Death and Diasbility Compensation - EC Act versus Group Personal Accident Policy

Dear Friends and Seniors,

Please clarify my doubts regarding EC Act, ESI, and other forms of medical and death/disability benefits that can be provided by a company.

My organization has two types of Medical cover and death/disability benefits, as follows:-

a) Medical Cover: For employees out of the ESI limit, we provide a Group Medical Policy up to a certain cover. Employees who are eligible for ESI are, of course, under ESI.

b) Death & Disability Benefit: The "employees who are working in our office" are covered under a Group Personal Accident Policy. Employees working at the Factory site of our "Principal Employer" are covered under the EC Act (one reason for this is that the PE has specifically asked for coverage under the EC Act for our employees working at his site).

My Doubts are:-

a) Is it necessary to cover every employee (irrespective of work location) under the EC Act?

b) Is this arrangement of Death & Disability benefit okay?

Would appreciate advice.

Thanks & Regards,

Arun

Dear ARUN,

I don't understand why such queries when your very post itself clearly distinguishes the scope and the extent of the coverage of the different insurance policies referred to therein. Anyway, for the sake of clarity by way of further explanation, let me answer the queries as follows:

1) EC Act, 1923 covers the risks of employment accidents in respect of only those employees who are within the ambit of the definition of the term "employee" as defined under section 2(1)(dd) of the Act read with the exhaustively enumerated list in Schedule II of the Act and not others. The factor for compensation under the Act is the extent of the loss of earning capacity as a result of disability caused by the employment accident based on the last-drawn wages only. On the contrary, the Group Personal Accident Policy, if I am correct, would cover all those insured irrespective of the place and cause of the accident, and the amount of compensation is limited to the maximum sum assured only. Therefore, it cannot be a substitute for the statutory compensation under the EC Act, 1923, but can be an addition only.

2) It is okay for those employees who are not covered by the EC Act, 1923.

Thank you.

Dear Arun,

If your Principal Employer is covered under the ESI Act and/or if their factory is situated in an implemented area of ESI, then you should cover your employees under ESI. The Principal Employer cannot insist on you for coverage under the EC Act, and you cannot escape from ESI liability. The Principal Employer can insist on the coverage of employees drawing a salary of more than Rs. 21,000 under the EC Act.

Suresh

Dear Arun ji,

Shri. Umakanthan ji rightly said that a claim under a PA policy cannot be a substitute for the statutory compensation under the E.C Act, 1923 but can only be an addition.

Employees covered under ESIS have the liability to pay or settle any claim or extend benefits under the Act lies with the ESI Corporation. Employees who are not covered under ESIS are covered by the EC Act, subject to falling under the definition of workmen. For such employees, the liability to pay compensation in case of an employment injury lies with the employer, who has to pay it from his own pocket.

However, if the employer has insured his employees covered under the EC Act with an EC policy, then only his liability is absorbed by the insurer; otherwise, it is not.

The settlement of a claim under mediclaim and PA policy is an additional benefit to the employee.

I hope your query is resolved with the answer by Shri. Umakanthan ji supplemented by me.

Thank you, Mr. Umakanthan, Mr. Suresh, and Mr. Korgaonkar, for your replies.

The kind of work we do falls under Serial (vii) of Schedule II, and we have covered our EC Liability with an appropriate policy with a GIC. From the replies received, it is clear that people covered under ESIC need not be covered under EC Act. As I understand, ESI is like a medical policy (There is no lump sum benefit to dependents in case of Death of IP), and EC act is like a Term Life Insurance (in which the employee's dependents get a Lump Sum Benefit).

Having said that, please allow me to ask a few more questions:

a) Is there anything in either ESI Act or EC Act (or any other act) which precludes an employee from claiming benefits simultaneously under both Acts for disablement allowable under the acts?

b) Is there anything in either ESI Act or EC Act (or any other act) which precludes a deceased employee's dependents from simultaneously claiming Dependents benefit under ESI Act and also Lump sum benefits under EC Act?

c) Fundamentally, from the point of view of company risk management, is it legally alright to have all employees as defined by Schedule II of EC Act to be covered by a policy so that the company's statutory liability arising out of EC Act is taken care of, irrespective of whether the employee is covered under ESI or not?

Please pardon my doubts, but would appreciate if experts in this forum can satisfy my curiosity. I am still learning!

Thanks and regards,
Arun