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Wednesday, March 26, 2014

Insurers directed to pay compensation to injured worker - GPA Vs WC

In common law legal systems, a contract is an agreement having a lawful object entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between them. The elements of a contract are "offer" and "acceptance" by "competent persons" having legal capacity who exchange "consideration" to create "mutuality of obligation.

Insurance Policy is a contract – a written one at that, between the Insurer and the Insured – whereby the Insurer upon payment of premium agrees to indemnify the policy holder in respect of loss or damage arising out of insured perils.  The insuring terms are of utmost significance as the policy is subject to terms, conditions, exceptions, exclusions and more, clearly stated in the pOlicy. For getting indemnity under the Policy, loss or damage should occur, that should cause monetary loss; the policy should be prejudiced by such loss & should have insurable interest over the subject matter – such loss should be caused by a peril insured against, further subjected to insuring terms and conditions.

One of the many policies is ‘Group Personal Accident Insurance’. – where the Insured covers ‘a named or specified group’ of persons against accidental bodily injury sustained by the insured person(s) during the policy period.  The Policy generally has difference table of benefits, ranging from Basic cover of death only to wider cover of death; permanent total disability & permanent partial disability to comprehensive cover of death + PTD + PPD + temporary total disability ~ which is a weekly benefit, subject to caps.

While GPA policy would provide compensation only for expenses arising out of accidental injuries, a Group Mediclaim policy would provide compensation in respect of hospitalization expenses for treatment of illness also.

There is another – Employees Compensation [Workmen Compensation earlier] – is based on the Act which provides for payment of compensation by the employer to his employees (or their dependents in the event of fatal accidents) in respect of personal injury due to accidents arising out of and in the course of their employment. The Insurance covers such liability of the employer.  Sec 3 of the WC Act 1923 reads “ If personal injury is caused to a workman by accident arising out of and in the course of his employment, his employer shall be liable to pay compensation in accordance with provision of this Chapter”. The section talks of : personal injury, accident, employment and compensation.

Here is a newsitem that appeared in Times of India Chennai edition titled ‘ Insurance firm to pay compensation to injured worker’ (reproduced below in Arial font Blue colour)….. Chennai: Brushing aside technical objections raised by an insurance company, the Madras high court has asked it to pay compensation to a worker injured while on duty.

In 2005, D Sivasankar, a helper earning a monthly salary of 3,650/- was shifting a granite stone weighing 50kg when he lost balance. The stone fell on his hand, injuring him grievously. He was administered 17 stitches at a private hospital and later shifted to a government hospital. Claiming he suffered a permanent disability of 15% and lost 17% of his earning capacity, he sought compensation.

The owner of the firm said the “injuries were superficial” and Sivasankar had not produced any documents to prove loss in his employment opportunities. Further, he was covered by a group insurance policy of Oriental Insurance. Sivasankar filed an insurance claim, but Oriental rejected it. Sivasankar filed a complaint before the commissioner for workmen’s compensation seeking a compensation of 1.5 lakh. Partly allowing the claim, the deputy commissioner of labour directed the insurance company to pay 53,394/-  to Sivasankar within 30 days.

Oriental Insurance moved the high court, saying since it was a group personal accident policy, it did not cover a claim under the Workmen’s Compensation Act. Unless the policy specifically covered a claim under the Workmen’s Compensation act, no direction could be issued for making the payment, it said. Counsel for Sivasankar said as the insurance policy was valid at the time of injury, there was no illegality in the order.

In a recent order, Justice R Mahadevan said an insurer could be directed to pay compensation even if it was not covered under the provisions of the Workmen’s Compensation Act. As Sivasankar was injured during employment, he was correct in approaching the commissioner. “The concept of insurance is to indemnify the insured against the claims,” said the court.

It would inappropriate to understand and comment based on newspaper report alone….. but – GPA policy is governed by its terms and conditions and is no substitute for a WC (Employers liability) insurance.  While the person had every right to file for compensation before the WC commissioner, in respect of an injury sustained at a work place (occurring during and in course of employment), the Insurers would be liable only when there existed a policy covering WC liability taken out by the employer.  A GPA policy would provide compensation, provided the injured was an insured person and was eligible for compensation under the table of benefits opted for.

With regards – S. Sampathkumar

26th Mar 2014.

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