After the styrene gas leak at the LG Polymers plant in Visakhapatnam claimed 11 lives, and injured thousands, the chemical company is now staring at a liability insurance payout to all the victims of the incident. LG Polymers is insured with public sector insurance major New India Assurance under the Public Liability Insurance (PLI) policy as per the Public Liability Insurance Act, 1991.
However, the families of victims who have died due to the gas leak, and those who are permanently disabled, will only get a maximum of Rs 25,000 from the insurance company, due to the caps in the law.
The Public Liability Insurance Act, 1991, which was enacted after the Bhopal gas tragedy (which happened in 1984) requires the owner of a company to compensate victims of accidents, irrespective of neglect. All industrial, chemical companies are mandated to have this insurance.
LG Polymers has two policies in place – one is the Public Liability Act policy as mandated by the Act with an AOA (Any One Accident) of Rs 5 crore, and in addition has an industrial PLI policy with a limit of Rs 5 crore – both from New India Assurance.
An AOA of Rs 5 crore means that the company will be liable to pay up to Rs 5 crore (in total, for all victims) per accident.
According to an insurance expert, most companies often supplement the Public Liability Act policy with another policy as a protection from additional liabilities they may face. In some cases, it might be an additional PLI policy, while in some cases it may be an environmental cover, pollution claims cover, etc.
In this case, LG Polymers has a total insurance cover of Rs 10 crore. So, while claims by victims could go up to a higher amount, LG Polymer will be able to recover a maximum of Rs 10 crore from insurance companies.
While New India Assurance is the lead insurer, it is also insured with HDFC Ergo, Magma and Future Generali, which have 8% share each, with Marsh as the insurance broker.
But what is important to note is that the PLI Act stipulates very meagre amounts as compensation that has to be paid under the PLI policy. As per the act, the company is liable to compensate medical expenses incurred up to a maximum of Rs 12,500 per person to those injured.
In the case of a death or total permanent disability, the compensation is Rs 25,000 per person, in addition to the medical expenses incurred (if any) up to Rs 12,500. This relief for the injured will be based on certification by a doctor.
For loss of wages due to temporary partial disability, which reduces the earning capacity of the victim, there will be a fixed monthly relief not exceeding Rs 1,000 per month up to a maximum of 3 months, provided the victim has been hospitalised for a period exceeding three days and is above 16 years of age.
These amounts were put in place nearly two decades ago, and there has been no amendment to the Act since then. What this would mean is that the victims of the Vizag gas leak will also be liable for the amounts mentioned above, which given the current cost of living, are very less. Medical bills alone, experts say, could run into much higher amounts
However, this does not mean that victims of the accident cannot get more than Rs 25,000 in case of loss of life and Rs 12,500 in case of an injury. How much the company will end up paying will be based on the total number of deaths and injuries officially reported, and the amounts drawn up by lawyers of the victims. For additional compensation, victims will have to sue the company and approach the courts to claim a higher compensation, and if the courts order a higher compensation, LG will have to pay up.
However, experts say that given the current pandemic, it is unknown when courts will open, and these legal procedures sometimes take years.