Tuesday, July 12, 2022

SC rules, Vehicles damaged by Heavy Rains duly covered under Insurance for Flood & Inundation.

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In a remarkable judgement, the Supreme Court of India interpreted the meaning of the words 'Flood and Inundation' in an Insurance Contract.

The judgement came out in a case titled Oriental Insurance Company Ltd v M/s J K Cement Works Ltd.

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

The appeal in the case arose from the order of the National Consumer Disputes Redressal Commission.


The coal stocked by the respondent got washed away due to a heavy rain incident. The appellant herein though rejected the claim in respect of that damage by saying that the damage due to heavy rains was not covered under 'flood and inundation'.

The respondent then took the matter to the NCDRC claiming compensation to the tune of ₹1.32 crores which was allowed and the insurance company appealed to the Supreme Court.

The company in its argument submitted that 'flood' refers to the overflowing of water bodies such as rivers, ponds, lakes, etc. while 'inundation', refers to 'accumulation of water' and could thus not be applied to the present case as the coal had merely been washed off due to heavy rains.

In an interesting move, the Court referred to the meanings of these words as defined in the Concise Oxford English Dictionary, Stroud's Judicial Dictionary, Black's Law Dictionary to settle the matter.

The Court on the basis of the above 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 body.

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

The Court concluded: 

"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 the 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 and thus dismissed the appeal. It said:

"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."

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