SC: Insurer not liable for flood loss where STFI perils expressly excluded; change in premises created fresh contract, not renewal

Case Name: Shree Ambica Medical Stores & Others v. The Surat People’s Co-operative Bank Limited & Others
Date of Judgment: JANUARY 28, 2020
Citation: 2020 INSC 98; Civil Appeal No. 562 of 2020 (arising out of SLP(C) No. 4362 of 2016)
Bench: Hon’ble Dr. Justice D.Y. Chandrachud and Hon’ble Mr. Justice Ajay Rastogi

Held: The Supreme Court held that the insurer was not liable for losses caused by the 2006 Surat floods because the relevant Rs. 60 lakh insurance policy specifically excluded storm, flood, tornado, and inundation (STFI) perils. Since the change of premises resulted in a fresh contract of insurance, the insurer was entitled to exclude STFI coverage and refund the additional premium.

Summary: The appellants’ goods, hypothecated with the respondent bank, were insured under two policies. For 2005–06, the bank remitted premium for STFI cover, but the insurer refunded Rs. 992 and issued a policy for Rs. 60 lakhs excluding STFI perils. When floods in August 2006 destroyed stock, the insurer settled only Rs. 23 lakhs under another policy (Rs. 25 lakh cover) and repudiated the larger claim. The State Commission held the bank liable for deficiency in service, but the National Commission exonerated both bank and insurer, noting acceptance of policy terms and refund without protest. The Supreme Court affirmed, ruling that the policy for the new premises was not a renewal but a new contract where STFI perils were excluded, and the insured, having received the refund and policy copy, could not later disclaim knowledge.

Decision: Appeal dismissed. Insurer absolved of liability; no costs imposed.