COMPENSATION FOR FLOOD AFFECTED BUILDING

[DR.MARIAPPAN GOVINDARAJAN]

In GOPAL DIKSHIT VERSUS UNITED INDIA INSURANCE COMPANY LTD. - 2025 (5) TMI 1450 - SUPREME COURT Gopal Dixit is the owner of a premises at Eshwar Nagar, New Delhi, having basement, ground floor and two floors.  Gopal Dixit insured the entire building with United India Insurance Company for Rs.1 crore for one year from 13.03.2016 to 12.03.2017.  There was a heavy rain in the area of the Gopal Dixit (‘appellant’ for reference) from 24.08.2016 to 29.08.2016.  During the said period the appellant was out of station.  When he returned, he found that the basement of the premises was inundated with water, resulting in extensive damage to the furniture, fittings, almirahs, books, and other belongings stored there.  The appellant removed the water in the building with the help of a motor on 30.08.2016 but the entire water was not drained. 

Due to the damages caused to the appellant, the appellant filed a compensation claim before the United India Insurance Company. One surveyor was sent to the destination by the insurance company to survey the affected building and give his report.  The survey visited the premises on 03.09.2016.  On 04.09.2016 the appellant enquired about the report of the surveyor.  The Insurance company informed that the said report was not satisfactory and another surveyor would be deputed to reassess the damage and report to the insurance company.  The appellant requested for the preliminary survey report but the same has not been furnished to him by the Insurance company.

The second surveyor visited the premises on 06.09.2016.  On the same day the first surveyor submitted his report.  The said report indicated that the loss was due to heavy rain in Delhi, which surrounded the building of the appellant.   

The appellant selected his own way by consulting two structural engineers concerning the safety of the building.  They both, in their report, indicated that the said building was not fit for habitation.  They recommended to demolish the said building and to construct a new one. The appellant once again visited the office of the insurance company 10.09.2016 and requested for the status report of his claim.   On 12.09.2016 the official of the insurance company informed him that in the survey report the term ‘seepage’ was found.  Therefore, the insurance claim would not be available to the appellant.  The final survey report was submitted on 18.10.2016.

The insurance company, vide their letter dated 23.11.2026, rejected the claim of the appellant on the ground that the damage was caused by continuous sweepage of water from the basement.  Such type was not included in the insurance policy and therefore the compensation as claimed by him could not be granted to the appellant.  The appellant, being aggrieved against the communication of the insurance company, filed a complaint before the National Consumer Disputes Redressal Commission (‘NCDRC’ for short).   The NCDRC held that the complaint filed by the appellant is an afterthought.  In the meteorological report, from 25.08.2016 to 31.08.2016, the NCDRC observed that no place in the report the heavy rain, leading to flood, on 25.08.2016 was reported.  The report of the technical Engineer revealed that there was continuous ingress of seepage into the foundation and basement of the building which corroded the reinforcement steel, making it weaker to sustain loads, especially the lateral loads.  As seepage of water was not named in the insured perils, the insurance company rightly repudiated the claim.  Against the order of NCDRC, the appellant filed the present appeal before the Supreme Court. 

The appellant submitted the following before the Supreme Court-

• The term ‘flood’, outpouring water including inundation and seepage.
• NCDRC ought to have relied on the Meteorological Department Report stating that Delhi had rainfall during the period of 25.08.2016 to 31.08.2016.
• The Ishwar Nagar area, in which the affected premises is there, received heavy rainfall and as such there was flooding in the area.
• The basement had accumulated over 3 feet of water within a span of just three days while the Appellant was away from Delhi.
• such rapid and substantial flooding cannot be classified as ‘seepage’ as seepage does not result in the sudden inundation of a basement with three feet of water.
• The NCDRC ought to have relied on the Survey Report dated 06.09.2016 rather than the Survey Report dated 18.10.2016.
• Once the survey was conducted on 09.09.2016, there was no occasion to submit the report on 18.10.2016 i.e. more than one month after conducting the survey. The same smacks of mala fide intentions on the part of the Respondent.
• The report of the engineers only stated the condition of the building which had nothing to do with the seepage water in the basement.
• The basement of the Appellant was perfectly dry when he left on 24.08.2016 but after his return on 29.08.2016 he found that the basement was flooded with water with water marks on the walls up to the window height.
• The Respondent is completely silent about the source of water in the basement which is unfair practice on the part of the Respondent.

The insurance company, respondent in the present appeal, submitted the following before the Supreme Court-

• Even if ‘seepage’ encompasses both inundation and seepage, it is pertinent to note that each case is distinct and should be evaluated/assessed based on its individual set of circumstances and the specific terms laid out in the contract.
• The specific terms and conditions of the policy do not encompass seepage as a covered peril.
• The appellant's claim timeline, ranging from 25th to 31^st August 2016, raises substantial questions regarding its reliability and consistency, leaving room for doubt as to whether it was introduced as an afterthought to buttress its claim by the appellant.
• The Meteorological Report did not provide substantial evidence to support the occurrence of significant rainfall in the specific area leading to flooding. It is pertinent to mention that the primary cause of the loss was attributed to seepage.
• The insurance company’s decision to repudiate the claim was a justifiable response, consistent with the policy’s terms and conditions and the distinct circumstances surrounding the loss.

The Supreme Court considered the submissions of both the parties.  The Supreme Court observed the following from the facts of the case and the documents on record such as survey reports etc.,

• The Preliminary Report and the Final Survey Report unequivocally identified the cause of the loss as continuous seepage of water into the foundation and basement of the affected building.
• There was no mention of heavy rainfall causing significant damage in ‘The Times of India’ editions dated 26.08.2016 and 27.08.2016.
• The certificates indicated that continuous seepage of water into the foundation and basement was the primary cause of the damage, rendering the building structurally unsound.

Based on the survey reports and Engineers’ report, the Supreme Court observed that it is evident that the cause of damage to the insured premises was the flooding of water into the basement due to heavy rainfall in Delhi during the relevant period. The report of the Consulting Engineers pertains solely to seepage affecting the structural elements of the building and is silent on the condition of the basement or the cause of damage in question. Therefore, the said report does not assist in determining the cause of damage to the basement and therefore, as a result of such limitation, it cannot be relied upon in the present appeal. 

From the reports and certificates, the Supreme Court concluded that the damage to the insured premises was not caused by any inherent structural defect or seepage, but was instead a direct consequence of the unprecedented and heavy rainfall which led to flooding of water into the basement.  Further the Supreme Court observed that the respondent proceeded to commission a second survey without furnishing any reasonable, cogent, or valid grounds justifying the necessity for a reassessment.  The second survey report failed to counter or address the detailed and comprehensive observations made in the first survey report dated 06.09.2016, nor did it offer any explanation or new material facts that would warrant a reversal of the initial conclusion.  The Supreme Court found that the belated reassessment conducted by the Respondent is deemed arbitrary and without due basis.

The Supreme Court allowed the appeal and set aside the impugned order of NCDRC.  Further the Supreme Court remanded the matter to the NCDRC for the limited purpose of determining the appropriate quantum of compensation payable to the Appellant in accordance with the policy terms and applicable law.