Coverage Of 'Flood & Inundation' Insurance Includes Damage Caused By Heavy Rains And Not Just Overflowing Of River

In Oriental Insurance Company Ltd v M/s J K Cement Works Ltd, Civil Appeal No. 7402/2009, an appeal was filed before the Supreme Court by the insurer against the order of the NCDRC allowing the claim of the respondent.

The respondent had purchased a Standard Fire and Peril Insurance Coverage from the appellant, which covered, among other things, damages due to "flood and inundation". Due to heavy rains, the coal stocked by the respondent got washed away. The appellant repudiated the claim in respect of that damage by saying that the damage due to heavy rains was not covered under 'flood and inundation'.

The insurer argued that ''flood' refers to overflowing of water bodies such as rivers, ponds, lakes etc. With respect to the term 'inundation', the company argued that the same refers to 'accumulation of water' and could thus not be applied to the instant case as the coal had merely been washed off due to heavy rains.

Rejecting the contention of the insurer, the Supreme Court held that as per Concise Oxford English Dictionary, Stroud's Judicial Dictionary, Black's Law Dictionary, 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 bodies. "Inundation" was said to be referring to both the act of overflow of water as well as the result of such overflow. Further, the terms 'flood' and 'inundation' are often used synonymously to refer to the act of overflowing of water over land that is generally dry and pluvial floods occur independently of a water body, therefore floods are not restricted to overflow of water bodies.

The Court also noted that there was no water body near the factory and decided that here 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.