Clipped from: https://www.business-standard.com/article/opinion/strengthening-public-liability-insurance-123031200930_1.html
Those who cause bodily harm, property damage, or financial loss to others on their premises or due to their operations should be liable in law to provide financial compensation to the victim
In December 2021, D S Ranga Rao, a retired government officer, and his wife visited a State Bank of India (SBI) branch in Thane, Maharashtra. He fell from a shaky, unstable ladder in the locker room, receiving major injuries that needed surgery. The bank refused to acknowledge any responsibility or offer compensation. Officials there would not even call an ambulance until he agreed to pay for it. Guided by the Moneylife Foundation, Mr Rao filed a complaint with the branch, escalating it to the nodal officer and then taking it up with the banking ombudsman (BO) office. At each stage, his claim was summarily rejected. To add insult to injury, the BO made its decision non-appealable. When we escalated the matter to the highest levels in the Reserve Bank of India, Mr Rao’s costs were partially reimbursed.
Every day people with modest means are maimed or lose their lives in public places such as banks, restaurants, cinemas, theatres, malls, hospitals, hotels, and airports, or while accessing bridges, roads, and ropeways. The terrible disaster in Morbi, where at least 135 people died when a bridge collapsed, is only the latest such tragedy. The most horrific was the Bhopal gas disaster in 1984, which killed tens of thousands and maimed many more. All these situations come under what is called public liability, a branch of the Law of Torts, which recognises that those who cause bodily harm, property damage, or financial loss to others on their premises or due to their operations are liable in law to provide financial compensation to the victim.
In India, seven years after the Bhopal gas tragedy, the government enacted the Public Liability Insurance (PLI) Act, 1991, which made both compensation and insurance mandatory, but only for hazardous industries. Businesses often take general-liability cover, which can be used to compensate victims. But there is no mechanism, compulsion, or public pressure to do so. Indeed, SBI didn’t have to compensate Mr Rao out of its pocket; it had taken general-liability insurance, which the branch was unaware of! This is also the plight of victims of accidents or fires caused by faulty equipment or improper maintenance at public places. Since insurance is non-mandatory and awareness is low, liability insurance is practically useless in dealing with public tragedies such as fire in a mall or cinema houses. All we have is ex gratia and ad hoc payments handed out by governments.
What needs to be done?
A recently released study by Uttara Vaid Advisory for the Moneylife Foundation has identified lacunae in both public and general liability laws and has made a slew of recommendations to them to make them workable. The first step would be to expand the PLI Act and make it mandatory for businesses and other non-commercial organisations for injury, death, or damage caused to the general public. The report also suggests setting up a separate judicial forum for victims of non-industrial mass casualties like the successful motor insurance tribunal, so that their cases can be fast-tracked.
There is a second, more sophisticated but far more difficult approach which the Economic Advisory Council to the Prime Minister has initiated. In a paper titled “Fair Compensation and Accountability: Why India Needs Punitive Damages and Stronger Torts Law”, issued a few days ago, Aditya Sinha and Bikashita Choudhury have advocated introducing torts law in India, incorporating punitive damages. The paper narrates the 2014 tragedy of an 11-year-old girl drowning due to the sudden release of water from an upstream dam. The Sikkim High Court awarded Rs 5-lakh compensation to the parents, holding the National Hydroelectric Power Corporation negligent. Yet, in 2020, two people lost their lives to a sudden release of dam water. This time, the court ordered victims be paid Rs 35 lakh each for the violation of guidelines issued in the earlier case.
The paper argues that had there been a codified torts law and exemplary cost imposed (say, Rs 50 crore) “at the first instance, perhaps, the guidelines would have been implemented sooner, and no repetition of the tragedy may have occurred”. This is called “punitive damages”, which are a monetary fine over and above the actual damage. “A codified law of torts would eliminate the need to keep developing new legislation each time a new form of injury or violation occurs. It would also prevent a repetition of denying adequate relief to victims, as happened in the Bhopal gas tragedy,” the paper said.
However, judges and advocates find it difficult to accept the concept of punitive damages. In clear cases of negligence, forget exemplary damages, courts — civil, criminal, or consumer — do not stir themselves into offering adequate compensation. Also, the idea of punitive damages goes hand in hand with the contingency fee system for lawyers, as practised in the US. It creates an incentive to go after negligent bodies. In India, lawyers have no incentive to seek punitive damages for their clients, and discourage demand for compensation, fines, and penalties beyond actual costs.
We saw this in action in our case, when the High Court imposed an unprecedented Rs 50-lakh fine on the National Stock Exchange (Rs 47 lakh for two hospitals) for slapping a defamation case on Moneylife. The fine alarmed the senior advocates, although they would freely charge Rs 50 lakh for a few appearances (or even non-appearances). While contingency fees and punitive damages are the right steps, it would be tough implementing them. There would be unified opposition from businesses and their shills in the legal ecosystem, who have the most to lose. It would be more practical to amend the PLI Act with steep inflation-adjusted compensation if we want to offer justice to victims of public-place mishaps.
The writer is the editor of http://www.moneylife.in and a trustee of the Moneylife Foundation