Kosha Doshi | Symbiosis Law School, Pune | 6th April 2020
Oriental Insurance Co Ltd. v. M/s JK Cement Works [Civil Appeal No. 7402 of 2009; Supreme Court of India]
Facts:
The respondent had a factory wherein the premises included an open coal yard wherein a stock of coal was used in the manufacturing process was stored. The respondent had purchased a Standard Fire and Special Perils insurance policy from the appellant for a stock of coal between 20/11/2002 and 18/11/2003 for the stock of coal. The policy covered damage caused by “Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation”.
Due to heavy rains on 29/8/2003 and 30/08/2003, some coal was washed off and it suffered damage. On 1/9/2003, this was informed to the appellant and request for appointment of a surveyor was asked for. A report submitted by the surveyor assessed the loss to be 58,89,400. A clarification needed to be sought as to whether the loss could have been caused by “Flood and Inundation” in the terms of the wording of the insurance policy. For the same, a CA had been hired for verification of the documents, but the verification failed.
Respondent’s claim on the ground that the loss caused to it did not fall within the scope of the policy, having occurred due to heavy and extraordinary rain and not ‘flood’ or ‘inundation’. This case is in regard to an appeal arising out of a judgment dated 18th November 2008 which had been passed by the National Consumer Disputes Redressal Commission. This impugned judgement allowed the consumer complaint filed by the respondent directing the appellant to pay 58,89,400 amounts with an interest at a rate of 9 percent per annum till the date of payment.
Issue:
Whether the terms ‘flood’ and ‘inundation’ refer to two significantly different phenomena that cannot be equated with each other? And whether that ‘flood’ needs to be understood in a narrow sense to refer only to the overflowing of a water body, and to exclude instances where overflowing of water occurs due to excessive rainfall?
Judgment:
The case was heard by Justice Mohan M. Shantanagoudar and Justice R. Subhash Reddy on 28th January, 2020 wherein it was 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 issue regarding the terms being different cannot be sustained. Further, the court referred to prior discussions and made a note that floods are not restricted to overflow of water bodies. This caused the arguments raised by the appellant in the second issue to lack merit.
The second argument was considered tenuous even if they looked into the intent of the parties entering into the contract, as it has not come on record that there was any water body near the coal yard or the factory premises. 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.
In addition, the court had also observed in the surveyor’s report that heavy rainfall had occurred in the area, causing flood like conditions that resulted in some of the coal kept in the insured premises being washed off. Moreover, the surveyor’s report also stated that there was accumulation of water due to the heavy rains, that had caused the coal to get washed off. The aforementioned view of the NCDRC supports the impugned judgment and the same cannot be said to be erroneous. The Appellant was directed to pay the sum awarded by the NCDRC within a period of eight weeks from the date of this order, to the Respondent.
Leave a Reply