Crying Need for Tort Insurance in India

Recent Headlines may be recalled, in which the horrifying experience of an aged lady passenger when a relatively young and fit passenger peed on her during an international flight. There was a huge uproar in the media, and severe action by the criminal court and on the part of the concerned Regulators. However, there was no word on the tort claims which the victim passenger could lodge on many counts. This is the widespread experience across accidents and unfortunate events in India. There is some movement with regard to tort for negligence of doctors and hospitals. In almost all other cases the victims are not able to take forward their rights to get compensation.

There is a great void in this area and as a result insurers are also not having an opportunity to help the economy in this great area of liability. In modern times, liability causing incidents are expanding and there are any number of liability protection covers. Victims and lawyers need to be familiar with how to file cases properly and courts need to be able to hand out justice speedily. There is a great void regarding this in the country.

For insurers, opening up the full liability insurance potential can add up to about half of their gross premium, as the number of ‘wrongs’ and injuries that can happen to victims are widening. Where victims are injured in any manner, they are legally entitled to a compensation. The only area where tort claims are flourishing in India is the Motor TP area owing to the liberal provisions of the Motor Vehicles Act. Insurers know that in this field, frauds and malpractices are rampant, but almost all genuine claims get lodged and settled as well. Recently even a film was made, showing how a poor desperate Advocate, needing to pay the medical costs of his mother, who had fractured her leg, stumbled upon the malpractice chain in a hospital where injuries like fracture were converted into MACT cases, by everyone creating documents and proofs which could not be easily found out and crores were being lost to the insurer. He also joined the racket and ultimately had the whole business to himself. However, this is a system fault and insurers need to work to clean the system along with courts and the police administration.

Coming back to the question of tort remedy for all the wrongs victims sustain, insures can take many initiatives. Popularising liability insurance is the need of the hour to save the economy and helpless victims from the many losses which are indemnifiable on the liability side. Side by side, insurers along with IRDAI can work with the Government on examining whether Tort Tribunals can be set up on the lines of MACT or Consumer Forum, so that speed in redressal is obtained.

The Law Commission of India in their 2008 Report on “The Inclusion of Acid Attacks as Specific Offences in the Indian Penal Code and a law for Compensation for Victims of Crime” stated that “We however feel that since not only victims of acid attacks but other victims of different crimes also need compensation for rehabilitation, like victims of rape, a law should be enacted to set in place Criminal Injuries Compensation Boards at the Centre, State and District levels in our country.” It may be seen that no action has been taken on this or any other such tort issues.

Coming to the Basics – it is only the insurers who can be a bridge between the first party who may cause a tort loss and the third party who is the victim. In the US, courts understood this long ago.?In the case Messersmith v. American Fidelity Co. 1921, in the Court of Appeals of the State of New York, Justice Cardozo stated: “Insurance instead of prejudicing the victim of an accident is seen to supply in many cases the only fund from which the victim can be paid.” In UK there was the Third Parties (Rights Against Insurers) Act 1930, “to confer on third parties rights against insurers of third-party risks in the event of the insured becoming insolvent ...”. Thus, liability insurance is considered a public good and this is missing in India. The view taken by various courts is that the purpose of liability insurance is not merely to protect the financial interests of the insured, but also to protect the interests of those to whom the insured may incur liability. The Louisiana Direct Action Statute provides, for example, that “all liability policies ... are executed for the benefit of all injured persons ... to whom the insured is liable”.

The vision of the IRDAI is to universalise insurance and make insurance grow by leaps and bounds. However, there is a deafening silence on this highly potential area which will really offer tangible monetary assistance to those who are victims of various tort actions by anyone. A national movement needs to be launched to create awareness. Necessary enabling Laws need to be passed and Tribunals set up before which insurers must not only settle the claims of Third Parties but also ensure that the insured is well defended in the case.

Long ago the Supreme Court of India in the case Jay Laxmi Salt Words (P) Ltd vs State Of Gujarat (1994) commented: “Since duty is the primary yardstick to determine the tortious liability, its ambit keeps on widening on the touchstone of fairness, practicality of the situation etc. In Donoghue v. Stevenson a manufacturer was held to be liable to ultimate consumer on the principle of duty to care. In Anns v. Merton London Borough Council, [1977] UKHL 4, it was, rightly, observed: “[T]he broad general principle of liability for foreseeable damage is so widely applicable that the function of the duty of care is not so much to identify cases where liability is imposed as to identify those where it is not........"