Karnataka High Court Clarifies Insurer's Liability Under Employee Compensation Act
The Karnataka High Court has issued a significant ruling clarifying that the Employee's Compensation Act (EC Act) does not treat medical expenses as a component of "compensation" payable. Consequently, reimbursement of medical expenses is not a statutory liability imposed on insurers under the law.
Court Modifies Award in Ranebennur Case
Justice K Manmadha Rao made this observation while modifying an award passed in a case originating from Ranebennur. In his order, Justice Rao also held that the liability to pay interest on compensation rests solely upon the employer, not on the insurer.
The case involved claimant Bettappa, who was employed as a labourer at Satish Ginning Factory in Ranebennur. In October 2013, while on duty, both his hands came into contact with a cotton baling machine, resulting in crushing injuries and amputation. Bettappa incurred over Rs 5 lakh in medical treatment expenses and subsequently filed a petition seeking Rs 30 lakh in compensation, along with 18% annual interest and costs.
Initial Award and Insurer's Challenge
In December 2017, the commissioner under the EC Act in Ranebennur awarded Bettappa Rs 16.7 lakh with 12% interest, payable by the National Insurance Company. The insurer challenged this order, arguing that the policy was an indemnity contract, with the primary statutory liability to pay compensation resting upon the employer.
Justice Rao noted that the insurance policy explicitly excluded liability for interest payments and that no additional premium had been paid to cover such liability. He emphasized that where an insurance policy specifically excludes liability for medical expenses incurred in treating employee injuries, and no premium is paid for such coverage, the insurer cannot be held liable contrary to the contract terms.
Court's Final Ruling and Compensation Award
However, the judge agreed with the tribunal's calculation of Bettappa's wages for determining compensation. He directed that the claimant was entitled to Rs 8.6 lakh in compensation, to be paid by the insurer, while absolving the insurer of liability for medical expenses and interest.
This ruling underscores the importance of clear policy terms and premium payments in determining insurer liabilities under the EC Act, providing clarity for employers and insurance companies in similar cases.
