SC: Heavy rainfall damage falls within ‘flood and inundation’ clause; insurer liable under Standard Fire & Special Perils Policy

Case Name: Oriental Insurance Company Limited v. J.K. Cement Works
Date of Judgment: JANUARY 28, 2020
Citation: Civil Appeal No. 7402 of 2009
Bench: Hon’ble Mr. Justice Mohan M. Shantanagoudar and Hon’ble Mr. Justice R. Subhash Reddy

Held: The Supreme Court upheld the NCDRC’s direction requiring the insurer to indemnify the insured for coal stock damage caused by heavy rains. The Court ruled that the terms “flood” and “inundation” must be construed broadly, encompassing heavy rainfall and resulting accumulation of water. The insurer’s restrictive interpretation that “flood” meant only overflow of a natural water body was rejected.

Summary: The respondent’s coal stock, insured under a Standard Fire and Special Perils Policy, was damaged by torrential rains on 29–30 August 2003. While the surveyor assessed loss at Rs. 58.89 lakhs, the insurer repudiated liability on the ground that damage from heavy rains was not “flood or inundation.” The NCDRC allowed the complaint and ordered payment with 9% interest. On appeal, the Supreme Court examined dictionary definitions and prior rulings, clarifying that floods may arise from various sources, including pluvial (surface) floods from excessive rainfall, not limited to river or coastal overflow. Since the surveyor confirmed accumulation of water causing the loss, the event squarely fell within policy coverage.

Decision: Appeal dismissed. Insurer directed to pay Rs. 58,89,400/- with 9% interest as awarded by NCDRCA.