazaar report, many businesses, especially in Tier 2 & Tier 3 clusters remain unaware that their insurance requirement has changed. The law has moved on, but industry hasn’t caught up.

Says Evaa Saiwal, head of liability and cyber insurance at Policybazaar for Business: “Public Liability Insurance is far more than a regulatory requirement, it’s a crucial financial and ethical safeguard for businesses and the communities they operate in. It provides immediate relief to those affected without legal delays, keeps businesses operational by cushioning them from financial setbacks, and ensures compliance that protects from penalties and reputational harm.”

This Act was never just about compliance, it was more about ensuring victims of industrial accidents are rightfully compensated, a lesson learned after the Bhopal gas tragedy. Industrial accidents may be rare, but when they occur, their impact spreads far beyond factory walls.

The updated law makes sure that when harm is caused, help follows quickly, with a higher amount of payouts than before.