Inundation In Insurance Policies Include Act Of Flooding As Well As Its Consequences: NCDRC

The National Consumer Disputes Redressal Commission, presided by AVM J. Rajendra, held National Insurance Company liable for deficiency in service due to denial of insurance claim stating that inundation resulting from excessive rainfall does not fall within the flood policy's coverage.

Brief Facts of the Case

The complainant purchased a Standard Fire and Special Perils insurance policy from the insurer, National Insurance Company Limited, to cover stock stored in rented premises. Following heavy rains that caused water damage and a partial building collapse, the complainant notified the insurer of the damage. The insurer appointed a surveyor to evaluate the loss. However, the insurer rejected the claim, arguing that while the policy covers flood and inundation, it does not cover damage from heavy rains. Displeased with this decision, the complainant filed a consumer complaint with the State Commission of Maharashtra, claiming deficiency of service, and sought a declaration of this deficiency, along with compensation for the incurred loss and additional damages for mental distress. The commission partially upheld the complaint, finding the insurer guilty of deficiency in service and ordering them to pay the complainant Rs. 46,48,565 plus interest at 9% per annum, along with ₹1 lakh for mental harassment, and to cover costs of Rs. 25,000. Aggrieved by the State Commission's order, the insurer appealed to the National Commission.

Contentions of the Insurer

The insurer argued that the complainant's claim for stock loss due to heavy rains is not covered under the terms of the Standard Fire and Special Perils Policy, asserting that the complainant did not provide sufficient evidence to demonstrate that the loss fell under the policy's listed perils. The insurer contended that the case law cited by the complainant is irrelevant and that the validity of the State Commission's order is questionable, maintaining that the facts of the case do not warrant a payable claim.

Observations by the National Commission

The National Commission observed that the primary issue was whether the stock loss due to heavy rain is covered under the Standard Fire and Special Perils Policy. The relevant policy terms include coverage for risks such as storm, cyclone, and inundation. The commission referenced the Supreme Court's decision in Oriental Insurance Company Limited vs. J.K. Cement Works, which clarified that “flood” refers to significant water overflow, and the definition of “inundation” includes both the act of flooding and its consequences. The commission noted that, as confirmed by previous rulings, inundation resulting from excessive rainfall falls within the policy's coverage, as confirmed by previous rulings,including Vaibhav Dyestuff Industries vs. New India Insurance Co. Ltd., which found the claim plausible based on surveyor observations and supporting evidence. Consequently, the commission upheld the State Commission's order and dismissed the appeal.

Case Title: National Insurance Co. Ltd. Vs. M/S. Geekay International Co.

Case Number: F.A. No. 870/2021