Archive / Investment Adviser (Level 2) / Non-Life Insurance Products
nism-series-xb-public-liability-insurance-act-1991-strict-liability[ INVESTMENT ADVISER (LEVEL 2) ]
Under the Public Liability Insurance Act, 1991 (PLI Act), what statutory obligation is imposed on industrial owners handling hazardous chemical substances?
[ A ]Mandatory insurance covering only company director luxury yachts.
[ B ]Mandatory statutory 'Strict Liability' insurance to provide immediate interim financial relief to third-party victims of industrial accidents (toxic gas leaks, chemical explosions) on a 'No-Fault' basis.[ CORRECT ]
[ C ]Voluntary insurance with zero penalties for non-compliance.
[ D ]The PLI Act covers only agricultural vegetable markets.
Takeaway
The correct answer is B: the Public Liability Insurance Act, 1991 mandates strict, no-fault liability insurance so that industrial units handling hazardous chemicals must provide immediate interim relief to third-party victims of accidents.
Derivation
Enacted in the aftermath of the Bhopal Gas tragedy, the PLI Act recognized that victims of industrial chemical disasters could not wait years for tort litigation to establish fault before receiving compensation. It therefore imposes 'no-fault' strict liability on owners handling specified hazardous substances -- liability arises purely from the fact of the accident and the handling of the substance, irrespective of negligence -- backed by compulsory insurance (or an Environmental Relief Fund contribution) so interim relief can reach victims of death, injury or property damage almost immediately, well before any full compensation claim is adjudicated.
Why the others fail
A — Mandatory insurance covering only company director luxury yachts.
Absurd distractor; the Act mandates public-victim relief cover for hazardous chemical accidents, not insurance on directors' personal yachts.
C — Voluntary insurance with zero penalties for non-compliance.
Confuses statutory strict-liability cover with private assets; company directors' personal property has no bearing on the PLI Act's mandate.
D — The PLI Act covers only agricultural vegetable markets.
False and irrelevant; the Act targets industrial units handling hazardous substances broadly, not a narrow carve-out for vegetable markets.
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