Karnataka high court: Employer, not insurer, must pay interest on payouts

Bengaluru: The Employee's Compensation Act (EC Act) does not treat medical expenses as a component of "compensation" payable and, hence, reimbursement of medical expenses is not a statutory liability imposed on the insurer under the law.The Karnataka high court made this observation while modifying the award passed in a case arising from Ranebennur. In his order, Justice K Manmadha Rao also held that the liability to pay interest on the compensation rests solely upon the employer, not on the insurer.
Claimant Bettappa was employed as a labourer in Satish Ginning Factory at Ranebennur. While on duty in Oct 2013, both his hands came in contact with a cotton baling machine, resulting in crushing and amputation. He spent more than Rs 5 lakh on his treatment. He then filed a petition seeking compensation of Rs 30 lakh, with an interest of 18% per annum and costs.In Dec 2017, the commissioner under the EC Act, Ranebennur, awarded Rs 16.7 lakh with a 12% interest to Bettappa, payable by the National Insurance Company.The insurer challenged the order, contending that the policy was purely an indemnity contract, under which the primary statutory liability to pay compensation rests upon the employer.Justice Rao noted that the insurance policy expressly excluded liability towards payment of interest and that no additional premium was paid to cover such a liability.The Judge pointed out that, where the insurance policy specifically excludes liability towards medical expenses incurred for treatment of injuries sustained by an employee, and no premium is paid for such coverage, the insurer cannot be fastened with liability contrary to the terms of the contract.However, the judge concurred with the calculation of wages of Bettappa for determining compensation by the tribunal and directed that the claimant was entitled to Rs 8.6 lakh in compensation, to be paid by the insurer.———-Blurb: The judge said where the insurance policy specifically excludes liability towards medical expenses incurred for treatment of injuries sustained by an employee, and no premium is paid for such coverage, the insurer cannot be fastened with liability contrary to the terms of the contract