ORIENTAL INSURANCE COMPANY LIMITED versus M/S. J.K. CEMENT WORKS on 28 January 2020

1. This appeal arises out of the judgment dated 18.11.2008 passedby the National Consumer Disputes Redressal Commission (‘NCDRC’)in Original Petition No. 59 of 2005. Vide the impugned judgment, theNCDRC allowed the consumer complaint filed by the RespondentGherein, directing the Appellant to pay Rs. 58,89,400/- to the Respondent,along with interest @ 9% per annum from 01.06.2004 till the date ofpayment.

2. The brief facts giving rise to this appeal are as follows:

2.1 Respondent herein (Complainant) is a cement manufacturer,Hhaving a factory in Nimbahera, District Chittorgarh, Rajasthan. These factory premises included an open coal yard, where a stock of coalthat was used in the manufacturing process was stored.

2.2 The Respondent purchased a Standard Fire and Special Perilsinsurance policy from the Appellant herein for the stock of coal for theperiod between 20.11.2002 and 19.11.2003. Among other things, thepolicy covered damage caused by “Storm, Cyclone, Typhoon, Tempest,Hurricane, Tornado, Flood and Inundation”.

2.3 Due to heavy rains in Nimbahera on 29.08.2003 and30.08.2003, some of the coal was washed off, and the stock of coalsuffered damage. Consequently, on 01.09.2003, the Respondent informedthe Appellant of the damage and requested the appointment of asurveyor. The surveyor so appointed submitted its report on 29.03.2004,assessing the loss caused to the Respondent at Rs.58,89,400/-.

2.4 Upon receiving such report, the Appellant sought aclarification from the surveyor, as to whether the loss could be said tohave been caused by “Flood and Inundation” in terms of the wordingof the insurance policy. The Appellant also hired a Chartered Accountantto verify the declarations submitted by the Respondent vis-à-vis itsaccounts books and daily stocks.

2.5 On 13.08.2004, the surveyor reaffirmed its stand that thelosses in question were payable to the Respondent as per the termsand conditions of the policy. On the other hand, the CharteredAccountant hired by the Appellant reported on 02.09.2004 that he wasunable to verify the declarations because the Respondent had notprovided the necessary documents to him.

2.6 Notably, vide letter dated 14.12.2004, the Appellant repudiatedthe Respondent’s claim on the ground that the loss caused to it did notfall within the scope of the policy, having occurred due to heavy andextraordinary rain and not ‘flood’ or ‘inundation’.

2.7 Aggrieved by this repudiation, the Respondent filed aconsumer complaint before the NCDRC seeking compensation to thetune of Rs.1.32 crores. Vide the impugned order dated 18.11.2008, theNCDRC allowed the complaint to the extent of the loss assessed bythe surveyor, i.e. Rs.59,89,400/-, and directed the Appellant to pay thesaid amount along with interest at the rate of 9% per annum. The instantappeal has been filed by the Appellant against this order.

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A3. Heard learned counsel for the parties.

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A3. Heard learned counsel for the parties.

4. Learned counsel for the Appellant argued that the terms ‘flood’and ‘inundation’ refer to two significantly different phenomena thatcannot be equated with each other. He contended that the term ‘flood’refers to overflowing of water bodies such as rivers, ponds, lakes etc.BAccordingly, he submitted that since it was not the case of theRespondent that there was a water body near the factory which hadoverflown into the coal yard, the loss cannot be said to have been causedby a ‘flood’. With respect to the term ‘inundation’, he argued that thesame refers to ‘accumulation of water’ and could thus not be appliedto the instant case as the coal had merely been washed off due toCheavy rains.

5. Per contra, learned counsel for the Respondent submitted thateven if the Appellant’s definition of ‘inundation’ as ‘accumulation ofwater’ were to be accepted, the surveyor’s report had clearly observedthat that there was an accumulation of water in the coal yard, therebyDmaking the policy applicable. Further, it was brought to our attentionthat the surveyor had relied on the rainfall data of Nimbahera for29.08.2003 and 30.08.2003, as received from the MeteorologicalDepartment of the Government of India, to conclude that that therewere adequate rains in the area to cause floods/inundation. It was alsoEsubmitted that the Appellant could not have appointed a second surveyorunilaterally, as the procedure under Section 64-UM of the InsuranceAct, 1938, requiring permission from the Insurance Regulatory andDevelopment Authority before appointing a second surveyor, had notbeen followed.F6. At the very outset, we note that as far as the Respondent’scontention regarding the appointment of a second surveyor is concerned,the Appellant had only appointed a Chartered Accountant for thepurposes of verifying the accounts books of the Respondent regardingits daily stock of coal. In our considered opinion, the appointment of aChartered Accountant for this limited purpose is not tantamount to theGappointment of a surveyor. Thus, we do not consider it necessary todeal with the prerequisites for the appointment of a second surveyor inthe instant case.

7. Further, it is pertinent to note that the quantum ofcompensation or the date of the incident are not in dispute here. NorHhas it been argued by the Appellant that the date of the incident did ORIENTAL INSURANCE COMPANY LIMITED v.M/S. J.K. CEMENT WORKS [MOHAN M. SHANTANAGOUDAR, J.]

not fall within the insurance period. The central question that thenremains to be considered is whether the loss caused to the Respondentoccurred due to ‘flood’ or ‘Inundation’.

8. Before delving into the particular facts of this case, it may beuseful to refer to the dictionary meanings of the terms ‘flood’ and‘inundation’.

8.1 The word ‘flood’ is defined in the Concise Oxford EnglishDictionary, 8[th] edition (1990) as follows:

“…1 a an overflowing or influx of water beyond its normalconfines, esp. over land; an inundation.

b the water that overflows.

2 a an outpouring of water; a torrent (a flood of rain)…”

Particularly in the context of insurance contracts, Stroud’sJudicial Dictionary, 5[th] edition (1986) defines the word ‘flood’, inreference to Young v. Sun Alliance and London Insurance, [1977]1 W.L.R. 104, an English case decided by the Court of Appeal, andreads as follows:

“…”Flood” in an insurance policy meant a large movement orirruption of water, and did not cover mere seepage from a naturalsource...”

8.2 The word ‘inundate’ is defined in the Concise OxfordEnglish Dictionary, 8[th] edition (1990) as follows:

“…1 flood.

2 overwhelm (inundated with enquiries)…”

Further, per Black’s Law Dictionary, 9th edition (1990), theword ‘inundate’ means:

“To overflow or overwhelm; esp. to flood with water”

9. Simply put, a flood may be described as overflow of waterover land. Floods can be broadly divided into the following categories:coastal floods, fluvial floods (river floods), and pluvial floods (surfacefloods).

9.1 Coastal floods occur when water from a sea or an oceanflows into nearby areas. They are caused either by extreme tidal activity A

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A(high tides) or by a storm surge – strong winds from a hurricane orother storms forcing the water onshore – or by the simultaneousoccurrence of both these phenomena.

9.2 Fluvial or river flood occurs when the water level exceedsthe capacity of a river, stream, or lake, resulting in the overflow of theBsurplus water to surrounding banks and neighbouring land. They areusually caused by either excessive rainfall or unusually high melting ofsnow because of rising temperatures.

9.3 Lastly, pluvial or surface floods refers to the accumulationof water in an area because of excessive rainfall. These floods occurCindependently of an overflowing water body. Pluvial floods include flashfloods which take place due to intense, torrential rains over a shortperiod of time. A pluvial flood may also occur if the area is surroundedby hilly regions from where the run-off water comes and accumulatesin the low-lying area. In urban localities, because of concrete streetsand dense construction, rainwater is unable to seep into the ground.DSteady rainfall over a few days or torrential rains for a short period oftime may overwhelm the capacity of the drainage systems in place,leading to accumulation of water on the streets and nearby structures,and resulting in immense economic damage.

10. So far as the term ‘inundation’ is concerned, it can be usedEto refer to both the act of overflow of water over land that is normallydry and to the state of being inundated. Inundation can also beintentional, which is sometimes carried out for military purposes, as wellas for agricultural and river-management purposes. In the latter sense,i.e. as a state of being, inundation refers to accumulation of water inFwhich objects or land may be submerged. In simpler terms, inundationcan be used to refer both the act of overflow of water as well as theresult of such overflow.

11. It flows from the above discussion that overflow of waterdue to a flood may result in the state of inundation. As discussed above,Gfloods are of different types, and may be caused due to several factorscomplementing each other. Usually, non-coastal floods originate fromrainfall, but the magnitude of rainfall sufficient to cause a flood, andthe damage that a flood causes, may vary depending on a variety ofaspects such as the location of land (low-lying or altitudinous), the waterretention capacity of the soil, and the density of population and man-Hmade construction in the area, among other things. In rare cases, a non- ORIENTAL INSURANCE COMPANY LIMITED v.M/S. J.K. CEMENT WORKS [MOHAN M. SHANTANAGOUDAR, J.]

coastal flood may also occur without any rainfall. For instance,shortcomings in the construction of a dam may lead to its completebreakdown, resulting in a flood.

12. It is not the case of the appellant that the coal was notproperly stocked or that there was any negligence on part of theRespondent. The only arguments advanced by the Appellant are: firstly,that the terms ‘flood’ and ‘inundation’ cannot be equated, and, secondly,that ‘flood’ needs to be understood in a narrow sense to refer only tothe overflowing of a water body, and to exclude instances whereoverflowing of water occurs due to excessive rainfall.

12.1 We have already highlighted that the terms ‘flood’ and‘inundation’ are often used synonymously to refer to the act ofoverflowing of water over land that is generally dry. Therefore, the firstargument of the Appellant cannot be sustained.

12.2 Similarly, given our prior discussion on pluvial floods, whichoccur independently of a water body, it is clear that floods are notrestricted to overflow of water bodies. Thus, the second argument raisedby the Appellant also lacks merit.

12.3 Furthermore, the second argument made by the Appellantseems tenuous even if we look into the intent of the parties enteringinto the contract, as it has not come on record that there was any waterbody near the coal yard or the factory premises. In such a scenario,where there was no risk of water from a water body overflowing ontothe dry land where the coal yard was located, it could not have beenthe intention of the parties entering into the contract to give a restrictivemeaning to the term ‘flood’. Such a narrow interpretation would leadto the conclusion that the insertion of the term ‘flood’ was superfluous,which could not have been the case.

13. In the instant case, the Appellant has not disputed that therewere heavy rains on 29.08.2003 and 30.08.2003 in the Nimbaheraregion. In fact, the surveyor appointed by the Appellant had alsoobserved in its report that heavy rainfall had occurred in the area,causing flood-like conditions that resulted in some of the coal kept inthe insured premises being washed off. Moreover, the surveryor’s reportalso stated that there was accumulation of water due to the heavy rains,that had caused the coal to get washed off.

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A14. The NCDRC in the following cases: (i) Bajaj AllianzGeneral Insurance Co. Ltd. v. M/s. Gondamal Hardyal Mal, [2009]NCDRC 127, (ii) Oriental Insurance Co. Ltd. v. M/sSathyanarayana Setty & Sons, [2012] NCDRC 124, and (iii)Oriental Insurance Co. Ltd. v. M/s R.P. Bricks, [2013] NCDRC494, had held that damage caused by heavy rainfall would not fallBbeyond the ‘flood and inundation’ clause of the Standard Fire andSpecial Perils insurance policies. It is brought to our notice by thelearned counsel appearing for the Respondent that the aforesaid viewhas been consistently taken by the NCDRC. The aforementioned viewof the NCDRC supports the impugned judgment and the same cannotCbe said to be erroneous.

15. In view of the above, the appeal stands dismissed. TheAppellant is directed to pay the sum awarded by the NCDRC within aperiod of eight weeks from the date of this order, to the Respondent.

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Appeal dismissed.

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