Mumbai: The Maharashtra State Consumer Disputes Redressal Commission, has set aside an order passed by the Sangli District Consumer Commission, which had directed ICICI Lombard General Insurance company to pay over Rs 7.25 lakh in compensation to Usha Sales Agency, a Sangli-based business, for damages caused by floods in August 2019.
The bench held that flood damage occurred in the basement, was explicitly excluded from coverage under the terms of the fire and special perils insurance policy.
Bench Upholds Strict Interpretation Of Insurance Contract
The state commission bench, comprising Justice S.P. Tavade and Vijay C. Premchandani while passing the verdict cited the Supreme Court precedents, there by reaffirming that insurers are liable only for risks covered under the policy and cannot be held responsible for losses outside its scope.
Flood Claim Rejected Due To Basement Clause
The dispute arose after Usha Sales Agency filed a claim for damage to its stock of spare parts and machinery submerged in floodwaters between August 5 and 13, 2019. The insurance company rejected the claim, citing a clause that excluded basement exposure at the insured premises.
The District Commission, however, had held the insurer guilty of deficiency in service and ordered it to pay Rs 7,25,960 along with Rs 20,000 as compensation and Rs 5,000 towards litigation costs.
State Commission Favors Insurer’s Appeal
In appeal, ICICI Lombard argued that the policy terms clearly stated “no basement exposure at the risk location,” and that the surveyor’s report confirmed the damage occurred in the basement. The company contended that the District Commission had erred in ignoring policy conditions and binding contract terms.
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Insurance Policy Terms Cannot Be Altered By Courts
The State Commission while passing the judgment upheld the arguments made by the insurance company stating that, the insurance contracts must be interpreted strictly as per their terms, and courts cannot add or modify exclusions agreed upon by the parties.
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