Workers are exposed to many
risks and there are beneficial legislations ..
Employees Compensation Act [Workmen Compensation Act 1923 earlier] – 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 enactment aims not at compensating the workmen the wages
but to provide compensation for the injury or death. The amount of compensation to be paid depends
on the nature of the injury and the average monthly wages and age of workmen.
This Act extends to the whole of India. The act
applies to factories, mines, docks, construction establishments, plantations,
oilfields and other establishments which are explicitly mentioned in Schedule,
however, it excludes establishments covered by the ESI Act. The owner of the worksite or the Management
of any workplace or the contractor who is undertaking some activity – all are
responsible to their employees and have to provide compensation for any injury
or death occurring during and in the course of employment. They can shift the risk to the Insurers by
taking a Policy upon payment of premium as appropriate.
This is a standard policy
product under Liability portfolio of Insurers (Both PSU & Private) – the
policy provides insurance protection to policy holder (Employer) against any sums
for which the insured would be liable towards his employees under WC Act 1923, Fatal
Accidents Act 1855 and Common Law. The foremost precondition is such injury /
death occurs ‘arising out of and in the course of employment’ i.e., there should be causal connection between such injury / death and the
employment.
The Act mandates payment
to worker by Employer but Insurance is not mandatory. Irrespective of any insurance in place, or in
the absence of that too, the employer is liable. The contract between the Insurer and the
employer covers liability arising under WC Act, but there would no direct relation
between the worker and the Insurer and thus unlike Motor vehicle insurance,
Insurers need not be direct parties in any dispute / adjudication before the
Labour commissioner or Court. Any
liability on the employer, the employer has to defend, satisfy their liability
and take reimbursement from the Insurer as applicable. There can be differential terms and there can be situations
where employer is liable, but insurers are not or are liable to a lesser /
limited extent. In earlier
days, there was ‘all or none clause’ where Insurers expressed denial of
liability if the no. of employees on roll at the material time exceeded those
numbers declared for insurance. Now,
many a Insurers have amended terms to provide for proportionate value of
liability – aka concept of Under Insurance in terms of no. of persons or the
amount of wages insured. The policy of Insurance is a contract between the
Insurer and Insured (employer here) and should only interpreted on the terms it
was concluded – and should not have bearing on the value of liability of the employer
towards his employee.
Here is an interesting
judgement rendered by the Madurai Bench of Madras High Court in Feb 2018 in a
case of 2012 involving United India Insurance Co.
This Civil
Miscellaneous Appeal has been preferred against the Order of 2012 - passed by the Workmen Compenstion Commissioner
of Labour, Madurai. The cause of action arose on 10.7.2009 when a person
employed as a security guard died. He
was under contract of a security agency and placed on employment at a private
bank. The security Agency had taken WC
policy with the PSU Insurer. The
dependents of the deceased filed for compensation under WC Act with the Deputy Commissioner of Labour claiming
compensation of Rs.2,39,700/-
As it could happen, the contractor (employer) did not
appear before the Authority nor was represented. The Bank and the Insurer contested the claim
by filing counter statements. The Authority awarded a sum of Rs.2,54,185/-
towards compensation, along with 12% interest / per annum. The insurance Company depositedthe
compensation and filed the present
CivilMiscellaneous Appeal before the Hon’ble High Court. On the appeal R1 to 3 claimants and R4
employer were setex-parte, after service of notice.
The counsel for Insurers contended that the security
guards were insured only to the extent of Rs.2000/- as monthly salary and the
liability of the Insurer should be so limited to that extent. But the Authority directed the Insurance
Company to pay thecompensation in excess of its liability and hence, the
appellant disputed the quantum of compensation awarded in the claim petition,
by the CompetentAuthority. The counsel for the bank contended that there was no
‘employer – employee’ relation of the deceased with the bank and that only the
contractor should be responsible for any compensation as per clause 8 of the agreement, executed
between that contractor and the bank.
The Court opined that there was no dispute that the
deceased had been employedas a security guard, by the 4th respondent and on the
ill-fated day, he was in the course of employment. It was further not disputed that
the deceased never joined in the bank. A
policy of insurance taken by the contractor covering 10 employees in this
cadre for the period 2007-08 was also
produced as evidence. The premium had
been paid reckoning the total cash wages ofRs.28,80,000/- was paid to 120
employees in the cadre of security guard by the contractor. The counsel for the appellants calculated the
monthly wages ofthe deceased security guard in this case as Rs.2,000/- per
month hence, contended that the insurer
is liable to pay only to paya sum of Rs.1,59,600/-, by fixing the monthly
salary of the deceased as Rs.2000/- towards the loss of income of Rs.2,51,885/-
due to death of the employee and that the balance amount of compensation of
Rs.92,285/- is to bepaid by the 4th respondent (Contractor).
The Court held that no record or document was produced
by the insurance company to show the name of 120 security guards with the
amount of wages / salary furnished by the employer / 4th respondentto the
Insurance Company at the time of taking out policy and held that the appellant
Insurance Company failed to prove the fact that the deceasedwas
getting the salary of Rs.2000/- per month, as contended by the appellantherein. It was further stated that this Court cannot presume the monthly wages of 120
numbers of employees each for Rs.2000/-, without any record from the Insurance
Company also.
The respondents 1 to 3 here had pleaded in their claim petition thatthe
deceased was getting a sum of Rs.3000/- per month and claimed
compensation of Rs.2,39,700/-, but P.W.1 has deposed
during her examination that the deceased was getting monthly salary of
Rs.5000/-. However, no proofwas filed
for the monthly salary either Rs.3000/- or Rs.5000/- per monthreceived by the
deceased. The Authority had assessed and
fixed the monthlyincome of the deceased as Rs.3150/- in the absence of proof of
monthly salaryof the deceased, as per G.O.No.38, Loabour and Employment
Department, dated 09.11.2005.
As the contractor remained ex-parte there was no
evidence in the form of employment records / salary slip – the Court concurred
with fixing of monthly salary of Rs.3150/-, as per the said Government Order. The Court held that in the given
circumstances and also the failure on thepart of the Insurance Company to
produce the relevant records to show thenames of the employees with amount of
salary each at the time of getting
thepolicy, this Court is not inclined to interfere with the order passed by
theDeputy Commissioner of Labour, Madurai, 2009 awarding a sum of Rs.2,54,185/-
along with interest at the rate of 12%per annum. The Appellate authority
dismissed the CMA and directed the Insurance Company / appellant to deposits
theabove amount as ordered.
The Insures may feel aggrieved in having
to satisfy an award where wages were reckoned at a higher figure than the value
that was purportedly insured for.
However, the lack of evidence and not properly steering the case to its
logical conclusion coupled with the absence of the contractor – all lead to a
different direction. In the end, there are lessons to be learnt for all
Insurers in underwriting these policy, on the documents /vital information to
be collected at the time of underwriting, the conditions that are to be
incorporated in the policy, the documents to be produced in the event of a
claim and the way such legal matters are to be steered.
With regards – S. Sampathkumar
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