Coverage Of 'Flood & Inundation' Insurance Includes Damage Caused By Heavy Rains And Not Just Overflowing Of River : SC [Read Judgment]

In a notable judgment, the Supreme Court had to interpret the meaning of the words 'Flood and Inundation' in an insurance contract.

The issue before the Court was that whether these words included only damage caused by overflowing of rivers, or they included damages caused by heavy rains as well.

This happened in the case Oriental Insurance Company Ltd v M/s J K Cement Works Ltd, which was an appeal arising from the order of National Consumer Disputes Redressal Commission.

The respondent, a cement manufacturer, had purchased a Standard Fire and Peril Insurance Coverage from the appellant, which covered, among other things, damages due to "flood and inundation".

Due to heavy rains, the coal stocked by the respondent got washed away. The appellant repudiated the claim in respect of that damage by saying that the damage due to heavy rains was not covered under 'flood and inundation'.

The matter was taken to the NCDRC by the respondent claiming compensation to the tune of Rs.1.32 crores. The NCDRC allowed the claim and the insurance company appealed to the Supreme Court.

The company argued that ''flood' refers to overflowing of water bodies such as rivers, ponds, lakes etc. With respect to the term 'inundation', the company argued that the  same refers to 'accumulation of water' and could thus not be applied to the instant case as the coal had merely been washed off due to heavy rains. 

To decide the matter, the bench referred to meanings of these words as defined in Concise Oxford English Dictionary, Stroud's Judicial Dictionary, Black's Law Dictionary.

Based on these, the Court held that floods can be broadly divided into the following categories: coastal floods, fluvial floods (river floods), and pluvial floods (surface floods).

 Pluvial or surface floods refers to the accumulation of water in an area because of excessive rainfall. These floods occur independently of an overflowing water bodies.

 "Inundation" was said to be referring to both the act of overflow of water as well as the result of such overflow. 

"We have already highlighted that the terms 'flood' and 'inundation' are often used synonymously to refer to the act of overflowing of water over land that is generally dry. Therefore, the first argument of the Appellant cannot be sustained.

Similarly, given our prior discussion on pluvial floods, which occur independently of a water body, it is clear that floods are not restricted to overflow of water bodies. Thus, the second argument raised by the Appellant also lacks merit".

The Court also noted that there was no water body near the factory.

"where there was no risk of water from a water body overflowing onto the dry land where the coal yard was located, it could not have been the intention of the parties entering into the contract to give a restrictive meaning to the term 'flood'. Such a narrow interpretation would lead to the conclusion that the insertion of the term 'flood' was superfluous,which could not have been the case", the bench observed, dismissing the appeal.

Case Details
Title : Oriental Insurance Company Ltd v M/s J K Cement Works Ltd
Case No. : Civil Appeal No. 7402/2009
Coram    : Justices Mohan M Shantanagoudar and R Subhash Reddy

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